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Article
Publication date: 14 June 2022

Almira Z. Nagimova

Over the past decades, Islamic finance has expanded its presence to many countries including Muslim-majority post-Soviet Central Asian and Transcaucasian region. Undoubtedly, this…

234

Abstract

Purpose

Over the past decades, Islamic finance has expanded its presence to many countries including Muslim-majority post-Soviet Central Asian and Transcaucasian region. Undoubtedly, this expansion has aroused keen interest among the representatives of a range of areas such as science, politics and business. The purpose of this paper is to describe the scope, the key players and the main investment strategies of the Islamic finance market based on the evidence obtained from Kyrgyzstan.

Design/methodology/approach

The main empirical corpus was formed from Bureau van Dijk’s databases (Zephyr and Orbis) and includes approximately 80 deals involving Shariah-compliant investments in Kyrgyzstan from 1991 to 2020. The initial corpus was then significantly expanded by means of content analysis of open media sources. Being still insufficient for deeper generalization, these data were further complemented by the analysis of an array of corporate information (press releases, presentations and financial reports) related to the identified deals. To ensure the credibility of the conclusions to be made on the nature of Islamic finance in Kyrgyzstan, the desk analysis was also complemented with field research using qualitative method of in-depth expert interviews.

Findings

This paper has shown that despite the yet modest market volumes represented by Islamic bank, Islamic windows, Islamic leasing company and microfinance companies, Islamic finance in Kyrgyz Republic has further growth prospects, which are associated with the arrival of large foreign Islamic banks that bring innovative financial products, the issuance of Islamic securities (sukuk) and launch of Islamic insurance (takaful). Being more open and consistent in the development of Islamic finance industry, the authorities of Kyrgyzstan understand the need for the initial development of the market by their own forces.

Originality/value

This paper is original and up-to-date, as it contains new and significant information. Suggesting a new approach to studying Islamic finance in post-Soviet area, this paper identifies the most active Islamic investors in Kyrgyzstan, classifies them, reveals their investment strategies and assesses the financial performance of Islamic investors as well as the total volume of Shariah-compliant capital in Kyrgyzstan. The findings of this paper can contribute to shaping policies toward Islamic finance in the post-Soviet region and, therefore, may be beneficial to the development of Islamic finance industry.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 8
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 12 January 2023

Almira Z. Nagimova

Over the past decades, Islamic finance has expanded its presence to many countries including post-Soviet region. The purpose of this paper is to empirically investigate this…

422

Abstract

Purpose

Over the past decades, Islamic finance has expanded its presence to many countries including post-Soviet region. The purpose of this paper is to empirically investigate this phenomenon in Kazakhstan by adopting qualitative sociological approach. The study also aims to provide vital information and propose recommendations for market participants to contribute to the development of Islamic finance industry in Kazakhstan.

Design/methodology/approach

Primary data were gathered using the qualitative method of in-depth expert interviews with nine Islamic finance professionals representing Islamic banks, ijarah companies, funds and development institutions in Kazakhstan who occupy senior positions (directors, managers, heads of departments, etc.). Furthermore, the primary data of interviews were analyzed and processed using another qualitative method of cognitive mapping, the essence of which is to graphically display the concepts that are most often used by informants.

Findings

The study has shown that first there is a demand for Islamic finance among Kazakh business and population. At the same time, Muslims are not the only consumers of Islamic financial services; therefore, it is affordability rather than religiosity that is an important criterion for choosing Islamic finance. Second, murabaha and ijarah are the two most popular Islamic financial products in Kazakhstan, while equity-based instruments are hardly ever used. Third, Kazakhstan government policy toward Islamic finance received controversial assessments of experts: the state support is declared, but specific actions required by the market participants are not taken. Fourth, key factors that significantly limit the development of the Islamic finance market in Kazakhstan include a shortage of supply, which, in turn, is strongly associated with the second factor – limited funding of local Islamic finance institutions, the absence of insurance (or guaranteeing) system of investment accounts of the local Islamic banks, insufficient economy of scale, lack of convenient service and weak marketing policy of the existing Islamic banks and, finally, lack of educational programs.

Practical implications

The study reveals the potential development of Islamic finance in Kazakhstan which is a rarely studied topic. The findings and recommendations of this study can be used by the regulators, market players and policymakers of Islamic finance industry in Kazakhstan, post-Soviet and other Islamic finance-oriented countries.

Originality/value

This study offers new insights on the future of Islamic finance in Kazakhstan: in long term, the development will be determined by new financial technologies – Islamic FinTech, but in short term – by Islamic windows (currently not allowed by Central Bank) that will help to significantly expand the audience, increase awareness and demand for Islamic finance among local businesses and public. The current study is original, important and up-to-date, as it uses an approach that sources primary data in the form of experts’ point of view instead of relying on literature or document analysis. It is not a mere theoretical study of the literature but an empirical investigation of the problem. Moreover, it seeks to contribute to the Islamic finance literature in the post-Soviet region, particularly from the experts’ perspective.

Details

Journal of Islamic Accounting and Business Research, vol. 14 no. 8
Type: Research Article
ISSN: 1759-0817

Keywords

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