Kuwaiti International Turnkey Systems Group (ITS) has won deal to provide technology for the first Islamic Bank in Tajikistan.
Tajikistan’s Open Joint-Stock Company (OJSC) Sohibkorbonk and ITS singed a groundbreaking deal on October 28, according to Sohibkorbonk press center.
Under this agreement, ITS will deliver a full Core Islamic banking and digital banking solution to Sohibkorbonk, which will be the first Islamic bank in Tajikistan.
Earlier this year, Sohibkorbonk has announced the contest for selection of company for providing Islamic banking technology for it.
Four companies, namely Oracle Corporation (USA), Path Solutions (Kuwait), Lyst Technologies (a subsidiary of the Catalyst Group a subsidiary itself of the Islamic Cooperation for the Development of the Private Sector) and Kuwaiti International Turnkey Systems Group (ITS) have participated in the contest. ITS has won the contest.
Recall, Tajik joint-stock bank for entrepreneurship support Sohibkorbonk announced its decision to convert operations to become a full-fledged Islamic bank a year ago.
During a four-day visit, representatives of the Islamic Corporation for the Development of the Private Sector (ICD) in October last year acquainted with activities of the bank, its financial indicators, structure, qualification of its employees as well as products and services being offered by the bank. ICD representatives reportedly gave recommendations to the bank about procedures to speed up introduction of Islamic banking. The sides coordinated the preliminary term of the conversion.
Chairman of Sohibkorbonk Board Sherali Zardov and ICD chief executive Khaled Al-Aboodi signed a memorandum of understanding (MoU) in Dushanbe in early October last year.
Established on the basis of Tojikbankbiznes, Sohibkorbonk was registered with the National Bank of Tajikistan (NBT) as diversified bank in 1999. Sohibkorbonk, with headquarters in Dushanbe, now has 7 branches and 50 banking service centers in various regions of the country.
As it had been reported earlier, Tajik lender Bonki Rushdi Tojikiston (Tajikistan Development Bank) planned to switch to Islamic banking in 2015, after it signed an agreement with ICD to advice on the transition. However, no specific decisions have been made so far.
The law on Islamic banking in Tajikistan came into force on August 5, 2014.
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.
