Uzbekistan moves towards Islamic banking with law expected soon

Uzbekistan is moving closer to introducing Islamic banking, with a dedicated law expected to be adopted soon as regulators complete the legal and institutional framework for the sector.

The Central Bank of Uzbekistan says commercial banks have shown strong interest in Islamic finance, which officials see as a way to widen access to capital, attract long-term investment and reduce reliance on informal financial channels.

The draft law on Islamic banking has already been approved by the lower house of parliament and is now under review in the Senate. It will come into force once signed by the president.

In 2025, the Central Bank took several preparatory steps, including signing a memorandum of understanding with the International Centre for Education in Islamic Finance and applying for membership of the Accounting and Auditing Organization for Islamic Financial Institutions.

A specialised project office has also been established to coordinate the sector’s launch.

Regulators plan to develop a national roadmap for Islamic finance through to 2030 in cooperation with the Islamic Financial Services Board, with work due to begin in the second quarter of 2026.

Additional by-laws covering supervision, licensing and compliance are expected later this year, alongside the creation of a Central Council on Islamic Banking under the regulator.

Islamic finance operates in line with Sharia principles, which prohibit interest and speculative transactions. Instead, financing is based on asset-backed structures, profit-and-loss sharing and partnership models.

Key instruments include Murabaha (cost-plus financing), Mudaraba (investment partnership) and Musharaka (joint venture).

The Central Bank says these principles make Islamic finance particularly suitable for small and medium-sized businesses, infrastructure projects and long-term investment, while offering an alternative for individuals and companies that avoid conventional banking.

Under Uzbekistan’s 2030 Strategy, Islamic financial services are expected to be introduced in at least three commercial banks, initially state-owned. Regulators say the number of banks offering Islamic products could rise to five or six by 2030, either through ‘Islamic windows’ or fully Islamic banks.

The Central Bank says the development of Islamic finance will broaden the range of financial products, improve financial inclusion and help channel funds from the shadow economy into the formal banking system.

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