BISHKEK, Kyrgyzstan, October 17. Kyrgyzstan has approved amendments to several regulations governing banks and microfinance organizations operating under Islamic principles, introducing a new financial instrument, "wakala bil-istismar," Trend reports via the country's National Bank.
Under this agreement, one party (the agent) manages the funds of another party (the principal) to generate profit. The contract can be concluded on a remunerated or gratuitous basis, with profits accruing to the investor and the agent receiving a fixed, proportional, or pre-agreed remuneration.
Banks and microfinance organizations may act as either agents or principals. The regulations define reserve formation, income distribution, and compensation procedures in the event of losses, all in accordance with Shariah standards under the supervision of the Shariah Council.
A wakala bil-istismar agreement may be restricted, with investment targets determined by the investor, or unrestricted, allowing the agent to select targets independently. Pooling of investors’ funds for joint investments is also permitted, similar to the Islamic mudarabah model.
Amendments have been made to six regulatory documents, including those governing microfinance organizations, credit unions, and licensing procedures. The new rules apply to all financial institutions offering Islamic banking services.
The National Bank stated that the reforms aim to develop Islamic finance in Kyrgyzstan, increase the flexibility of financial instruments, and enhance operational transparency.