Islamic Banking and Finance
Micro, small, and medium enterprises (MSMEs), are the drivers of Kyrgyz economic growth and key contributors to sustainable gross domestic product (GDP). Since the country achieved independence from the Soviet Union in 1991, MSMEs became one of the prime supports of the economy as the number of industrial enterprises declined. Most MSMEs are engaged in the trade and trade-related sectors. These generate significant employment opportunities for skilled and unskilled labor alike. Despite their importance to economic development, however, the growth of the country's MSMEs has been hindered by their limited access to banking services, along with high tax rates, and inconsistent policies. Thus, government support programs and assistance from multilateral agencies and policy makers are essential to MSME growth. The Bank Advisory Services of IFC’s Financial Institutions Group provides advisory services to banks in aid of strengthening their capacity and increasing their outreach to the MSME sector. This is achieved through capacity building, training, knowledge sharing, and dissemination of best practices in MSME banking and risk management. IFC’s primary goal is to increase the number of banks that offer banking services to MSMEs in a profitable and sustainable manner. The organization is globally recognized as a market leader in MSME banking, through its various regional engagements. IFC is also recognized for its global expertise and knowledge in this area. In response to growing market demand, IFC has recently enhanced its advisory services to include Islamic financing. In this respect, the National Bank of Kyrgyz Republic has also expressed an interest in exploring this segment of the market. Indeed, the NBKR is already looking at the possibility of putting regulations for Islamic banking in place. The study reveals a funding potential of $342.2 to 456.3 million for Islamic financing to MSMEs, with a corresponding depository potential of $402.6-536.9 million over the next few years. This funding potential exists due to the ‘new-to-bank’ funding opportunity within the un-served and underserved MSME segments. These are either partially served by financial institutions or do not borrow at all for various reasons. Findings include ‘new-to-bank’ funding potential of $309.6-412.9 million, which is untapped as banks and other financial institutions lack adequate the strategic focus needed on this segment to offer Shariah-compliant products.
| Main Author: | |
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| Format: | Report biblioteca |
| Language: | English en_US |
| Published: |
Bishkek, Kyrgyz
2016-02
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| Subjects: | microfinance, Islamic finance, small and medium-sized enterprises, microenterprises, SME, MSME, |
| Online Access: | http://documents.worldbank.org/curated/en/167041481601059316/Islamic-banking-and-finance-opportunities-across-micro-small-and-medium-enterprises-in-the-Kyrgyz-Republic https://hdl.handle.net/10986/25777 |
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| Summary: | Micro, small, and medium enterprises
(MSMEs), are the drivers of Kyrgyz economic growth and key
contributors to sustainable gross domestic product (GDP).
Since the country achieved independence from the Soviet
Union in 1991, MSMEs became one of the prime supports of the
economy as the number of industrial enterprises declined.
Most MSMEs are engaged in the trade and trade-related
sectors. These generate significant employment opportunities
for skilled and unskilled labor alike. Despite their
importance to economic development, however, the growth of
the country's MSMEs has been hindered by their limited
access to banking services, along with high tax rates, and
inconsistent policies. Thus, government support programs and
assistance from multilateral agencies and policy makers are
essential to MSME growth. The Bank Advisory Services of
IFC’s Financial Institutions Group provides advisory
services to banks in aid of strengthening their capacity and
increasing their outreach to the MSME sector. This is
achieved through capacity building, training, knowledge
sharing, and dissemination of best practices in MSME banking
and risk management. IFC’s primary goal is to increase the
number of banks that offer banking services to MSMEs in a
profitable and sustainable manner. The organization is
globally recognized as a market leader in MSME banking,
through its various regional engagements. IFC is also
recognized for its global expertise and knowledge in this
area. In response to growing market demand, IFC has recently
enhanced its advisory services to include Islamic financing.
In this respect, the National Bank of Kyrgyz Republic has
also expressed an interest in exploring this segment of the
market. Indeed, the NBKR is already looking at the
possibility of putting regulations for Islamic banking in
place. The study reveals a funding potential of $342.2 to
456.3 million for Islamic financing to MSMEs, with a
corresponding depository potential of $402.6-536.9 million
over the next few years. This funding potential exists due
to the ‘new-to-bank’ funding opportunity within the
un-served and underserved MSME segments. These are either
partially served by financial institutions or do not borrow
at all for various reasons. Findings include ‘new-to-bank’
funding potential of $309.6-412.9 million, which is untapped
as banks and other financial institutions lack adequate the
strategic focus needed on this segment to offer
Shariah-compliant products. |
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