Khaled M. Al-AboodiASTANA — The Islamic Development Bank is looking to resource-rich Kazakhstan and Central Asia as a fertile ground for investment, with the launch of a $50 million renewable energy fund Monday and plans to finance agricultural projects, an official said. The Saudi Arabia-based multilateral bank's private sector arm, the Islamic Corporation for the Development of the Private Sector (ICD), said it was considering financing farming projects in Kazakhstan from its $600 million agribusiness fund. “There are Gulf countries which have the capital but lack the agricultural resources, while there are countries in Central Asia, Africa, which have the resources but not the capital. This fund will try to bridge the gap," ICD Chief Executive Khaled M. Al-Aboodi said on the sidelines of a conference. “We are looking at Kazakhstan," he said. Kazakhstan's resource-driven economy, at $185 billion the largest in Central Asia, presents opportunities for Islamic banking. Seventy percent of its 17 million population is Muslim, and investors in Kazakhstan have been looking for alternative sources of finance since the financial crisis laid bare Kazakh banks' exposure to bloated real estate markets and foreign borrowing. President Nursultan Nazarbayev, a 72-year-old former steelworker who has led Kazakhstan since Soviet times, has given his support to the development of an Islamic finance industry in the country. Al-Aboodi said the ICD's agribusiness fund was considering grain, meat and dairy projects in Kazakhstan, one of the world's top 10 wheat exporters, for sharia-compliant investment. Its Central Asia-specific renewable energy fund is lining up potential solar and wind projects, he said, adding that the fund had commitments from government and institutional investors for more than half of the $50 million it plans to raise. Kazakhstan's open steppe has huge potential for renewable energy, although investment to date has been minimal in a country that also holds around 3 percent of global crude oil reserves and is the world's largest uranium miner. “This sector (renewable energy) is not receiving enough attention. Everyone is focusing on oil and gas," said Al-Aboodi. Oil-rich Kazakhstan has shelved plans for a sovereign Islamic bond issue, but the issuance of a debut sukuk bond this year by the state-run Development Bank of Kazakhstan was a major breakthrough for Islamic finance in the country. The ICD also said it had agreed with a group of international and local investors to establish the first ijara, or Islamic leasing, company in Kazakhstan, with initial paid-up capital of around $35 million. The company is due to launch in early 2013. One of the potential investors is Al Hilal Bank, the Abu Dhabi-based lender that became the pioneer for Islamic banking in Kazakhstan when it opened its doors in March 2010. Al Hilal is still the only Islamic bank operating in Kazakhstan so far. “We hope to be a joint shareholder in the leasing company," Al Hilal Chief Executive Prasad Abraham said. “We have a portfolio in excess of $120 million. Al Hilal has become profitable, proving that the Islamic banking model can work." Abraham said, however, that the presence of a second or third Islamic bank would be important to the growth of sharia-compliant banking in Kazakhstan. Al Hilal represents less than 1 percent of Kazakhstan's total banking assets. Entry rules for new players - Islamic or conventional - are strict, with a minimum capital requirement of 10 billion tenge, or around $67 million. Kazakh law does not permit conventional banks to run Islamic sections. “One is a very lonely number. Contrary to what people often ask me, we wouldn't consider another Islamic bank coming in as a challenge; we would consider it complementary," Abraham said. – Reuters