The National Bank has expanded the list of Islamic operations that Mbank can conduct

The National Bank of Kyrgyzstan has authorised Mbank to conduct new types of banking operations based on Islamic financing principles through an ‘Islamic window’. The relevant decision was taken by the regulator's board on 13 August.

The bank will now be able to conduct transactions in national and foreign currencies under istisnaa and parallel istisnaa agreements.

Istisnaa is a contract used to finance production or construction. Under this contract, the customer instructs the contractor to manufacture goods or construct a facility with specified characteristics. Payment can be made in advance, in stages or after completion of the work. This instrument is used, for example, for the construction of buildings, the manufacture of equipment and the implementation of infrastructure projects. Parallel istisnaa is a combination of two independent istisnaa contracts. In the first case, the bank enters into a contract with the customer, undertaking to deliver the finished goods or object.

In the second case, the bank acts as the customer of the contractor, instructing it to manufacture the same object. The legal independence of the two transactions allows the principles of Islamic law to be observed and the prohibition on riba (interest) to be avoided. In this case, the bank effectively acts as an intermediary between the customer and the manufacturer.