Fresh legislation would allow Islamic finance to develop better under the secular regulatory regime of the predominantly Muslim country, said Yerlan Baidaulet, the
"A new unified law being developed would aim to avoid any complicated Arabic terms. Instead it will focus on a certain set of financial instruments, on a clear tax regime, the actual structures and mechanisms the industry has to offer."
Drafting could take between four and six months and the proposed legislation may be presented to the government by the middle of next year, said Baidaulet, who also advises the
The new law is to include provisions to facilitate conversion of conventional banks to sharia-compliant ones, a key element in a country with only one full-fledged Islamic bank,
In May last year, the private investment arm of the IDB said it planned to invest up to 35 percent of the subscribed and paid-up capital of
The rigidity of the existing law means conventional banks would have to shut down and then reapply for licenses to convert their operations, a process that could take up to three years, said Baidaulet.
"The existing law is just a declarative act. Why should we compromise on a dead law that of course is not effective?"
Currently, Islamic banks are categorized on a par with other commercial banks, known as Tier 2 banks, but the current law does not extend to them all the tax privileges that conventional banks have, he added.
"We are not asking for offshore tax or any tax exemptions, we just want to equalize legally all rights and privileges among all other Tier 2 banks to compete on the same and fair basis."
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