Regulations on the Provision of Islamic Financing Services by Microfinance Organizations

Resolution of the Board of the Central Bank of the Republic of Uzbekistan, registered on 26.07.2024, registration number 3536

Date of Entry into Force

26.07.2024

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[
OKOZ:
1.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.05.00.00 Republic Budget / 07.05.06.00 Financing of Social and Other Sectors]
[
TSZ:
1.
Finance / General Issues]

Resolution of the Board of the Central Bank of the Republic of Uzbekistan

On Approval of the Regulation on the Procedure for Providing Services Related to Islamic Financing by Microfinance Organizations

[Registered by the Ministry of Justice of the Republic of Uzbekistan on July 26, 2024, registration number 3536]

In accordance with the Laws of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan" and "On Non-Bank Credit Organizations and Microfinance Activities," the Board of the Central Bank of the Republic of Uzbekistan resolves:

The Regulation on the Procedure for Providing Services Related to Islamic Financing by Microfinance Organizations
is approved in accordance with the
appendix.
[
OKOZ:

01.00.00.00 Constitutional System / 01.14.00.00 Law-Making Activity of State Bodies / 01.14.05.00 Publication and Entry into Force of Normative Legal Acts]

This resolution enters into force from the date of its official publication.

Chairman M. NURMURATOV

Tashkent city,

July 19, 2024,

No. 23/4

APPENDIX

to the Resolution of the Board of the Central Bank of the Republic of Uzbekistan dated July 19, 2024, No. 23/4

REGULATION

On the Procedure for Providing Services Related to Islamic Financing by Microfinance Organizations

This Regulation establishes the procedure for providing services related to Islamic financing by microfinance organizations.

Chapter 1. General Provisions

The following main concepts are used in this Regulation:
[
OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.01.00 General Issues]

Islamic lease (Ijarah)
— the transfer to the client for temporary ownership and (or) use of non-consumable goods (property) purchased by the microfinance organization upon the client's application or held on its balance sheet, for an agreed period; [ OKOZ:
1.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.23.00.00 Other Credit Institutions / 07.23.01.00 Credit Unions]

Special Council for Coordinating Islamic Finance Issues (hereinafter referred to in the text as the Special Council) — a special council responsible for ensuring that the services related to Islamic financing provided by the microfinance organization are provided in accordance with legislative acts and the requirements of this Regulation; [ OKOZ:
1.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.01.00 General Issues]

Financing based on credit sales (Murabaha)
— financing of the client by the microfinance organization through the sale of goods on credit, including the purchase price of the goods and the markup amount; [ OKOZ:
1.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.01.00 General Issues]

Financing based on advance payment (Salam)
— financing of the client by the microfinance organization through full advance payment for goods to be delivered in the future to the microfinance organization (client); [ OKOZ:
1.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.01.00 General Issues]

Financing based on profit sharing (Mudaraba)
— financing of the client by the microfinance organization by allocating monetary funds to the client's commercial activity with the aim of obtaining profit;

Partnership — Financing based on profit and loss sharing (Musharaka) — financing of the client by the microfinance organization by conducting commercial activity (partnership) together with one or more participants (clients) or by participating in the charter capital of legal entities.

A microfinance organization may provide clients with Islamic lease, financing based on profit sharing (Mudaraba), financing based on credit sales (Murabaha), partnership — financing based on profit and loss sharing (Musharaka), and financing based on advance payment (Salam) services based on the requirements of this Regulation.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.05.00 Contract. Conclusion, Amendment and Termination of Contracts;
2.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.02.00 Loans of the Central Bank of the Republic of Uzbekistan, Interest Rate of the Central Bank of the Republic of Uzbekistan;
3.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.23.00.00 Other Credit Institutions / 07.23.01.00 Credit Unions]

A Special Council must be established in the microfinance organization for the provision of services related to Islamic financing. Upon the decision of the general meeting of participants (shareholders) of the microfinance organization, it may engage a Special Council formed in accordance with the requirements established by this Regulation, organized under industry-specific associations or unions, on a contract (outsourcing) basis. In this case, the microfinance organization is responsible for managing the risks associated with the activities of the engaged Special Council.

The microfinance organization submits information to the Central Bank regarding the establishment of the Special Council or changes to its composition within 10 working days from the date of such actions, attaching the relevant decision of the general meeting of participants (shareholders) and documents confirming the compliance of the Chairman and members of the Special Council with the requirements established in
Chapter 2
of this Regulation.

