Eurasianet reports that the Islamic Development Bank and the Kyrgyz government are launching a pilot project with a view to introducing Islamic financing in the Republic.

In recent years the issue of Sharia-compatible financing has attracted an increasing amount of attention from banks. The problem with “traditional” financial products such as loans and mortages is that the payment and collection of interest is forbidden. Obviously this leaves many Muslims in a quandary, as they seek to reconcile their faith with their financial requirements. Islamic mortgages are an increasing market in many countries, including the UK.

In Central Asia, however, there has so far been limited interest in providing Islamic financial services, especially from the private sector, as Ben reported on this site a couple of months ago.

In Kyrgyzstan, however, the private sector is involved in the shape of EkoBank. As Eurasianet reports,

Bakiev said after the signing ceremony that he thinks the development of Islamic banking will convince the IDB’s other 55 member countries to invest in his country’s economy. He also indicated that his government was considering pushing the experiment further and set up a regional Islamic banking center in Bishkek.

As the article notes, this aim is still a fair way off, despite the presence of the IDB in Central Asia and the fact that some Kazakh banks are already offering Islamic products and services. However, the conclusions it draws are still cautious:

The time appears to be over when Muslim bankers lamented that Central Asian governments did not even appear to know that Islamic banking existed. Regional decision-makers and private bankers are gradually opening up to Islamic financial products.

Whether Islamic banking will achieve widespread success among Central Asian publics is another question.