Central Bank Approves Regulation on Islamic Finance for MFOs

The Central Bank of Uzbekistan has approved regulations on Islamic funding for microfinance institutions (MFIs). The regulations are developed in accordance with the standards of AAOIFI (the Accounting and Auditing Organization of Islamic Financial Institutions) and consider local expertise, as explained by the Central Bank.

The regulations outline the core requirements for the provision of services. For instance, an MFI should establish Special Board of Islamic finance coordination (with the option to outsource this function).

In cases where MFIs also provide traditional financial services, the accounting for Islamic transactions must be kept separate.

The regulation details the procedure for providing Islamic financial instruments such as leasing agreement (Ijarah), profit-sharing partnership (Mudarabah), cost-plus financing (Murabahah), joint venture structure (Musharakah) and prepayment financing (Salam).

Kursiv already reported that the Islamic Development Bank (IsDB) plans to send a group of its representatives to Uzbekistan to monitor the progress of investment projects.