The National Bank of Kyrgyzstan has amended several regulations governing the activities of commercial banks and microfinance organizations operating under Islamic principles.
According to the bank’s press service, a key innovation is the introduction of a new Islamic financial instrument called Wakala bil-Istithmar. Under this agreement, one party (the agent) manages the funds of another party (the principal) to generate profit. The contract can be concluded on either a fee-based or gratuitous basis.
A bank or microfinance organization can act as either the agent or the principal. Profits earned from investments belong to the investor, while the agent’s remuneration is determined by a fixed amount, a share of the investment, or a pre-agreed indicator.
The regulations also establish rules for creating reserves to smooth profit, conditions for income distribution, and procedures for compensation in case of losses. All operations must comply with Sharia standards and be overseen by the Sharia Board.
This initiative aims to develop Islamic finance in the country, increase the flexibility of financial instruments, and enhance transparency in transactions.
