Resolution of the Board of the National Bank of the Kyrgyz Republic No. 24/12 of May 30, 2014 on Amendments to the Regulation on Operations by Microfinance Organizations and Credit Unions in Accordance with Islamic Principles

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of May 30, 2014 No. 24/12

On Amendments and Additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation 'On Operations Carried Out by Microfinance Organizations and Credit Unions in Accordance with Islamic Principles of Banking and Financing' dated October 26, 2011 No. 60/8"

In accordance with Articles 7 and 43 of the Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic

RESOLVES:

1. Make amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation 'On Operations Carried Out by Microfinance Organizations and Credit Unions in Accordance with Islamic Principles of Banking and Financing' dated October 26, 2011 No. 60/8" (attached).

2. This Resolution shall enter into force upon the expiration of fifteen days after its official publication.

3. The Legal Department:

• publish this Resolution on the official website of the National Bank of the Kyrgyz Republic;

• after official publication, send this Resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Regulatory Legal Acts of the Kyrgyz Republic.

4. The Department of Supervision and Licensing Methodology shall bring this Resolution to the attention of the Association of Microfinance Organizations, the Association of Credit Unions and Cooperatives of Kyrgyzstan, and JSC "Financial Company of Credit Unions".

5. Control over the implementation of this Resolution shall be entrusted to the Deputy Chairman of the National Bank of the Kyrgyz Republic Z. Chokoev.

Chairman	T.S. Abdygulov

	Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12

AMENDMENTS AND ADDITIONS to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation 'On Operations Carried Out by Microfinance Organizations and Credit Unions in Accordance with Islamic Principles of Banking and Financing' dated October 26, 2011 No. 60/8"

Make the following amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation 'On Operations Carried Out by Microfinance Organizations and Credit Unions in Accordance with Islamic Principles of Banking and Financing' dated October 26, 2011 No. 60/8":

in the Regulation on operations carried out by microfinance organizations and credit unions in accordance with Islamic principles of banking and financing, approved by the aforementioned Resolution:

1) throughout the text, replace the word "NBKR" with the words "National Bank" in various grammatical cases;

2) in Section I:

• rephrase paragraph 3 as follows:

"Financial Credit Unions (FCUs) carrying out operations in accordance with Islamic financing principles are not entitled to charge remuneration in the form of interest, attract funds under interest, guarantee the return of an investment deposit or income from it, and must invest funds only in business permitted by Sharia.";

• recognize paragraph 10 as having lost its force;

3) in the second paragraph of paragraph 13 of Chapter 1 of Section II, replace the words "Bank of Kyrgyzstan" with the words "National Bank";

4) in the title of Chapter 4, exclude the words "(if having the corresponding license of the Bank of Kyrgyzstan)";

5) in Chapter 5 of Section II:

• in the title of the chapter, exclude the words "(for MFOs, CUs attracting deposits if having the corresponding license of the Bank of Kyrgyzstan)";

• recognize the seventh paragraph of paragraph 113 as having lost its force;

• add paragraph 113-1 as follows:

"113-1. The Qard Hasan transaction is applied in two cases:

• as an instrument for attracting funds, in accordance with the requirements of the legislation of the Kyrgyz Republic (only for CUs, if having the corresponding license of the National Bank to attract funds);

• as an instrument of financing.

In individual cases, the FCU may consider the possibility of issuing a loan to the client on the terms of a Qard Hasan contract.";

• in the third paragraph of paragraph 114, replace the word "correspondent" with the word "settlement";

• recognize paragraph 4 of paragraph 114 as having lost its force;

• recognize paragraph 115 as having lost its force;

6) supplement Section II with Chapter 7 as follows:

"Chapter 7. Guarantees

154-1. MFOs, if having the corresponding license of the National Bank, have the right to issue guarantees within the limits of restrictions established by regulatory legal acts of the National Bank.

154-2. The validity period and the amount for which the guarantee is provided are established in the guarantee.

154-3. The creditor has the right to demand the debt amount from both the debtor and the guarantor.

154-4. It is not permitted to issue guarantee letters in favor of the applicant who will use them to obtain an interest-based loan or to conclude prohibited transactions.".