DUSHANBE, July 8, 2011, Asia-Plus — Open joint-stock company (OJSC) Agroinvestbonk and the Islamic Corporation for the Development of the Private Sector (ICD) have singed an agreement on a US$7 million financing line.
The source at Agroinvestbonk says the agreement was signed during Agroinvestbonk head Farrukh Taghoymurodov’s visit to Jeddah, Saudi Arabia for attending an annual meeting of the Islamic Development Bank (IsDB). The 36th annual meeting of IsDB took place on June 26-30, 2011.
The document was inked by Farrukh Taghoymurodov and ICD CEO Khaled M. Al-Abudi. Financing line is provided on terms of Islamic banking, the source added.
Founded in 1992, Agroinvestbonk, with headquarters in Dushanbe, is the second largest commercial bank in Tajikistan. The bank has main branches in Khorog, Khujand, Kulob and Qurghon Teppa and 61 other branches across the republic.
Islamic Corporation for the Development of the Private Sector (ICD) is a multilateral organization, affiliated with the Islamic Development Bank (IsDB) Group. Its shareholders are the IDB, 45 Islamic member countries, and 5 public financial institutions from member countries. ICD was established by the IDB Board of Governors during their 24th annual meeting held in Jeddah in November 1999. The head office of ICD is in Jeddah, Kingdom of Saudi Arabia.
The mandate of ICD is to support economic development of its member countries through provision of finance to private sector projects in accordance with principles of the Sharia through promoting private sector development. ICD also provides advice to governments and private organizations to encourage the establishment, expansion and modernization of private enterprises.
Projects financed by ICD are selected on the basis of their contribution to economic development considering factors such as creation of employment opportunities and contribution to exports. ICD also attracts co-financiers for its projects and provides advice to governments and private sector groups on policies to encourage the establishment, expansion and modernization of private enterprises, development of capital markets, best management practices and enhance the role of market economy. ICD operates to complement the activities of IDB in member countries and also that of national financial institutions.
Islamic banking (or participant banking) is banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the 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 (forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were 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. Because Islam forbids simply lending out money at interest, Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to avoid this problem. The basic technique to avoid the prohibiton is the sharing of profit and loss, via terms such as profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijar).
