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Dawn in Tajikistan
By Muath Mubarak
In 1991, Tajikistan became an independent country following the break up of the Soviet Union and the post-Soviet Union era has prompted Tajikistan (and most of the regional countries) to consider restructuring their political and economic system with a long-term strategic framework. Tajikistan, considered as one of the world’s most beautiful countries, is land-locked, with 93% of it being mountainous. The leaders of the regional countries have made significant efforts in infusing Islamic principles and elements of it into the root of government structure since the 1990s. Tajikistan became a member of the Islamic Development Bank (IDB) in 1996. By introducing some projects in the region, IDB brought in the Islamic finance system. Many potential global market leaders are studying the feasibility of entering the country with different strategies. Some banks and Islamic financial institutions (IFIs) have expressed interest in exploring the market opportunities. Some others have already entered the market in different ways. The Islamic Infrastructure Fund, targeted at US$500 million, intends making Shariah compliant equity investments in the 12 countries that are borrowing members of IDB as well as the Asian Development Bank (ADB), including Tajikistan.
Four large banks control 62.2% of assets (as of July 2009) # 1 2 3 4 Name Agroinvestbank Oriyonbank Amonatbank Tojiksodirotbonk No. of Branches 61 32 5 13

between the conventional and Islamic financial systems as well as the advantages of using Islamic finance in developing a long-term strategic framework.

Legislative changes
There is a need to amend the necessary laws and regulations in order to accommodate the Islamic banking system in Tajikistan and ensure its viability in an increasingly interconnected world after the negative influence of the global financial crisis on the country’s economy. Such a move will attract foreign Islamic banks to the country and create a healthy competition that will further the Islamic finance industry.
Fact box Banking Sector – two tier banking system State Bank Joint Stock Bank Foreign Banks Total Banks 1 9 3 13 Micro Credit Deposit Org. Micro Loan Org. Micro Loan Funds Total MFIs 31 42 43 116 6 Credit Societies & 1 Non-Banking Financial Institution

The National Bank of Tajikistan is the country’s central bank

New strategies
Tajikistan must work out new strategies to attract new investors and institutions which can use Shariah compliant banking to exploit investment opportunities. To draw up new strategies, however, requires talented human capital with experience in modern multi-faceted business segments along with in-depth Shariah knowledge, which is currently lacking in Tajikistan. Finally, Tajikistan has been described as the poorest among the Commonwealth of Independent State countries and its revenue inflow is heavily dependent on cotton and aluminum exports as well as remittances by migrant workers abroad. The economy of Tajikistan seems to be highly vulnerable to external shocks. The government could also benefit from Islamic finance, for example by issuing Sukuk to raise funds for development and infrastructure financing. Underserved and untapped markets can be opened up through Shariah compliant projects and institutions, spurring the development of the much-needed socio-economic infrastructure in Tajikistan. The establishment of a full-fledged Islamic bank or window should be seriously pursued and, given the large number of global players in the market, this could be realized in the very near future.

However, Tajikistan is still in the early stages whereas other Muslim and non-Muslim countries, both developed and developing, are eagerly accommodating this fast-growing industry. Tajikistan faces significant challenges as its economy requires a far wider and more comprehensive approach in addressing issues in socio-economic development, such as alleviating poverty and powering overall economic growth. In developing the nation under a real economic structure using Islamic finance principles, some important factors need to be considered:

Even though some initiatives have been taken by international financial institutions such as the IDB and local institutions to develop socioeconomic infrastructures, there is a need to take some additional measures. This is where IFIs can play an effective role in providing financing for construction projects, industrial development and even an Islamic micro finance system for small scale private enterprises.

Professional education and training
IFIs must educate officials, business people and the masses by conducting workshops, seminars, roundtable discussions and training programs to bring about an understanding of the real differences

Muath Mubarak Coordinator, Financial Control & Strategic Planning Barwa Bank, Qatar Tel: +9746844847


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17th March 2010