Bishkek: Aiyl Bank and the Guarantee Fund OJSC have signed a cooperation agreement to broaden access to Islamic financing for entrepreneurs, particularly small and medium-sized businesses in regional areas.

According to Trend News Agency, the agreement allows the Guarantee Fund to cover up to half of a client’s liabilities, enabling businesses with limited collateral to access financing. These funds are provided in line with Islamic principles, utilizing interest-free trade and partnership-based contracts.

Islamic finance operates on Sharia principles, which differ from conventional banking by prohibiting riba, or interest. This is achieved through the use of contracts based on trade, such as Murabaha, and profit/loss sharing, such as Mudarabah or Musharakah. The sector shows stable growth globally, with assets of Islamic financial institutions worldwide exceeding $2.5 trillion. The Gulf countries and Southeast Asia are noted as key hubs for Islamic finance.