Senate Approves Law on the Introduction of Islamic Banking in Uzbekistan

Tashkent, Uzbekistan (UzDaily.com) — At a regular plenary session of the Senate of the Oliy Majlis, lawmakers reviewed and approved the Law “On Amendments and Additions to Certain Legislative Acts of the Republic of Uzbekistan Aimed at Introducing Islamic Banking Activities in Uzbekistan.”

During the discussion, it was noted that in recent years the country has been carrying out systematic efforts to develop the banking system by drawing on international experience and introducing modern financial services. In response to the growing demand to expand financial inclusion and offer alternative banking products, the law establishes the legal framework for Islamic banking activities.

The document provides for the introduction of new provisions into two codes and seven laws, defining a specific type of license granting the right to conduct Islamic banking. Under such a license, banks will be able to operate either as fully fledged Islamic banks or in a combined format, offering both conventional and Islamic banking services simultaneously.

To coordinate matters related to Islamic finance, the law stipulates the establishment of Islamic finance councils within the Central Bank and within banks engaged in Islamic banking activities. In addition, taking into account the specific nature of Islamic financial transactions, a separate chapter is introduced into the Tax Code to regulate taxation. Under these provisions, income from Islamic financial operations is treated as equivalent to interest income, while the markup applied by banks and microfinance organizations to goods sold to clients is exempt from value-added tax.

Senators emphasized that the adoption of the law will help expand access to financial services for the population and entrepreneurs, strengthen competition in the banking sector, and attract new strategic investors.

Following the discussion, the law was approved by the Senate.