INSTITUTIONAL PATHWAYS FOR EXPANDING ISLAMIC FINANCE IN THE REAL SECTOR OF UZBEKISTAN: EVIDENCE, INTERNATIONAL BENCHMARKS, AND POLICY PRIORITIES

Abstract

Uzbekistan is entering a new stage in the institutionalization of Islamic banking while its real sector remains highly dependent on bank-intermediated finance and external development resources. This thesis examines how Islamic finance can be expanded as a credible source of working capital and investment finance for industry, agriculture, construction, and small and medium-sized enterprises. The study combines legal-document analysis, descriptive structural analysis, and comparative institutional benchmarking. Official data from the National Statistics Committee, the Central Bank of Uzbekistan, the Islamic Development Bank Group, Bank Negara Malaysia, the Participation Banks Association of Türkiye, and the Central Bank of the United Arab Emirates are used. The results show that industry, agriculture, and construction jointly generated 52.6 percent of Uzbekistan’s gross value added in 2024, while existing financing practices aligned with Islamic finance principles were still predominantly donor-intermediated and concentrated in trade-finance lines. Law No. O‘RQ-1126 of 27 March 2026 provides a legal foundation for Islamic banking and establishes central and bank-level governance of compliance with Islamic finance principles [1]. However, market expansion requires more than legislation. The thesis proposes a staged framework built on product-sector matching, a guarantee mechanism compatible with Islamic finance principles, synchronized statistical reporting, domestic funding capacity, and a phased movement from murabaha-based working-capital finance to ijara, istisna, musharaka, and sukuk. The thesis also demonstrates why cumulative approved facilities must not be divided by a single-date loan stock and presented as a precise market share. The findings offer a replicable policy framework for developing Islamic finance without compromising statistical comparability, prudential discipline, or real-sector alignment.