In Uzbekistan, the approval of the "Murabaha" standard of Islamic financing is expected
The Central Bank intends to establish the procedure for Islamic banks to sell goods on installment terms with a markup
"Murabaha" Islamic Finance Standard Expected to Be Approved in Uzbekistan
The Central Bank plans to establish the procedure for the sale of goods by Islamic banks with a markup under the condition of installment payments.
The Central Bank of Uzbekistan has prepared a draft decision on the approval of the first Islamic finance standard named "Murabaha".
According to the document, Murabaha is a method of financing through the bank purchasing a good and selling it to a client—including through deferred payment—by openly disclosing its initial cost and the added markup amount.
In this process, the bank must first take ownership of the good, and only after that can it sell it to the client with a markup. The initial price of the good as well as the bank's markup must be clearly specified in the contract.
An important aspect is that banks are prohibited from charging additional commissions for financing. Furthermore, adding an extra markup to the price of the good due to late payment or term extension is not allowed.
If the client delays payment, a penalty provided for in the contract may be collected. However, these funds must be directed entirely to charitable purposes, not to the bank's income.
According to another important rule, if the bank receives a discount when purchasing the good, the financial benefit of this discount must also be passed on to the client.
Additionally, the sale of gold, silver, and currencies on a deferred basis under Murabaha is prohibited.
The new standard establishes the legal procedure for conducting Murabaha operations for financial institutions carrying out Islamic banking activities.
The document is currently a draft departmental order of the Regulator and will enter into force upon official publication.