Services related to Islamic financing provided by the microfinance organization must be provided in compliance with the requirements of legislative acts and the recommendations of the Special Council.
[
OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.01.00 General Issues]

It is prohibited to engage in the sale of goods and financing of activities that are prohibited by legislative acts and contradict the recommendations of the Special Council in the provision of services related to Islamic financing by the microfinance organization.
[
OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.01.00 General Issues]

The microfinance organization must explain to its clients the specific features of services related to Islamic financing and the risks associated with them in the provision of such services.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.05.00 Contract. Conclusion, Amendment and Termination of Contracts]

A preliminary contract may be concluded between the microfinance organization and the client before concluding a contract for the provision of services related to Islamic financing.

The preliminary contract may provide for the payment of a down payment by the client for services related to Islamic financing.

If a microfinance organization provides other services specified in Part 1 of Article 4 of the Law of the Republic of Uzbekistan "On Non-Bank Credit Organizations and Microfinance Activities" along with services related to Islamic financing, separate accounting must be maintained for the activities of this microfinance organization related to the provision of services related to Islamic financing.
[
OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.22.00.00 Lending / 07.22.02.00 Loans of the Central Bank of the Republic of Uzbekistan, Interest Rate of the Central Bank of the Republic of Uzbekistan]

Other terms of contracts concluded within the framework of the provision of services related to Islamic financing by the microfinance organization, not provided for in this Regulation, are determined by the agreement of the parties in accordance with legislation and the recommendations of the Special Council.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.02.00 Ensuring Performance of Obligations / 03.10.02.01 Penalty;
2.
03.00.00.00 Civil Legislation / 03.11.00.00 Specific Types of Obligations / 03.11.16.00 Bank Account]

If the microfinance organization collects a penalty from the client for delayed payments, it must maintain the collected penalty in a separate account and direct it for charitable purposes in the name of the client.

Chapter 2. Special Council and Requirements Therefor

The Special Council in the microfinance organization is established by the general meeting of participants (shareholders) of the microfinance organization with a composition of not less than five people.
[
OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.02.00.00 Management in the Field of Finance and Economy]

The Chairman of the Special Council leads the Special Council.

The appointment of the Chairman and members of the Special Council and the termination of their powers is carried out by the general meeting of participants (shareholders) of the microfinance organization.

The Chairman and members of the Special Council must comply with the requirements for business reputation established in Part 2 of Article 16 of the Law of the Republic of Uzbekistan "On Non-Bank Credit Organizations and Microfinance Activities."
[
OKOZ:

13.00.00.00 Education. Science. Culture / 13.01.00.00 Education / 13.01.01.00 General Rules]

At least one of the members of the Special Council must have higher education in the field of Islamic law, one member must have higher legal education, and the remaining members must have an international certificate in Islamic financing.
The Special Council carries out its activities based on the Regulation approved by the general meeting of participants (shareholders) of the microfinance organization.
The conclusions and recommendations of the Special Council are mandatory for the members of the executive body of the microfinance organization or the person performing the functions of the sole executive body.
The duties of the Special Council include:
[
OKOZ:

02.00.00.00 Fundamentals of State Administration / 02.08.00.00 General Issues of State Administration in the Field of Economy, Social and Cultural Construction / 02.08.07.00 Accounting. Reporting. Statistics (also see 07.29.00.00)]

review and approval of draft standard contracts, internal documents, and reports related to the implementation of services related to Islamic financing by the microfinance organization;

ensuring the compliance of services related to Islamic financing provided by the microfinance organization with legislative acts and the consideration of requirements established in standards for implementing Islamic financing, and submitting periodic reports to the management bodies of the microfinance organization on the results of assessing the compliance status;

assisting the management and executive bodies of the microfinance organization in managing risks associated with services related to Islamic financing and implementing an internal control system through its conclusions and recommendations.

Chapter 3. Provision of Services Related to Islamic Financing

Section 1. Provision of Financing Based on Credit Sales (Murabaha) Service

The service of financing based on credit sales (hereinafter referred to in the text as credit sales) is implemented by the microfinance organization based on the client's relevant application. The application may indicate the name of the object of credit sales, the approximate price at which the client agrees to purchase it, as well as the conditions of purchase.
The client may determine the seller from whom the object of credit sales can be purchased, in mutual agreement with the microfinance organization.

