Role of Islamic finance for the development: A Case Study of the Kyrgyz Republic and Tajikistan

Finance is expected to play a major role in equitable and sustainable economic development. However, the track record of conventional finance is not encouraging for the task. It has not been very successful in addressing unemployment and poverty. Indeed, the stylized facts show that many countries suffer from increasing income and opportunities inequalities along with economic and financial instabilities. Can Islamic finance offer a solution where conventional finance has failed in the task of equitable socio-economic development? The present paper seeks to explain how promotion of Islamic finance can help in the development of low-income countries.1 This potential role of Islamic finance is discussed in the context of a case study of Kyrgyz Republic and Tajikistan. Development of Islamic financial sector is high on the agenda of Islamic Development Bank in its efforts to partner in the socio-economic development of its member countries and restoration of human dignity.