Legal Challenges Hindering the Development of Islamic Finance in Uzbekistan

Abstract

Background: Recently, the Uzbek government expressed interest in introducing Islamic financial services. Nevertheless, the creation of the legal framework for the smooth operation of Islamic financial institutions is dragging. This work attempts to identify legal hurdles preventing thepenetration of the Islamic finance industry in Uzbekistan, and formulates vital policy recommendations to lead the development of a regulatory framework for the industry. Methods: A library research method and legal analysis is employed by going through diverse legal matters. For that purpose, we studied a range of legal documents varying from banking and capital market legislation to some newly introduced laws. Additionally, issues of Islamic finance in the tax law and the civil code of the nation are scrutinized. Results and Conclusions: The finding of the paper shows that some legal barriers exist that hinder the complete implementation of the Islamic finance industry in the country. They are not only in one area of national legislation but also exist in various parts of the legal system. Accordingly, it is recommended that the Uzbek government develop a sound legal and regulatory framework to provide a favourable environment for the activities of Islamic finance institutions. The general conclusion of the research resolves that, even if the process of developing an Islamic finance legal framework may start gradually, it should be holistic to be fully effective.