If more favorable offers for purchasing the object of credit sales are available from other sellers, the microfinance organization has the right to independently select the seller.

The microfinance organization may require the client to make a down payment in the form of monetary funds for the object of credit sales.

The down payment is accepted as part of the payments that the client must repay within the framework of credit sales.

The microfinance organization assumes all risks associated with the purchase of the object of credit sales and its delivery to the client in credit sales.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.04.00.00 Objects of Civil Legislation / 03.04.01.00 General Rules]

The microfinance organization is not entitled to sell to the client goods that are not owned by it as the object of credit sales.

The object of credit sales cannot be purchased from the client himself, his representative, or an organization in which the client owns more than fifty percent (share, stock).
If there are contractual obligations between the client and the seller selling the object of credit sales to the microfinance organization regarding the purchase of the object of credit sales, the sale of this object on a credit sales basis to this client is not permitted.
The price of the object of credit sales and the amount of the markup added to it must be clearly specified in credit sales.

It is not permitted to set the price of the object of credit sales or the markup added to it based on unclear or future values determined by indicators.
[
OKOZ:
1.
03.00.00.00 Civil Legislation / 03.11.00.00 Specific Types of Obligations / 03.11.01.00 Sale and Purchase / 03.11.01.01 General Issues;
2.
03.00.00.00 Civil Legislation / 03.11.00.00 Specific Types of Obligations / 03.11.22.00 Insurance / 03.11.22.01 General Rules]

Expenses related to the purchase, delivery, and insurance of the object of credit sales are carried out at the expense of the microfinance organization.
[
OKOZ:

09.00.00.00 Entrepreneurship and Economic Activity / 09.17.00.00 Trade / 09.17.01.00 General Rules]

If expenses related to the purchase, delivery, and insurance of the object of credit sales are included in the purchase price of the object of credit sales, the microfinance organization must provide detailed clarification to the client about these expenses.

If the seller provides a discount to the microfinance organization for the object of credit sales, the microfinance organization must proportionally reduce the selling price of the object of credit sales to the client by the amount of the discount.
The microfinance organization may designate the client or a third party as a representative to purchase the object of credit sales in its name. In this case, the microfinance organization must make payments for the object of credit sales directly to the seller and accept documents confirming the sale of the goods.

The microfinance organization and the representative acting in its name must clearly define obligations regarding risks associated with the purchase of the object of credit sales in the representation contract concluded between them. [ OKOZ:
1.
09.00.00.00 Entrepreneurship and Economic Activity / 09.17.00.00 Trade / 09.17.01.00 General Rules]

If the client refuses to purchase the object of credit sales, the microfinance organization has the right to sell this object to a third party.

If the client refuses to purchase the object of credit sales, the microfinance organization has the right to demand compensation for the actual losses incurred by selling the object of credit sales to a third party from the client.

Actual losses mean the negative difference between the purchase price of the goods purchased by the microfinance organization at the request of the client and the price at which it was sold to a third party due to the client's refusal to accept the goods. [ OKOZ:
1.
09.00.00.00 Entrepreneurship and Economic Activity / 09.17.00.00 Trade / 09.17.01.00 General Rules]

Actual losses incurred by the microfinance organization in selling the object of credit sales to a third party may be deducted from the down payment provided by the client. In this case, the remaining part of the down payment must be returned to the client. [ OKOZ:
1.
09.00.00.00 Entrepreneurship and Economic Activity / 09.17.00.00 Trade / 09.17.01.00 General Rules]

It is not permitted to collect additional fees from the client for extending the payment period for credit sales for the benefit of the microfinance organization.
It is prohibited for the microfinance organization to collect brokerage fees and (or) other types of fees from clients for providing credit sales services.
[
OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.21.00.00 Banking Activity / 07.21.13.00 Currency Operations (also see 07.27.00.00)]

Monetary funds (currency), crypto-assets, gold, and silver cannot be objects of credit sales.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.05.00 Contract. Conclusion, Amendment and Termination of Contracts]

It is not permitted to sell (refinance) the object of credit sales to the same client under a new credit sales contract based on an existing contract between the microfinance organization and the client.
If payments for credit sales are paid in advance by the client, the microfinance organization may waive part of the sum that the client should pay. However, this condition must not be specified as part of the credit sales contract.

