Islamic finance in the states of Central Asia: Strategies, institutions, first experiences

[Introduction] Islamic finance has been developing steadily in the last decades since the 1970s, yet for most parts its growth was concentrated in the Arab states and in several south-east Asian parts of the world with a Muslim majority (Malaysia in particular). Perhaps the only exceptions to that were global financial centers like London or New York that serve as organizational hubs to channel and direct Islamic financial resources (Baba 2007). In comparison with that, in Central Asia Islamic finance appeared only in recent years. Triggered not least by the global financial crisis, political decision makers and financial entrepreneurs in the region were eager to develop new sources for capital. The Middle East and the Arabic states, less touched by the meltdown of Western banks, were welcoming partners for fresh capital a part of which now was labeled 'Islamic'. Before, Central Asia had experienced almost no developments in Islamic finance. Only the 'Islamic Development Bank' (IDB), a major development-aid institution that sometimes applies Islamic principles of loan-giving and investment, had been launching projects in the republics since the end of the 1990s. After the financial crisis, however, the double effect of a real-economy need for new and fresh cash-flows and the rising discourse of and the search for alternative forms of banking has opened a new chapter for Islamic finance in the region of Central Asia. The following text looks at first developments and concentrates on the emerging relations between the different states and its institutions on the one hand and Islamic finance and its practices on the other.