BISHKEK (TCA) — Kyrgyzstan is considering changes to the legislation to introduce banking principles consistent with the Islamic law, Sputnik news agency reported citing Jyldyz Sulaimanbekova, head of the Supervision Methodology and Licensing Department of the National Bank of the Kyrgyz Republic.
“Kyrgyzstan’s Ministry of Economy is currently considering the introduction of changes and amendments related to Islamic financing principles to the Tax Code of Kyrgyzstan to create a unified equal law-based financial environment,” Sulaimanbekova said.
The National Bank official noted that it was legally problematic to equate the Islamic banking with the traditional financial operations, because of banks assuming ownership of the clients’ assets and the specifics of the division of the profits and losses on credits and deposits between the sides.
According to Sulaimanbekova, the taxation of the Islamic banking operations is a key issue for the future development of the Islamic banking in Kyrgyzstan, in particular, leasing agreements and the exemption of suppliers from value-added tax.
Sulaimanbekova said that many countries, including the United Kingdom, Malaysia and Bahrain adjusted or changed their national taxation systems to accommodate Islamic banking.
The Islamic banking, available for all, irrespective of confession, prohibits charging interest or investing in companies whose main source of funding is related to loans. The businesses share part of their profits with the bank instead of paying back with an interest.
Kyrgyzstan began introducing elements of Islamic banking into its financial system about 10 years ago.