Section 2. Provision of Islamic Lease Service

The Islamic lease service is provided by the microfinance organization based on the client's relevant application. The application may indicate the object the client plans to lease under Islamic lease and its relevant characteristics.
The microfinance organization may require the client to make a down payment in the form of monetary funds for the object of Islamic lease.

This down payment is accounted for as an advance payment under the Islamic lease contract and/or may be directed to compensate for actual losses incurred by the microfinance organization as a result of the client's refusal to accept the object of Islamic lease. [ OKOZ:
1.
03.00.00.00 Civil Legislation / 03.04.00.00 Objects of Civil Legislation / 03.04.01.00 General Rules;
2.
09.00.00.00 Entrepreneurship and Economic Activity / 09.17.00.00 Trade / 09.17.01.00 General Rules]

The microfinance organization may designate the client or a third party as a representative to purchase the object of Islamic lease.
The microfinance organization assumes responsibility for any defects that limit the client's opportunities to use the property leased under Islamic lease.
If the object of Islamic lease provided by the microfinance organization does not match the characteristics provided for in the Islamic lease contract, the client may refuse to accept the object of Islamic lease.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.11.00.00 Specific Types of Obligations / 03.11.22.00 Insurance / 03.11.22.01 General Rules]

The microfinance organization may insure the object of Islamic lease if necessary. In this case, all expenses related to insurance are carried out at the expense of the microfinance organization and these expenses may be included in the composition of Islamic lease payments.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.11.00.00 Specific Types of Obligations / 03.11.22.00 Insurance / 03.11.22.01 General Rules]

After the Islamic lease contract is concluded between the microfinance organization and the client, it is prohibited to impose additional expenses on the client that increase the amount of Islamic lease payments.

Based on the agreement of the parties, the insurance of the object of Islamic lease may be carried out by the client as a representative of the microfinance organization.

The microfinance organization must own the property rights to the object of Islamic lease to implement Islamic lease.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.05.00 Contract. Conclusion, Amendment and Termination of Contracts;
2.
03.00.00.00 Civil Legislation / 03.11.00.00 Specific Types of Obligations / 03.11.01.00 Sale and Purchase / 03.11.01.01 General Issues]

The microfinance organization may purchase the object of Islamic lease from its client and lease it back to this same client under Islamic lease. In this case, the sale and purchase contract concluded between the microfinance organization and the client must not provide for the condition that the object of the contract will subsequently be leased under Islamic lease.

The object of Islamic lease may be subleased under Islamic lease to a third party by the client in agreement with the microfinance organization.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.05.00 Contract. Conclusion, Amendment and Termination of Contracts]

The term of the Islamic lease contract and the payment schedule (graph) must be clearly specified.

Islamic lease payments may be specified in the form of periodic or one-time lump-sum payments.

The microfinance organization may require the client to provide security to reduce risks that may arise from the client's failure to fulfill obligations specified in the contract and possible dishonest actions (inaction) in Islamic lease.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.03.00 Liability for Breach of Obligations]

If enforcement is directed against the security provided by the client by the microfinance organization, the microfinance organization may withhold from the value of the security only the payments calculated for past periods and the amount of actual losses incurred by the microfinance organization as a result of the client's failure to fulfill its obligations.

In this case, the microfinance organization is prohibited from collecting payments from the client for future periods during which the client did not use the object of Islamic lease.

The microfinance organization must calculate payments for Islamic lease starting from the day the object of Islamic lease is handed over to the client.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.05.00 Contract. Conclusion, Amendment and Termination of Contracts]

If there is a difference between the date the Islamic lease contract was concluded and the date the object of Islamic lease was handed over to the client, the microfinance organization is prohibited from collecting payments from the client for this period of difference.

