www.islamicfi nancenews.comCOUNTRY REPORT

Page 11© 17th March 2010

In 1991, Tajikistan became an independent country following the break up of the Soviet Union and the post-Soviet Union era has prompted Tajikistan (and most of the regional countries) to consider restructuring their political and economic system with a long-term strategic framework. Tajikistan, considered as one of the world’s most beautiful countries, is land-locked, with 93% of it being mountainous.

The leaders of the regional countries have made signifi cant efforts in infusing Islamic principles and elements of it into the root of government structure since the 1990s. Tajikistan became a member of the Islamic Development Bank (IDB) in 1996. By introducing some projects in the region, IDB brought in the Islamic fi nance system.

Many potential global market leaders are studying the feasibility of entering the country with different strategies. Some banks and Islamic fi nancial institutions (IFIs) have expressed interest in exploring the market opportunities. Some others have already entered the market in different ways.

The Islamic Infrastructure Fund, targeted at US$500 million, intends making Shariah compliant equity investments in the 12 countries that are borrowing members of IDB as well as the Asian Development Bank (ADB), including Tajikistan.

Four large banks control 62.2% of assets (as of July 2009)

# Name No. of Branches

1 Agroinvestbank 61

2 Oriyonbank 32

3 Amonatbank 5

4 Tojiksodirotbonk 13

However, Tajikistan is still in the early stages whereas other Muslim and non-Muslim countries, both developed and developing, are eagerly accommodating this fast-growing industry.

Tajikistan faces signifi cant challenges as its economy requires a far wider and more comprehensive approach in addressing issues in socio-economic development, such as alleviating poverty and powering overall economic growth.

In developing the nation under a real economic structure using Islamic fi nance principles, some important factors need to be considered:

Assistance/sponsorshipEven though some initiatives have been taken by international fi nancial institutions such as the IDB and local institutions to develop socio-economic infrastructures, there is a need to take some additional measures. This is where IFIs can play an effective role in providing fi nancing for construction projects, industrial development and even an Islamic micro fi nance system for small scale private enterprises.

Professional education and trainingIFIs must educate offi cials, business people and the masses by conducting workshops, seminars, roundtable discussions and training programs to bring about an understanding of the real differences

between the conventional and Islamic fi nancial systems as well as the advantages of using Islamic fi nance in developing a long-term strategic framework.

Legislative changesThere is a need to amend the necessary laws and regulations in order to accommodate the Islamic banking system in Tajikistan and ensure its viability in an increasingly interconnected world after the negative infl uence of the global fi nancial crisis on the country’s economy. Such a move will attract foreign Islamic banks to the country and create a healthy competition that will further the Islamic fi nance industry.

New strategiesTajikistan must work out new strategies to attract new investors and institutions which can use Shariah compliant banking to exploit investment opportunities. To draw up new strategies, however, requires talented human capital with experience in modern multi-faceted business segments along with in-depth Shariah knowledge, which is currently lacking in Tajikistan.

Finally, Tajikistan has been described as the poorest among the Commonwealth of Independent State countries and its revenue infl ow is heavily dependent on cotton and aluminum exports as well as remittances by migrant workers abroad. The economy of Tajikistan seems to be highly vulnerable to external shocks.

The government could also benefi t from Islamic fi nance, for example by issuing Sukuk to raise funds for development and infrastructure fi nancing. Underserved and untapped markets can be opened up through Shariah compliant projects and institutions, spurring the development of the much-needed socio-economic infrastructure in Tajikistan.

The establishment of a full-fl edged Islamic bank or window should be seriously pursued and, given the large number of global players in the market, this could be realized in the very near future.

Dawn in TajikistanBy Muath Mubarak

Fact boxBanking Sector – two tier banking system

State BankJoint Stock BankForeign BanksTotal Banks

19313

Micro Credit Deposit Org.Micro Loan Org.Micro Loan FundsTotal MFIs

314243116

6 Credit Societies & 1 Non-Banking Financial Insti-tution

The National Bank of Tajikistan is the country’s central bank

Muath MubarakCoordinator, Financial Control & Strategic PlanningBarwa Bank, QatarTel: +9746844847