JAKARTA – Uzbekistan has taken a significant step toward establishing Islamic banking services within its financial system, as the country’s parliament approved a groundbreaking draft law in its initial reading on September 16, 2025. The Legislative Chamber of the Oliy Majlis endorsed the proposed legislation that would create a comprehensive legal foundation for Shariah-compliant banking operations.

Comprehensive Legal Structure

The proposed legislation establishes formal recognition for Islamic banking institutions and clearly defines acceptable financial operations under Islamic law. The framework encompasses essential Islamic financial contracts including murabaha (cost-plus financing), mudaraba (profit-sharing partnerships), and musharaka (joint ventures), which form the backbone of Shariah-compliant financial services.

The draft law introduces a structured licensing system that accommodates both dedicated Islamic banks and conventional banks offering Islamic banking services through specialized “windows.” To ensure seamless integration, the legislation proposes modifications to existing legal frameworks, including the Tax Code and Civil Code, creating harmony between traditional and Islamic banking systems.

Regulatory Oversight and Compliance

The proposed system emphasizes strict adherence to Islamic principles through mandatory establishment of Shariah supervisory councils, specialized auditing mechanisms, and tailored accounting systems within Islamic financial institutions. The Central Bank of Uzbekistan is actively preparing for its oversight role, drawing from international expertise and standards established by prestigious organizations such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).

Addressing Market Demand

The initiative responds to substantial domestic demand for religiously compliant financial services. Research indicates that a considerable segment of Uzbekistan’s population and business sector has avoided conventional banking due to religious considerations, creating an underserved market segment. The introduction of Islamic banking aims to bridge this gap, potentially bringing previously excluded individuals and businesses into the formal financial system.

This expansion of financial services is anticipated to stimulate broader economic participation and growth by providing viable alternatives that align with Islamic principles while meeting modern financial needs.

Economic Growth Potential

Financial experts project that Islamic banking implementation could mobilize significant untapped financial resources, particularly benefiting small and medium enterprises that have historically avoided interest-based financing. The diversification of financial services is expected to enhance Uzbekistan’s appeal to both regional and international investors seeking Shariah-compliant investment opportunities.

The development positions Uzbekistan to tap into the growing global Islamic finance market, potentially attracting foreign direct investment from Islamic countries and institutions worldwide.

Learning from Global Best Practices

Uzbekistan’s approach draws inspiration from successful Islamic banking implementations in established markets including Malaysia, Turkey, and the United Arab Emirates. The draft legislation incorporates international standards for governance, auditing procedures, and Shariah compliance mechanisms to ensure the system meets global benchmarks from its inception.

Path Forward

The legislation now proceeds to additional parliamentary review and refinement phases before the second reading and final passage. Upon enactment, the law will enable the operational launch of Islamic banks and the introduction of various Shariah-compliant financial products and services.

This development represents a pivotal moment in Uzbekistan’s financial sector evolution, promising enhanced economic inclusion, diversified financial services, and stronger integration with regional Islamic finance networks. The initiative demonstrates the country’s commitment to accommodating diverse financial preferences while pursuing broader economic development objectives.

Original Article:

Halal Times. (2025, September 19). Uzbekistan Proceeds with Draft Law to Launch Islamic Banking System.  Retrieved from https://www.halaltimes.com/uzbekistan-proceeds-with-draft-law-to-launch-islamic-banking-system/