The object of Islamic lease may also be purchased by the microfinance organization as jointly owned property together with the client. In this case, payments for Islamic lease are calculated based on the microfinance organization's share in the joint property.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.03.00 Liability for Breach of Obligations]

If the client delays payments for Islamic lease, the microfinance organization may notify the client that the delayed part of the Islamic lease payments must be paid in a lump sum within the specified period, and after the period specified in the notice expires, demand that the client pay the remaining part of the Islamic lease payments in a lump sum.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.10.00.00 Law of Obligations / 03.10.02.00 Ensuring Performance of Obligations / 03.10.02.01 Penalty]

The microfinance organization must not increase Islamic lease payments if the client delays payment of Islamic lease payments. The microfinance organization has the right to collect a penalty from the client for delaying payment of Islamic lease payments.
[
OKOZ:

03.00.00.00 Civil Legislation / 03.08.00.00 Property Rights and Other Real Rights / 03.08.01.00 General Rules]

The microfinance organization may transfer property rights to the object of Islamic lease to a third party.

Here, the microfinance organization must notify the person to whom ownership rights are transferred regarding the existence of an Islamic leasing contract for this property.

[OKOZ:
1.
09.00.00.00 Entrepreneurship and economic activity / 09.12.00.00 Construction / 09.12.13.00 Capital repair, technical re-equipment, expansion and reconstruction of existing enterprises, buildings, structures]

Capital repair costs of the Islamic leasing object are covered at the expense of the microfinance organization, while costs related to current repair and periodic technical maintenance are covered by the client. Based on the agreement of the parties, capital repair work may be carried out by the client. In this case, costs related to capital repair are deducted from the amount of Islamic leasing payments.
If, as a result of the client's dishonest actions (inaction) or violation of the terms of the Islamic leasing contract, the possibility of using the Islamic leasing object is completely or partially lost while it remains intact, the microfinance organization has the right to demand that the client restore the possibility of using the Islamic leasing object.

In this case, regardless of whether the microfinance organization uses the Islamic leasing object, it may demand payment of Islamic leasing payments from the client for the period of repair of the object.

The client is responsible for damage caused to the Islamic leasing object due to their fault. In this case, the client must compensate for the damage caused or replace the Islamic leasing object with another object suitable for it.
If the Islamic leasing object is partially damaged due to reasons not dependent on the client and this damage limits the possibility of full use of the Islamic leasing object, the client may terminate the Islamic leasing contract or agree with the microfinance organization to change the amount of Islamic leasing payments. In this case, Islamic leasing payments are not collected by the microfinance organization for the period during which the Islamic leasing object was not used.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

In the event of the destruction of the Islamic leasing object, the contract for Islamic leasing is terminated and subsequent Islamic leasing payments are not made, except in cases where the Islamic leasing object is destroyed as a result of the client's negligence or dishonest actions (inaction) in the course of fulfilling their obligations.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

If the client returns the Islamic leasing object to the microfinance organization before the period specified in the contract without its consent, the microfinance organization has the right to demand Islamic leasing payments for the remaining period of the Islamic leasing contract.

If the Islamic leasing payments for the remaining period are paid by the client, the right to lease the Islamic leasing object remains with the client, and the microfinance organization is not allowed to lease this Islamic leasing object to a third party until the end of the contract term.

Section 3. Provision of Islamic leasing service on the condition of subsequent purchase of the leasing object (lease-muntahiya bit-tamlik)

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.11.00.00 Separate types of obligations / 03.11.01.00 Sale / 03.11.01.01 General issues]

The microfinance organization and the client may conclude an Islamic leasing contract on the condition that the leasing object will be subsequently purchased by the client (lease-muntahiya bit-tamlik).

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.11.00.00 Separate types of obligations / 03.11.01.00 Sale / 03.11.01.01 General issues;
2.
09.00.00.00 Entrepreneurship and economic activity / 09.17.00.00 Trade / 09.17.01.00 General rules]

The requirements and rules established in paragraph 2 of this Regulation also apply to the Islamic leasing service on the condition of subsequent purchase of the leasing object.
The transfer of ownership rights to the leasing object to the client within the framework of the Islamic leasing service on the condition of subsequent purchase of the leasing object must be carried out on the basis of a separate contract. In this case, the transfer of ownership rights to the client may be carried out by selling or gifting the leasing object to the client.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.11.00.00 Separate types of obligations / 03.11.01.00 Sale / 03.11.01.01 General issues]

If the Islamic leasing object is destroyed or becomes unusable under the Islamic leasing service on the condition of subsequent purchase of the leasing object, and there is no possibility to continue contractual relations regarding the Islamic leasing object, and this situation was not committed due to the fault of the client, the amount of lease payments, including payments made for the past period, must be recalculated based on the average market value of lease payments, and the positive difference between them must be returned to the client.

