Publication Details
Abstract
The growing need to diversify Uzbekistan’s financial system and expand financial inclusion has driven interest in Islamic finance. Given that more than 90% of the country’s population is Muslim, implementing Sharia-compliant financial mechanisms provides both economic and social advantages. Despite the successful collaboration with the Islamic Development Bank (IsDB), Uzbekistan’s commercial banks have not acquired a holistic understanding of the Islamic financevalue proposition in terms of GDP, employment, and investment diversification benefits in the long long-term. At the macroeconomic level, there are few empirical models of these types of effects. Theoretical, comparative, empirical, and statistical analyses were performed in this research with data from the IsDB, Central Bank of Uzbekistan, and the Institute for Economic Research. The impact of Islamic finance on GDP growth, jobs, and fiscal revenues was estimated using the economic multiplier method. Islamic financial instruments: murabaha, mudaraba, musharaka, ijara and sukuk for about $18 billion in new investments; 16.3% of GDP, and 2 million new jobs. These tools also offer the opportunity to broaden financial inclusion through the involvement of citizens who used to stay away from traditional borrowings for religious motives. There are some economic advantages of integrating Islamic finance which boost financial stability, increase socially responsible investments and align the Uzbekistan economy with the UN Sustainable Development Goals. This indicates immediate action in terms of legislations, banks setting up Islamic finance departments and expanding sukuk and takaful markets to achieve sustainable and inclusive economic growth, the results showed.