Uzbekistan Proceeds with Draft Law to Launch Islamic Banking System

On September 16, 2025, the Legislative Chamber of the Oliy Majlis, Uzbekistan’s lower house of parliament, approved in its first reading a draft law designed to establish a legal framework for Islamic banking. This development is part of the government’s broader strategy to diversify the financial sector, enhance economic inclusion, and attract both domestic and foreign investment through Shariah-compliant financial services.

Legal Framework for Islamic Banking

The draft law formally recognizes Islamic banks and defines the structure of permissible financial operations, including contracts such as murabaha, mudaraba, and musharaka, which are central to Shariah-compliant finance. It also outlines a licensing framework for both fully Islamic banks and Islamic “windows” within conventional banks. The legislation proposes amendments to the Tax Code, Civil Code, and several other laws to align Uzbekistan’s financial system with the requirements of Islamic finance.

Institutional and Regulatory Infrastructure

To ensure compliance with Shariah principles, the draft law requires the establishment of dedicated councils, auditing bodies, and accounting systems within Islamic financial institutions. The Central Bank of Uzbekistan is preparing to oversee this transition and has studied international best practices, including guidance from the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).

Economic Impact

Introducing Islamic banking is expected to provide alternative financial services to individuals and businesses that currently avoid conventional banks due to religious beliefs. Surveys indicate that a significant portion of Uzbekistan’s population and business community prefers Shariah-compliant financial options. By offering these products, the government aims to expand financial inclusion, increase access to formal banking services, and stimulate economic growth.

Furthermore, analysts suggest that the adoption of Islamic banking could unlock substantial financial resources for businesses and foster a more diversified economy, making Uzbekistan an attractive destination for regional and international investors interested in Shariah-compliant finance.

Regional Cooperation and International Standards

Uzbekistan is taking cues from countries with established Islamic finance sectors, such as Malaysia, Turkey, and the United Arab Emirates. The draft law aligns with international standards in governance, auditing, and Shariah compliance to ensure that Uzbekistan’s Islamic banking system meets global benchmarks.

Following its first reading, the draft law will undergo further deliberations and refinements before the second reading and final approval. Once enacted, it will enable the launch of Islamic banks and the introduction of Shariah-compliant financial products, marking a significant milestone in Uzbekistan’s financial sector development and regional economic integration.