Section 4. Provision of financing service based on advance payment (Salam)

[OKOZ:
1.
01.00.00.00 Constitutional order / 01.06.00.00 Rights, freedoms and duties of a person and citizen / 01.06.03.00 Basic (Constitutional) political rights and freedoms / 01.06.03.04 Right to address with applications, suggestions and complaints]

The financing service based on advance payment (hereinafter referred to as advance payment in the text) is provided by the microfinance organization based on the corresponding application of the client.
Goods (products) that can be weighed, measured or counted and are interchangeable with others may be taken as the object of advance payment. In this case, the object of advance payment must be a thing (product) that can be easily identified by its characteristics.
The microfinance organization must fully pay the payments for advance payment to the client no later than three working days from the date the contract is concluded.

[OKOZ:
1.
07.00.00.00 Legislation on finance and credit. Banking activity / 07.21.00.00 Banking activity / 07.21.13.00 Currency operations (see also 07.27.00.00)]

Monetary funds (currency), crypto-assets, gold and silver cannot be objects of advance payment.
The contract concluded for advance payment must clearly indicate the time/period for the client to deliver the object of advance payment to the microfinance organization.
The microfinance organization may require security from the client in the manner established by legislation to ensure the fulfillment of the terms of the contract for the advance payment service.
If the client offers to deliver a product of higher quality (better) than the product specified in the advance payment service contract and the price of the product is not increased (no additional fee is charged) for this offer, the microfinance organization must accept this offer.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

If the quality of the object of advance payment delivered by the client is lower than the requirements specified in the contract, the microfinance organization may refuse to accept the object of advance payment or accept it in this condition.
If the object of advance payment is delivered before the period specified in the contract and the microfinance organization has sufficient grounds to refuse to accept the object of advance payment, the microfinance organization has the right not to accept the object of advance payment.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.03.00 Liability for breach of obligations;
2.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

If the client fails to fulfill their obligations under the advance payment contract on time, the microfinance organization has the right to set an additional time for the delivery of the object of advance payment or demand the return of payments made for the object of advance payment by terminating the advance payment contract.
The microfinance organization and the client may mutually agree to cancel the delivery of the object of advance payment on the condition of full return of the payment amount.

If the parties agree to partially cancel the delivery of the object of advance payment, the amount of payment corresponding to the value of the canceled part of the object of advance payment must be returned to the microfinance organization by the client.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.02.00 Ensuring the performance of obligations / 03.10.02.01 Penalty]

The microfinance organization may apply a penalty to the client for delayed delivery of the object of advance payment.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.08.00.00 Property rights and other real rights / 03.08.01.00 General rules]

Until the microfinance organization acquires ownership rights to the object of advance payment, the microfinance organization cannot conclude a contract for the sale of this object.

Section 5. Provision of financing service based on profit sharing (Muzara'a)

[OKOZ:
1.
07.00.00.00 Legislation on finance and credit. Banking activity / 07.22.00.00 Lending / 07.22.01.00 General issues]

The financing service based on profit sharing is provided by the microfinance organization based on the corresponding application of the client.

Within the framework of the financing service based on profit sharing, the debt of the client or a third party to the microfinance organization cannot be presented as capital.

The microfinance organization may require security from the client in the manner established by legislation to ensure the fulfillment of the terms of the contract for the financing service based on profit sharing.

If the microfinance organization suffers damage as a result of dishonest actions (inaction) committed by the client, the microfinance organization may cover this damage from the security.

If capital is provided to the client in the form of tangible assets under the financing service based on profit sharing, the value of these tangible assets must be clearly specified.
The profit received by the microfinance organization under the financing service based on profit sharing is distributed in the form of a share of the profit received in accordance with the terms of the contract concluded between the microfinance organization and the client.

It is not allowed to include conditions in the contract concluded within the framework of the financing service based on profit sharing that the parties receive a strictly defined amount of profit.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

When the contract concluded between the microfinance organization and the client expires or is terminated early based on the agreement of the parties, if the total income received within the framework of the financing service based on profit sharing is equal to the total expenses, the invested capital (monetary funds) is returned to the microfinance organization.
If the microfinance organization suffers losses within the framework of the financing service based on profit sharing, it is not allowed to collect this loss from the client, except for losses caused as a result of the client's dishonest actions (inaction) in fulfilling their obligations.
If the client has begun to fulfill the terms of the contract concluded within the framework of the financing service based on profit sharing or if the term of this contract has not yet expired, the microfinance organization is not allowed to unilaterally terminate this contract, except in cases provided for in the contract terms.

