The role of Islamic finance in Kazakhstan

Abstract

The role of Islamic finance increased worldwide in recent years. In Kazakhstan,
Islamic finance is considered as one of the alternative sources of
funding the country’s economy in order to influence its further growth and
diversification. The main purpose of the development of Islamic finance
in Kazakhstan is the need to attract foreign investment for the realization
of long-term industrial development plans, diversification of investment
flows, as well as providing the public of alternative sources of funding.
Islamic Banking is the banking system wherein the banking transaction
are without Interest / Riba, besides ensuring that all the dealings
and affairs of the banking must be according to the Islamic Law / Shariah.
Islamic banks showed stronger resilience during the global financial crisis.
With conventional banks entering into Islamic banking, there’s a lot
more competition in this fast growing market. This has meant there are
new finance tools, such as Istisna, Parallel Istisna, Musharaka, Diminishing
Musharaka, Salam, Parallel Salam, Operational Ijara, Sub-leasing, Financial
Ijara, Mudaraba and Investment Wakala and many others.Various
forms of Investment Funds and Sukuk, also, came into practice as a good
source to obtain liquidity for non-monetary goods and services by selling
to potential dealers.The variety of Islamic banking tools are unlike those
of conventional banking, as conventional ones are usually based on one
contract, while in Islamic banking, each tool has its own contractual nature
and features that make it different from other tools.Nowadays the Islamic
banking experiment is still new and is still in the early stage of application.