Lukoil, Russia's second largest oil company, is to raise $500m for an oil producing project in Kandym and Khausak-Shady in Uzbekistan. The lenders' consortium is expected to include the Islamic Development Bank, the Asian Development Bank and commercial banks. The transaction is subject to the approval of the Uzbekistani government.
This will be yet another IDB-sponsored Islamic finance deal in Uzbekistan, which is rapidly becoming a Central Asian hub for the industry. Alan Nasurlaev, a former project manager for the National Bank for Foreign Economic Activity of Uzbekistan (NBU) told The Islamic Globe that the IDB is behind a number of projects in Uzbekistan, including water supply, ambulances, power lines, agriculture, construction and educational institutions.
He said that if the Islamic finance sector continues to grow, he hopes that new privately held Islamic banks will start lending to small businesses, especially in inner regions of Uzbekistan. The Uzbek government is trying to develop the SME sector and the country's president Islam Karimov ordained 2011 the Year of Small Business and Entrepreneurship.
Nasurlaev believed the potential Islamic finance market is huge: "Given the geographical position of its historical evolution in the central Asian region, it can be assumed [that there are] great prospects for the introduction of Islamic financing."
Whilst Nasurlaev's was at NBU, the bank approved loans with the IDB for private and public enterprises with a view to privatization. He said these projects: "Do not contradict Shari'ah", create jobs and improve social integration and knowledge.
Mahir Humbatov, a member of the working commission for the application of Islamic finance in Russia and the former CIS countries described Uzbekistan as: "The weakest and the most passive amongst [the] CIS countries of the IDB."
Humbatov argued that this was not always the case: "Even during the Soviet Union, a number of people studying Islamic sciences used to go to study in Uzbek universities.
"However, today Islamic finance, it seems, is not promoted by the Uzbek government."
If the Uzbek government was more welcoming to Islamic finance, Humbatov said that development efforts could be "doubled or maybe tripled."
Uzbekistan is the most recent CIS country to join the IDB, joining in 2003 and has the smallest subscribed share capital to the IDB's total capital at just 0.02%.
© The Islamic Globe 2011
