Islamic banking in Kazakhstan
Al Hilal’s story
The first Islamic Bank in Kazakhstan
and its relations with
domestic regulative bodies:
lessons and recommendations
By Prasad Adraham
Chairman
Al Hilal Bank Kazakhstan
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Quick Facts. Introduction
 Al Hilal Islamic Bank is a 100% subsidiary of Al Hilal Bank, UAE;
 First Islamic bank in Kazakhstan and CIS countries;
 Raise the profile of Islamic banking in the CIS countries whilst contributing to Kazakhstan’s
national growth and prosperity;
 Provide the right Islamic finance solutions to meet Customers needs;
 Shariah Board – Shariah Coordinator;
 Almaty
Astana
More Planned for 2010.
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Quick facts. What has been done
Intergovernmental
agreement approved
by the Governments of
UAE and Kazakhstan
President’s
Nazarbayev visit to
UAE
Introduction of
amendments to
Banking law, related to
Islamic banking
activity
February
2009
Intergovernmental
working group started
working on agreement
May
2009
June 2009
Al hilal, Abu Dhabi
decides to enter
Kazakhstan market
August
2009
End of
2009
Al hilal, Abu Dhabi
started working with
Legal advisors on basic
documents and
agreements
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First
transaction
approved on
amount of
$8mln.
Official registration
of legal entity
January
2010
March
2010
First Islamic
banking license
obtained on 17th
of March
April
2010
Product philosophy

Strict Adherence to Sharia Requirements

To start with Basic products – the must haves
 To evolve into Market Differentiation
 To take important role in syndication
 To develop strong Sukuk structuring capabilities
Customer is at the Centre of Our Product Development Philosophy
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Industry breakdown of Al Hilal bank’s portfolio
Mining and oil industry
Manufacturing
Transportation
Trade and distribution
Mining and oil industry
Manufacture
Telecommunications
Trade and distribution
Production of consumer goods
Energy
Production and processing of agricultural production
Transportation
Construction
Health care and pharmacy business
Others
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Industry breakdown. Financing Criteria
 Industry:
Any industry except military, tobacco, alcohol, gambling,
residential construction and other non-Shari’a compliant
industries;
 Track record:
The business should exist at least for three years; stand-alone
start-up projects are not acceptable;
 Owner contribution:
The project owner contributes at least 20% of the project value in
cash;
 Financial reporting:
Financial statements for the last 3 years;
 Investment range:
The target investment range is up to USD 20 mln;
 Investment span:
Up to seven years, depending on the industry and project
features;
 Investment purpose:
Working capital, trade finance or capital expenditures;
 Financial standing:
Business has been profitable over the last three years;
 Credit history:
Absence of existing past-due loans;
 Independent assessment:
Feasibility study done by a reputable independent consultant .
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FINANCING PRODUCTS
Products offered by Al Hilal Islamic Bank
FINANCING PRODUCTS
Product
Structure
Ijarah
Murabaha/LC
Murabaha
Commodity
Murabaha
Currency
●
●
KZT, USD
●
●
KZT, USD
Working Capital Finance
Asset Acquisition Finance
●
Asset Finance
●
Project Finance
●
●
●
KZT, USD
Contract Finance
●
●
●
KZT, USD
KZT, USD
Pricing
Tenor
Fixed
Less that 3 years
Floating
More that 3 years
Product
Structure
Current Account
Qard Al Hassan
Term Deposit
Mudharaba and Wakala Investment
DEPOSIT PRODUCTS
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Islamic Products
Ijara
 - Ownership Registration Requirements
 - Transactions Subject to lease Law
 -Ijara Mawsuffa Fi Dimma (Forward Lease)
Murabaha
 - Promise to Purchase
 - Non Recognition of Murabaha
 - Reverse Murabaha
 - Murabaha Transaction Sequence
 Letter of Credit
 Savings Account
 FX Forward Transactions
 New Islamic Products
 Interbank Transactions
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Practical Issues
 Off Balance Sheet Booking of Wakala and Mudaraba
 VAT Issue on Wakala transactions
 Penalty Clause
 Governing Law Clause

Interest Waiver Clause
 Mudaraba Issues
 Investment Risk Reserves
 Sukuk
 Subordinatd Financing – Tier 2 Capital
 Prudential Regulations
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