Implementing Islamic Banking in Uzbekistan

What the paper says

This research investigates how to implement the Islamic banking system in Uzbekistan. It explores the need, size of the potential demand and supply of Sharīʿah-compliant products and services. The study also identifies opportunities and challenges of implementing Islamic banking in Uzbekistan and provides insight into how to overcome those challenges. This paper aims to fill the gap and answer the following questions: why is there a need to introduce an Islamic banking system in Uzbekistan? Research Methodology: Exploratory research was conducted to explore the opportunities and challenges of implementing Islamic banking instruments in Uzbekistan. It relies on mixed methods and a combined approach. Empirical data was collected from 400 members of the public and 45 professionals in the capital of Uzbekistan-Tashkent. The questionnaire was distributed randomly to adult residents using a survey and structured interviews based on the fieldwork carried out in Tashkent. Data were analysed using statistical methods. Findings: This research reveals novel findings and results indicate that the potential demand exists as demonstrated by the samples. This research recommends Uzbekistan government revise the following: existing legislation, Central Bank rules and regulations, Tax Code, Civil Code, Law on Commodities, prudent Regulatory Framework for Islamic Financial Institutions (IFI), and human capital need to be developed. The country can cooperate with the Islamic Development Bank Group and other foreign organizations to achieve these tasks. Practical implications: The implications of this research are to provide a road map to the regulators, policymakers, governments, and the financial industry on how to introduce Islamic banking and finance in Uzbekistan. A likely remedy is the incorporation of Islamic financial instrument principles through the equitization of mortgages. As far as the author's knowledge this is the first research assessing the markets for Islamic banking in Uzbekistan. Originality/Value: This research complements the existing literature on why there is a need to implement Islamic banking in Uzbekistan and it contributes towards filling the gap as no empirical research exists. This paper sketches an avenue for further research in Islamic banking in Uzbekistan.