LONDON Oct 31 A new head of Kazakhstan's central bank and a raft of initiatives from the Islamic Development Bank (IDB) are rekindling hopes for the development of Islamic finance in that country.
This month, Kazakh President Nursultan Nazarbayev sacked central bank chief Grigori Marchenko and replaced him with Deputy Prime Minister Kairat Kelimbetov.
The move could herald a new start for Islamic finance, Yerlan Baidaulet, the Kazakhstan member of the board of executive directors at the Jeddah-based IDB, said on the sidelines of the World Islamic Economic Forum in London.
"Almost five years after introducing Islamic banking, the situation hasn't changed. The predecessor tried to stop everything," said Baidaulet.
Close to 70 percent of Kazakhstan's population of 17 million is Muslim. But even though the government has said it wants to make the country a centre for Islamic finance, progress has been slow, partly because the government also declares itself to be secular and officials do not want to appear overtly religious.
Currently, Abu Dhabi-based Al Hilal Bank is the sole Islamic bank in Kazakhstan, having opened its doors in March 2010; it has not so far tapped the retail market.
But a grant from the IDB, a multilateral lending institution, is now set to kick-start the drafting of a new Islamic banking law, superseding a law passed in 2008 which lacks sufficient detail to be effective, Baidaulet said.
"The Islamic banking law is but a package of different amendments. It's just phrasing but there is no depth, no structure, no mechanism. We hope to bring new legislation, a standalone law."
In March, the Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of the IDB, took a stake in Zaman Bank in order to convert it into an Islamic lender, a process which could be completed as soon as next year, Baidaulet added. "Hopefully next year this bank will start."
Also, the country will soon have a sovereign credit rating from the Bahrain-based Islamic International Rating Agency, another unit of the IDB, said Baidaulet.
In July last year, the Development Bank of Kazakhstan issued a 240 million ringgit ($75.5 million) Islamic bond in Malaysia, but no other Kazakh issuers have followed.
The ICD is in the process of launching an Islamic leasing company in Kazakhstan this year, with capital of $36 million. Meanwhile a Kazakh renewable energy fund managed by the ICD, currently in the closing stages of capital raising, aims to have up to $70 million in capital, Baidaulet said.
An Islamic mortgage company is seeking to attract foreign investors, with $50 million of capital already contributed by the ICD and a local partner. And in March, the ICD offered $20 million of Islamic financing for real estate development projects in Kazakhstan and earmarked $40 million for financing small and medium-sized businesses in the country. (Editing by Andrew Torchia)