Section 6. Provision of financing service based on profit and loss sharing partnership (Musharaka)

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.03.00.00 Legal entities / 03.03.01.00 General rules;
2.
07.00.00.00 Legislation on finance and credit. Banking activity / 07.22.00.00 Lending / 07.22.01.00 General issues]

Within the framework of the financing service based on profit and loss sharing partnership (hereinafter referred to as partnership in the text), the microfinance organization and its clients contribute a certain amount of monetary funds or, based on mutual agreement, tangible assets to joint activity without forming a legal entity or as a share in the capital of a formed legal entity.
Partners may agree to entrust the right to manage partnership activity to several partners or to one partner within the framework of the partnership.
When tangible assets are contributed to the partnership capital as a non-monetary contribution, the value of these assets in monetary equivalent must be assessed and the share of partnership participants in the total capital must be strictly determined based on this value.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.11.00.00 Separate types of obligations / 03.11.17.00 Accounts (see also 07.21.03.00) / 03.11.17.01 General rules. Receivables and payables]

It is not allowed to contribute receivables as a contribution to the partnership capital, except for receivables that are an inseparable part of the capital being contributed.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

The microfinance organization and its client(s) may conclude a contract within the framework of the partnership for a limited or unlimited period, as well as agree on conditions that serve as grounds for suspending or terminating the contract.
The microfinance organization may require the client to provide security to ensure the fulfillment of the client's obligations specified in the contract for the partnership service and to reduce risks that may arise as a result of possible dishonest actions (inaction) of the client.
When concluding a contract within the framework of the partnership, the microfinance organization and its client(s) must clearly determine the size of their shares in profit sharing.

When profit is distributed, the microfinance organization and the client may agree to change the ratio of their shares in profit distribution or for one party to renounce part or all of its profit in favor of the other party.

If the contract does not provide for a different procedure, the profit received within the framework of the partnership is distributed between the microfinance organization and the client(s) based on the share of each party in the capital.

In this case, it is not allowed to specify the received profit as a strictly defined amount.

The distribution of profit between the microfinance organization and the client(s) should not be linked to expected future income and expenses and should be carried out based on the actual financial results of the activity.
The final distribution of profit received within the framework of the partnership between the parties may be carried out after deducting operational expenses, commission fees, taxes and payments from the profit, as well as after the return of the initial invested capital.
The distribution of losses incurred within the framework of the partnership service must be distributed among participants based on their share in the capital.

The microfinance organization and its client(s) cannot agree to impose losses incurred in the partnership on one party or to impose losses on a participant exceeding the amount of capital they contributed.

The client(s) may voluntarily assume losses incurred within the framework of the partnership without prior agreement.

Within the framework of the partnership, the microfinance organization may sell its share in the capital to the client on the basis of a separate contract.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.05.00 Contract. Conclusion, amendment and termination of contracts]

Each party (participant) of the contract concluded within the framework of the partnership has the right to withdraw from the contract, having notified the other parties. In this case, the party withdrawing from the contract may demand the return of its share (contribution) to the capital.

The withdrawal of one or several parties (participants) from the contract does not lead to the termination of partnership relations between the remaining parties.

If the partnership activity is terminated due to the expiration of the term of the contract concluded for the partnership service, all assets of the partnership must be sold based on current market values, and the proceeds received must be distributed in the manner established by legislative acts and the terms of the contract.

Chapter 4. Final Provisions

[OKOZ:
1.
17.00.00.00 Fair trial / 17.01.00.00 General issues of justice and court structure. Judicial reform]

Disputes arising between the microfinance organization and its clients are resolved in the manner established by legislation.

[OKOZ:
1.
03.00.00.00 Civil legislation / 03.10.00.00 Obligation law / 03.10.03.00 Liability for breach of obligations]

Persons guilty of violating the requirements of this Regulation are liable in the manner established by legislation.
(, 26.07.2024, No. 10/24/3536/0560)

Regulations on the Provision of Islamic Financing Services by Microfinance Organizations

Lineage: In force