Four Islamic banks may open in Kazakhstan-cbank

Business Materials 12 June 2009 15:06 (UTC +04:00)

Kazakhstan expects three or four Islamic banks to set up operations in the former Soviet republic this year, central bank head Grigory Marchenko said on Friday, Reuters reported.

The mainly Muslim nation passed legislation in February allowing Islamic banking -- which operates under the principles of Islamic law.

"All the necessary documents have been adopted by the FSA (Kazakh financial supervisory authority) in Kazakhstan and on the side of accounting, all the documents have been adopted by the central bank," Marchenko said.

"Overall we are expecting that maybe three or four Islamic banking licences will be extended in the next 12 months," he told a foreign investment forum attended by EBRD President Thomas Mirow.

Qatar Islamic Bank QISB.QA and Bahrain-based Islamic lender Ithmaar Bank ITHMR.BH have already expressed interest in entering the Kazakh market, citing social stability, skilled workforce and a good economic fundamentals.

Marchenko said traditional and Islamic banking would be separated by law.

"An existing Kazakh bank can establish an Islamic subsidiary. But the law does not anticipate operation through a separate part in an existing non-Islamic bank. ... Traditional banking and Islamic banking should be kept separate," he said.

Kazakhstan's banking sector, which borrowed extensively abroad to finance growth, has been hit hard by the global credit crunch, and market players have been looking for ways to diversify investment and lending in the industry.