Otbasy Bank to Launch Interest-Free Islamic Mortgages in Kazakhstan

Significant changes are expected in Kazakhstan’s housing finance sector. Otbasy Bank recently met with the National Union of Builders and major construction firms to discuss the implementation of mortgage products based on Sharia principles, according to a report by "Naryq."

According to recent studies, 55% of Muslims in Kazakhstan are currently forced to use traditional banking products due to a lack of viable alternatives. Furthermore, more than 2 million citizens in the country are in need of better housing conditions, yet many refrain from taking interest-based loans due to their religious beliefs.

During President Kassym-Jomart Tokayev’s official visit to Pakistan, Otbasy Bank signed a cooperation agreement with Meezan Bank Limited, a leader in the Islamic banking sector. Within the framework of this partnership, the following mechanisms will be developed:

• Introduction of Islamic financial instruments: Implementation of products such as Murabaha (cost-plus financing), Ijarah (leasing), and Musharakah Mutanaqisah (diminishing partnership);
• Risk management: Establishing systems to monitor compliance with Sharia requirements and risk mitigation;
• System adaptation: Adapting Islamic financial tools to fit the existing housing construction savings system.

Currently, the bank’s internal working group has finalized the concept for Islamic financing. The next crucial step is introducing amendments to the Law "On Housing Construction Savings." These changes will provide the legal foundation necessary for Otbasy Bank to conduct Islamic banking operations.

"Every day, we receive inquiries from citizens who cannot utilize traditional mortgages due to religious reasons. Islamic mortgages will provide an accessible solution for them. This is a matter of ensuring equal access to financing," stated Lyazzat Ibragimova, Chairperson of the Board of Otbasy Bank.

Previously, bank employees underwent specialized training in financial law in accordance with Sharia standards, conducted in collaboration with the Malaysian organization CSQ Law.