Al Hilal Bank seeks to popularise Islamic banking in Kazakhstan
In a sense, Kazakhstan's know-how in introducing the Sharia-based financial activities is unique, for the appropriate legislative frameworks were provided long before the first Islamic institution started functioning in the country. Having adopted the corresponding law in 2009, Kazakhstan was the first country in Central Asia and in the CIS which took steps to introduce the Islamic banking at the legislative level.
Al Hilal Bank, the first commercial Islamic bank in Kazakhstan, recently conducted a series of seminars and business lectures for media representatives in Almaty and Astana in a move to enhance public awareness on basic principles of Islamic financing.
According to the Regional Director of Al Hilal Bank, Timur Alim, the bank's mission is to expand and promote Islamic banking in Kazakhstan, following which it would seek expansion into the CIS financial market.
"Al Hilal is, above all, a corporate bank. Today, our major priority is to render assistance to government infrastructural projects, which were organized or initiated - in one form or another - through the "Samruk-Kazyna" National Welfare Fund or government agencies. The government provided a guarantee because the bank was established under the intergovernmental agreement (between Kazakhstan and the UAE) which defined our further strategy. Financial backing of the private sector is of secondary importance, at least at the moment," he said.
Kazakh business people have now received a chance to attract Islamic funds through direct financing or through securities issued by Al-Hilal. In addition, large projects may be implemented in cooperation with national holdings, which in this case will be issuing the securities.
At the same time, Alim stressed, Al Hilal Bank doesn't seek an increase in its deposit base. "We are offering our individual clients, who are ready to invest up to US $5-10,000 only two types of products, which are wakalah and mudarabah. The population, however, is still not so well prepared for the Islamic products," he said.
In the Islamic banking, wakalah, or "the power of attorney", occurs when a person appoints a representative to undertake transactions on his behalf, similar to a power of attorney. Mudarabah is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. The mudarabah, which is also called profit sharing, is a contract, with one party providing 100 percent of the capital and the other party providing its specialist knowledge to invest the capital and manage the investment project. Profits generated are shared between the parties according to a pre-agreed ratio.
As for the investment activity, the Bank's representative says, it finances business exclusively through buying or selling assets or leasing activities.
"At the present stage, Al Hilal doesn't offer products for entering into the capital, because the latter implies risk sharing, which is rather a problematic thing, largely due to the lack of experience. That is why we need some time to introduce products of the kind in Kazakhstan," Alim said.
"Our corporate colour is orange. Thus, we wanted to say that the Islamic banking is not something antique or medieval, but a completely new, available and modern financial activity. As for the fact that in our bank women wear head scarves or hijab, this is only a part of corporate culture. They are not forced to do so", Alim said.
Unlike a number of other banks in Kazakhstan these days, Al Hilal has no liquidity problems, and, on the contrary, comes short of good projects. All the while, Al Hilal makes grand plans for the expansion in the CIS region. In the short run, the second Islamic bank is likely to be established in Kazakhstan. The Development Bank of Kazakhstan and the Malaysian financial group "AmanahRaya", which adopted the project's implementation plan last July, are supposed to be the major shareholders of the new bank.
According to the Director of DAMU Research Group Timur Ayssautov, the establishment of the first Islamic bank in Kazakhstan is not only an opportunity to satisfy the requirements of a certain part of Muslim population, but, above all, is a real and practical diversification of system risks in the financial and banking sectors.
According to the press service of the Kazakh Foreign Ministry, the Al Hilal Islamic Bank was established following the signing of intergovernmental agreement between Kazakhstan and the United Arab Emirates. The Bank is a 100% subsidiary of the "Al Hilal Abu Dhabi" and is based in the country's two major cities - Astana and Almaty. A relatively young Al Hilal Islamic Bank, established during the height of financial crisis in 2008, has achieved serious progress in the UAE.
In 2009, following the official visit of President Nursultan Nazarbayev, a decision was made to open the bank's subsidiary in Kazakhstan. In 2010, it officially received the banking license to operate in the country.