DUSHANBE, May 13, 2014, Asia-Plus -- The law on Islamic banking in Tajikistan, which was drafted by the government, has been tabled to the agenda of a May 14 sitting of the fifth session of the Majlisi Namoyandagon (Tajikistan’s lower chamber of the parliament) of the fourth convocation.

MP Ismoil Talbakov, who is the member of the Majlisi Namoyandagon Committee on Finance and Economics, considers that introduction of the Islamic banking system in Tajikistan “will open a new page in the sphere of credit relations and will help attract investments from Islamic nations, create new jobs in the country and reduce outflow of labor migrants from Tajikistan.”     

Under the law on Islamic banking in Tajikistan, the National Bank of Tajikistan (NBT) grants licenses to Islamic lending agencies for operating in Tajikistan and regulates their activities in the country, Talbakov added.

Islamic banking is a banking activity that is consistent with the principles of Sharia and its practical application through the development of Islamic economics.  Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba, or usury) for loans of money.  Investing in businesses that provide goods or services considered contrary to Islamic principles is also haraam ("sinful and prohibited").  Although these principles have been applied in varying degrees by historical Islamic economies due to lack of Islamic practice, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

Islamic banking has the same purpose as conventional banking: to make money for the banking institute by lending out capital.  But that is not the sole purpose either. Adherence to Islamic law and ensuring fair play is also at the core of Islamic banking.  Because Islam forbids simply lending out money at interest, Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to prevent it. The basic principle of Islamic banking is based on risk-sharing which is a component of trade rather than risk-transfer which is seen in conventional banking.

Islamic banks reportedly have more than 300 institutions spread over 51 countries, including the United States through companies such as the Michigan-based University Bank, as well as an additional 250 mutual funds that comply with Islamic principles.