Tashkent, Uzbekistan (UzDaily.com) -- Deputy Minister of Economic Development and Poverty Reduction Ilkhom Norkulov, after a report on a new era of economic development in Uzbekistan, answered questions from participants at the International Congress Center in Tashkent as part of the annual meeting of the Board of Governors of the Islamic Development Bank (IDB) panel session.

In particular, answering the question of why Islamic financing has not been fully introduced in Uzbekistan, Norkulov noted that President Shavkat Mirziyoyev annually addresses this issue to parliament and the government has been working on this for the past 5 years. The Deputy Minister drew attention to the fact that this is not just banking services, but a complex system. Which requires the development of its own approach. Speaking about the possibility of introducing Islamic banking, he noted that in addition to the complexity of the system, citizens’ trust in commercial banks is necessary, which is already quite realistic, and this can be observed in the three times increasing amounts of deposits in private banks.

The scale of demand for Islamic banking services

In Uzbekistan, there is a demand for Islamic banking services in rural areas. In many countries that are not members of the IDB, for example, in Luxembourg, Islamic finance departments have been introduced into banks, as this provides additional development opportunities for the bank. In addition, agriculture can be successfully developed through Islamic finance, bringing additional economic benefits.

Based on his experience in the Central Bank, Norkulov pointed out that the issue of introducing Islamic finance and Islamic banking services into commercial banks has been raised for many years. It is necessary to introduce additional legislation for the comfortable operation of the Islamic finance system in the country’s banking system. This procedure diversifies the list of banking services for clients. Many residents of the country would like to use the services of Islamic finance. The issue of increasing the financial literacy of the population is also on the agenda.

“The fact is that the level of financial literacy among the population of the country is rather low. Maybe people know something about ordinary banking services, but practically nothing about Islamic finance. This topic is especially relevant in the context of the development of fintech. It is necessary to create a certain potential and increase the financial literacy of the population. With an increase in the financial literacy of the population, it will be much easier to introduce Islamic banking,” Norkulov said.

On 1 January 2021, the Russian Federation began to introduce Islamic banking finance. This country understood the need to introduce the mentioned banking services into its system, although Russia is not a member of the IDB. The same was done in France. Islamic finance leads to an expansion of the range of banking services.