ALMATY, August 15 (Interfax) -- Governments in the Commonwealth of Independent States (CIS) will take measures to promote Islamic finance in the next five years, according to a report by Moody's, a ratings agency. Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan are expected to become leaders in Islamic finance in the CIS region, the report said. The governments of these countries, which have large Muslim populations, have made efforts to create favorable legal and regulatory conditions for the development of Islamic finance. The government plans to increase the proportion of Islamic banking assets to 3% of total banking assets by 2025, up from 0.2% now. The central bank plans to raise that share to 5% by 2021 from 1.4% now. Compared with Central Asian countries, there is less room for Islamic finance to develop in Russia, but some banks are still looking for opportunities within the existing legal framework to meet the potential demand for Islamic-compliant financial products and services.

According to the report, most CIS countries still have regulatory barriers to the development of Islamic finance, such as asset purchases and resales subject to VAT without authority approval; Islamic bank deposits in some countries have not been included in the national deposit insurance system. In addition, Islamic banks are unable to use the traditional channels of fund circulation and allocation provided by the central bank for banks due to interest payments, resulting in higher capital allocation and operating costs than ordinary banks.

At present, there are two Islamic banks in the country, Al Hilal Bank and Zamon Bank. Afore-mentioned bank assets scale in the whole Kazakhstan 28 secondary banks ranked the 26th and 27th respectively. (Economic and Commercial Office, Embassy of the People's Republic of China)