In 1991, Tajikistan became an independent country following the break up of the Soviet Union and the post-Soviet Union era has prompted Tajikistan (and most of the regional countries) to consider restructuring their political and economic system with a long-term strategic framework. Tajikistan, considered as one of the world’s most beautiful countries, is land-locked, with 93% of it being mountainous.
The leaders of the regional countries have made signifi cant efforts in infusing Islamic principles and elements of it into the root of government structure since the 1990s. Tajikistan became a member of the Islamic Development Bank (IDB) in 1996. By introducing some projects in the region, IDB brought in the Islamic fi nance system. Many potential global market leaders are studying the feasibility of entering the country with different strategies. Some banks and Islamic fi nancial institutions (IFIs) have expressed interest in exploring the market opportunities. Some others have already entered the market in different ways. The Islamic Infrastructure Fund, targeted at US$500 million, intends making Shariah compliant equity investments in the 12 countries that are borrowing members of IDB as well as the Asian Development Bank (ADB), including Tajikistan.
However, Tajikistan is still in the early stages whereas other Muslim and non-Muslim countries, both developed and developing, are eagerly accommodating this fast-growing industry. Tajikistan faces signifi cant challenges as its economy requires a far wider and more comprehensive approach in addressing issues in
socio-economic development, such as alleviating poverty and powering overall economic growth.
In developing the nation under a real economic structure using Islamic finance principles, some important factors need to be considered:
Assistance/sponsorship
Even though some initiatives have been taken by international financial institutions such as the IDB and local institutions to develop socio economic infrastructures, there is a need to take some additional measures. This is where IFIs can play an effective role in providing fi nancing for construction projects, industrial development and even an Islamic micro finance system for small scale private enterprises.
Professional education and training
IFIs must educate offi cials, business people and the masses by conducting workshops, seminars, round table discussions and training programs to bring about an understanding of the real differencesbetween the conventional and Islamic fi nancial systems as well as the advantages of using Islamic fi nance in developing a long-term strategic framework.
Legislative changes
There is a need to amend the necessary laws and regulations in order to accommodate the Islamic banking system in Tajikistan and ensure its viability in an increasingly interconnected world after the negative influence of the global financial crisis on the country’s economy. Such a move will attract foreign Islamic banks to the country and create a healthy competition that will further the Islamic finance industry.
New strategies
Tajikistan must work out new strategies to attract new investors and institutions which can use Shariah compliant banking to exploit investment opportunities. To draw up new strategies, however, requires talented human capital with experience in modern multi-faceted business segments along with in-depth Shariah knowledge, which is currently lacking in Tajikistan.
Finally, Tajikistan has been described as the poorest among the Commonwealth of Independent State countries and its revenue inflow is heavily dependent on cotton and aluminum exports as well as remittances by migrant workers abroad. The economy of Tajikistan seems to be highly vulnerable to external shocks.
The government could also benefi t from Islamic fi nance, for example by issuing Sukuk to raise funds for development and infrastructure financing. Underserved and untapped markets can be opened up through Shariah compliant projects and institutions, spurring the development of the much-needed socio-economic infrastructure in Tajikistan. The establishment of a full-fl edged Islamic bank or window should be seriously pursued and, given the large number of global players in the market, this could be realized in the very near future.
Muath Mubarak
Coordinator, Financial Control & Strategic Planning
Barwa Bank, Qatar
Tel: +9746844847
Email: muath2015@gmail.com
This article was published by Red money in IFN on 17-Mar-2010
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