Resolution of the Board of the National Bank of the Kyrgyz Republic No. 47/3 of December 17, 2008, on Amendments and Additions to Resolution No. 32/2

Registered in the Ministry of Justice of the Kyrgyz Republic

January 26, 2009. Registration No. 9-09

Bishkek

Resolution of the Board of the National Bank of the Kyrgyz Republic No. 47/3 of December 17, 2008

On Amendments and Additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 30, 2006 No. 32/2 "On the Regulation 'On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of the Pilot Project', registered in the Ministry of Justice of the Kyrgyz Republic on November 30, 2006, registration number 120-06"

Having considered the draft amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 30, 2006 No. 32/2 "On the Regulation 'On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of the Pilot Project', registered in the Ministry of Justice of the Kyrgyz Republic on November 30, 2006, registration number 120-06, guided by Articles 7 and 43 of the Law of the Kyrgyz Republic 'On the National Bank of the Kyrgyz Republic', the provisions of the Memorandum of Understanding between the Kyrgyz Republic, the Islamic Development Bank, and JSC 'EcoBank' regarding the implementation of Islamic banking principles and financing in the Kyrgyz Republic dated May 16, 2006, ratified by the Decree of the President of the Kyrgyz Republic of July 12, 2006 No. 373 'On the Pilot Project for the Implementation of Islamic Financing Principles in the Kyrgyz Republic', the Board of the National Bank of the Kyrgyz Republic resolves:

1. To make amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 30, 2006 No. 32/2 "On the Regulation 'On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of the Pilot Project', registered in the Ministry of Justice of the Kyrgyz Republic on November 30, 2006, registration number 120-06", in accordance with the Appendix to this Resolution.

2. To send this Resolution to the Steering Committee formed within the framework of the implementation of the Memorandum of Understanding between the Kyrgyz Republic, the Islamic Development Bank, and JSC 'EcoBank' regarding the implementation of Islamic banking principles and financing in the Kyrgyz Republic dated May 16, 2006.

3. To instruct the Methodology of Supervision and Licensing Department together with the Legal Department to send this Resolution for state registration to the Ministry of Justice of the Kyrgyz Republic in the established manner.

4. This Resolution shall enter into force after state registration in the Ministry of Justice of the Kyrgyz Republic and subsequent official publication.

5. After the publication of the registered normative legal act, the Legal Department is to inform the Ministry of Justice of the Kyrgyz Republic about the source of publication (name of the edition, its number, and date).

6. Control over the execution of this Resolution is entrusted to the Deputy Chairman of the National Bank of the Kyrgyz Republic K.K. Bokonbaev.

Published in the journal "Normative Acts of the National Bank of the Kyrgyz Republic", No. 2009/2

Chairman of the Board of the National
Bank of the Kyrgyz Republic M. Alapaev

@1 Appendix

to the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 17, 2008 No. 47/3

AMENDMENTS AND ADDITIONS to the Resolution of the Board of the National Bank of the Kyrgyz Republic of 30.10.06 No. 32/2 "On the Regulation 'On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of the Pilot Project', registered in the Ministry of Justice of the Kyrgyz Republic of 30.11.06, registration number 120-06"

To make the following amendments and additions to the Regulation 'On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of the Pilot Project', approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 30, 2006 No. 32/2 "On the Regulation 'On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of the Pilot Project', registered in the Ministry of Justice of the KR on November 30, 2006, registration number 120-06":

1. In the titles of Section 2 "Types of Transactions under Islamic Principles and Procedure for Their Implementation" and Section 4 "Organization of Bank Activities under Islamic Principles", after the word "principles", add the word "financing".

2. In the title of Chapter 2.1, before the word "mudaraba", add the word "Transaction".

3. In paragraph 1 of Chapter 2.1, replace the words "according to which on the basis of a contract" with the words "concluded on the basis of a contract, the terms of which".

4. The second paragraph of paragraph 2 of Chapter 2.1 is to be worded as follows:
   "Restricted mudaraba - a mudaraba transaction, the terms of which the investor establishes a list of assets or objects for investment by the entrepreneur, in this case, for each investment object, a separate contract is concluded with the entrepreneur and the investor. In this case, the investor has the right to expect a share of the profit received from the use of funds for each transaction separately, determined by a separate contract."

5. In the first paragraph of paragraph 11 of Chapter 2.1, replace the word "Mudaraba" with the words "mudaraba contract".

6. Subparagraph j) of paragraph 11 of Chapter 2.1 is to be worded as follows:
   "j) Based on the type of mudaraba contract, restricted or unrestricted, the client's share of profit is calculated. In the case of a restricted mudaraba contract, the client's share of profit will be calculated based on the profitability of investing in a specific project, the share of funds invested by the client, and the distribution ratio established in the contract. In the case of an unrestricted mudaraba contract, the client's share of profit is calculated based on the bank's profitability from placing attracted funds into active operations carried out by the bank under Islamic financing principles (mudaraba, murabaha, istisna, sharia, salam, ijara, etc.) for a specific period specified in the contract, proportionally to the parties' investments."

7. The sixth paragraph of paragraph 1 of Chapter 2.3 is to be worded as follows:
   "A murabaha contract is concluded in written form, simple or notarial. Ownership rights to the goods transfer after full payment of the price, unless otherwise established by the terms of the contract. If ownership rights to the property are subject to state registration, ownership rights of the purchaser arise from the moment of its registration. If a contract for the alienation of property is subject to state registration, ownership rights of the purchaser arise from the moment of its registration."

8. The title of Chapter 2.4 is to be worded as follows:
   "Chapter 2.4. Transaction 'Ijara and Ijara Muntahia Bitamlik'."

9. In the first paragraph of paragraph 1 of Chapter 2.5, replace the words "according to which" with the words "according to the terms of which".

10. In subparagraph 2.3 of paragraph 2 "Transaction Wadi'ah Yad Damanah" of Chapter 2.12, after the words "remuneration", add the word "hiba".

11. Section 2 "Types of Transactions under Islamic Principles and Procedure for Their Implementation" is to be supplemented with Chapter 2.13 of the following content:
    "Chapter 2.13

Hiba Remuneration

Hiba remuneration is a type of material incentive paid to bank clients who have placed funds on the terms of kard-hasan, wadi'ah Yad Damanah, and other deposit (deposit) operations on an interest-free basis.

Since kard-hasan, wadi'ah Yad Damanah, and other interest-free deposits (deposits) contracts do not provide guaranteed profitability, the payment of Hiba remuneration is made at the bank's discretion depending on the bank's performance results.

The bank may pay Hiba remuneration in monetary or other forms - in the form of incentive gifts, benefits, and discounts on tariffs for banking services, etc.

When placing information about the acceptance of Islamic deposits (deposits) under kard-hasan, wadi'ah Yad Damanah, and other interest-free (deposits) contracts in the contracts for the acceptance of Islamic deposits (deposits) concluded by the bank with clients, the bank is obliged to inform potential clients (depositors) that in case of positive results of the bank's activities in accordance with Islamic banking principles and financing, the bank may, as an incentive, pay depositors Hiba remuneration depending on the size of the deposit (deposit) made by the depositor."

12. Throughout the text of Section 3 "Risk Management", after the words "principles(i)", add the word "financing" in the appropriate case.