AKIPRESS.COM - The law on Islamic banking in Tajikistan has come into force on August 5 after it was published in the official government newspaper, according to the National Bank of Tajikistan (NBT).

“A plan of events on putting this law into practice has been drawn and the NBT is carrying out negotiations with the Islamic Development Bank (IsDB) on receiving technical assistance (grant) for preparation of statutory acts for introducing the Islamic banking principles in the country,” an official source at Tajik central bank told Asia-Plus in an interview.

We will recall that Tajikistan’s lower house of parliament passed the draft law on Islamic banking in Tajikistan on May 14 this year.

Presenting the draft law, the NBT head Abdujabbor Shirinov noted that many countries across the world, including the United States, some countries of the European Union, China, Russia, Azerbaijan, Kyrgyzstan, and Kazakhstan, had already introduced the Islamic banking principles.

Islamic banking is a banking activity that is consistent with the principles of Sharia and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba, or usury) for loans of money. Investing in businesses that provide goods or services considered contrary to Islamic principles is also haraam (sinful and prohibited). Although these principles have been applied in varying degrees by historical Islamic economies due to lack of Islamic practice, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

Islamic banking has the same purpose as conventional banking: to make money for the banking institute by lending out capital. But that is not the sole purpose either. Adherence to Islamic law and ensuring fair play is also at the core of Islamic banking. Because Islam forbids simply lending out money at interest, Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to prevent it. The basic principle of Islamic banking is based on risk-sharing which is a component of trade rather than risk-transfer which is seen in conventional banking.

Islamic banks reportedly have more than 300 institutions spread over 51 countries, including the United States through companies such as the Michigan-based University Bank, as well as an additional 250 mutual funds that comply with Islamic principles.