LocationsUNDP in cooperation with the Islamic Development Bank supports the Government of Uzbekistan in developing the enabling environment for Islamic Finance instruments
September 17, 2024
On September 13, 2024, UNDP jointly with the National Agency of Perspective Project under the President’s Administration and the Islamic Development Bank held a round table on “Introduction of Islamic Finance in Uzbekistan: opportunities and challenges” aimed to facilitate the exchange of views among key government agencies in the process of discussion of the draft Law “On Capital Market in Uzbekistan”. The event was attended by more than 30 representatives of key stakeholders including the Ministry of Economy and Finance, Central Bank, Ministry of Investment, Industry and Trade, Ministry of Justice, Committee of Religious Affairs and Tax Committee under the Cabinet of Ministers, Chamber of Commerce and Industry, leading ‘Think Tanks’ and others.
In recent years the Government of Uzbekistan has been expressing its strong interest and commitment to introduce Islamic Finance in the country. This has been indicated and reflected in several Government resolutions and the National Development Strategies. As part of this work the National Agency of Perspective Projects (NAPP) has developed a draft the Law "On Capital Market in Uzbekistan" that contains separate and specific Chapter on Islamic Securities “Sukuk”. Meanwhile, the Ministry of Investment, Industry and Trade jointly with the Central Bank of Uzbekistan along with the support of the Islamic Development Bank (IsDB) have been developing the legislative framework for introduction of Islamic Banking in the country. These draft documents are currently under review by the government.
Islamic Financing instruments, including Sukuk, have emerged as a new promising tool to attract development financing. Sukuk instruments are gaining recognition not only in the Muslim countries, but also worldwide. According to Fitch Ratings, globally total outstanding sukuks in the market was above USD 867 billion at end of 1Q 2024.
Additionally, the “Green” Sukuk is a new type of sukuk that is used to finance environmentally sustainable projects, for example, in development of renewable energy sources, introduction of energy efficient and resource-saving technologies, solid waste management. “Green” Sukuk is becoming extremely important due to its two-fold benefit both as an alternative instrument to finance SDGs and as a support to climate change action.
The main objective of the round table event was to present the draft Law of “On Capital Market in Uzbekistan” focusing on the chapters related to introduction of Islamic (Sukuk) securities, as well as on proposed changes into existing legislation towards developing the enabling environment for Sukuk, Green Sukuk and Islamic Banking. Participants have also discussed opportunities and existing challenges related to introduction of these new Islamic financing instruments.
Experts from the NAPP, UNDP and the Ministry of Investment, Industry and Trade gave presentations, updated on recent developments and facilitated the discussions. During the discussion session the event participants exchanged their views on key points including the importance of awareness rising and capacity development of the government, private sector and public on Islamic Finance. Special attention was paid to the taxation issues that can potentially hamper competitiveness of the Islamic Financing instruments throughout the process of introduction. In general, the round table provided a unique opportunity for the key stakeholders to share their views and recommendations towards developing a proper legal and regulatory framework for Islamic Finance ecosystem in the country.
This event was a part of UNDP’s joint initiative with the NAPP and IsDB on “Developing the Enabling Environment for Green Sukuk in Uzbekistan” that has being implemented since 2021 and aimed to develop the relevant legislative, institutional and regulatory framework as well as strengthening the government capacities in this area.