Kazakhstan studies lower capital requirements for Islamic banks

By: Reuters.

Dec 1 Kazakhstan's central bank is considering halving the capital requirement for Islamic banks to 5 billion tenge ($16.3 million) from 10 billion tenge, part of a series of initiatives to attract foreign capital to Central Asia's largest economy.

The majority Muslim state is keen to develop Islamic finance, a sector that currently holds less than 1 percent of total banking assets, according to a Thomson Reuters study released on Tuesday.

A proposed reduction in capital requirements for Islamic banks would apply for both local and foreign investors, deputy governor Nurlan Kussainov was quoted as saying in the study.

This could encourage new entrants in a market that now has one full-fledged Islamic bank, Al Hilal Islamic Bank, which holds less than 1 percent of total banking assets.

"Large banking groups such as Al Baraka and Maybank are showing interest in our market," Kussainov said, referring to Bahrain-based Al Baraka Banking Group and Malaysia's Maybank Islamic Berhad.

The central bank also plans to introduce insurance for Islamic deposits and allow conventional banks to establish Islamic windows, Kussainov said.

Legislative amendments have also been approved last month to allow the conversion of conventional banks into Islamic ones, which would come into force in January, he added.

Kussainov reiterated plans by the government to sell sovereign Islamic bonds, or sukuk, early next year, although he did not specify a size for the issuance.