ASTANA – Two decades after the collapse of the Soviet Union freed Kazakhstan from Marxist ideology, the country of 17 million people is making a bid to become a regional center of Islamic finance. President Nursultan Nazarbayev, in power since Soviet times, has declared he wants Almaty to become a hub for Islamic banking in the former Soviet Union, which includes other majority Muslim states and Russian republics such as Tatarstan. While that reflects growing demand among a generation of Muslims who grew up after the Soviet Union's collapse, it could also bring direct economic benefits to Kazakhstan by linking the country to big pools of Islamic investment money in the Gulf and Southeast Asia. On the face of it, the country is ideal for Islamic finance. About 70 percent of its population is nominally Muslim and, in the wake of the global financial crisis, people are more receptive to alternative forms of banking. Abu Dhabi-based Al Hilal Bank became the pioneer for Islamic banking in Kazakhstan by opening its doors there in March 2010. It employs nearly 50 people in the country and its investments to date are worth $90 million, said Prasad Abraham, the bank's local chief executive, adding that it had set a target of $200 million by the end of 2012. So far, Al Hilal's business has been in the corporate sector and with state-owned companies such as postal firm KazPost, with which the bank signed a wakala or agency agreement worth 1.5 billion tenge ($10 million) in March. Legislation was passed in 2009 that would in principle allow the government to issue a sovereign sukuk or Islamic bond, which would be a big step in creating a Shariah-compliant debt market. Zaratkazy Nurpiissov, chairman of the management board of Fattah Finance, the country's first brokerage to offer Shariah-compliant services, said there was demand for Islamic consumer finance to buy cars and household goods. Fattah Finance's Haj fund, in which pilgrims set aside cash to visit Makkah, has accumulated $150,000 in its first year. Nurpiissov said such numbers were the tip of the iceberg. "I would say there are more than 1 million people who wish to use Islamic finance services," he said. "That number is growing every year." – Reuters
