RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of October 30, 2006 No. 32/2

About the Provision "About Realization of the Islamic Principles of Financing in the Kyrgyz Republic within Pilot Project"

Board of National Bank of the Kyrgyz Republic, having considered the project of the Provision "About Realization of the Islamic Principles of Financing in the Kyrgyz Republic within Pilot Project", being guided by the Memorandum of understanding between the Kyrgyz Republic and Islamic Development bank and Ekobank open joint stock company concerning implementation of Islamic banking and financing in the Kyrgyz Republic, of the May 16, 2006 (further "Memorandum") ratified by the Presidential decree of the Kyrgyz Republic "About the Pilot project of implementation of the Islamic principles of financing in the Kyrgyz Republic" of July 12, 2006 No. 373, provisions of the called Presidential decree of the Kyrgyz Republic, article 7 of the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic", considering the enclosed conclusion of the Ministry of Justice of the Kyrgyz Republic (the letter of September 18, 2006 No. 02-4/8135 for members of Steering committee, the called Memorandum formed within), decides:

1. Approve the Provision "About Realization of the Islamic Principles of Financing in the Kyrgyz Republic within Pilot Project" it (is applied).

2. To management of methodology of supervision and licensing together with Legal department, in accordance with the established procedure to carry out state registration of this resolution in the Ministry of Justice of the Kyrgyz Republic.

3. Item 3 is excluded according to the Resolution of Board of National Bank of the Kyrgyz Republic of 29.06.2007 No. 33/1.

4. This resolution becomes effective from the moment of its official publication after state registration in the Ministry of Justice of the Kyrgyz Republic.

5. After publication of the registered resolution to Legal department to inform the Ministry of Justice of the Kyrgyz Republic on publication source (the name of the edition, its number and date).

6. To impose control of execution of this resolution on the vice-chairman of National Bank of the Kyrgyz Republic Bokontayev K. K.

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of October 30, 2006 No. 32/2

Regulations on realization of the Islamic principles of financing in the Kyrgyz Republic within pilot project

Introduction
Introductory part (preamble)

This Provision is developed in pursuance of the Presidential decree of the Kyrgyz Republic of July 12, 2006 No. 373 "About pilot project of implementation of the Islamic principles of financing in the Kyrgyz Republic" and "The memorandum of understanding between the Kyrgyz Republic and Islamic development bank and Ekobank, concerning implementation of Islamic banking and financing in the Kyrgyz Republic" of May 16, 2006 (further "Memorandum").

Section 1. General questions

1. The purpose of this provision is establishment of procedure of separate types of activity by branch/department of JSC Ekobank (further "bank") according to the Islamic principles of financing within the Pilot project according to Memorandum conditions.

2. The bank when implementing the activities shall observe all economic standard rates and other requirements established by National Bank of the Kyrgyz Republic (further - National Bank). During implementation of activities according to the Islamic principles of financing within carrying out Pilotnogo proyekta Bank is guided by this provision, and shall not put at risk interests of bank, his investors and other creditors.

3. The pilot project on realization of the Islamic principles of financing shall be performed by bank through branch/department which transactions will be limited to the operations performed within this provision.

4. the item 4 is excluded according to the Resolution of Board of National Bank of the Kyrgyz Republic of 29.06.2007 No. 33/1.

5. When implementing activities according to the Islamic principles of financing the bank has the right to invest means in the business permitted by Sharia.

6. In bank Sharia council for approval of transactions (contracts) for compliance to requirements of Sharia shall be created. When implementing activities according to the Islamic principles of financing, all transactions (agreements) shall be approved by Sharia council.

Section 2. Types of transactions on the Islamic principles of financing and procedure for their implementation

Chapter 2.1. "Agreement of mudarab"

1. Mudarab - the agreement under the terms of which one party - the investor - provides the capital (money) and another - the entrepreneur - accepts the capital and uses it using own manpower, for the purpose of profit earning and its distribution between the parties according to the agreement.

2. Agreements of mudarab are divided into the following types:

Limited (special) mudaraba - the agreement of mudarab under the terms of which the investor establishes the list of assets or objects for investment mudariby at the same time on each investment object the separate agreement with mudariby and the investor is signed. In this case the investor has the right to expect part of profit, received from use of means according to each transaction separately, determined by the separate agreement;

Unrestricted (general) mudaraba - the agreement of mudarab under the terms of which mudarib independently determines object for investment, without any restrictions, according to the knowledge, experience, within the Agreement, and according to the subject of the agreement;

Open mudaraba - the agreement of mudarab under the terms of which the investor has the right to receive ahead of schedule at mudarib the money provided to them on the first demand of. In this case the bank (if it acts as mudarib) pays to the investor profit for the last complete period (month, year).

3. The agreement of mudarab is applied by bank in two cases:

- as the tool on attraction of financial resources;

- as the tool on placement of the funds raised on mudaraba.

4. Mudarab's agreement shall be signed in writing.

5. Bank, acting as the investor, shall carry out business plan assessment, determine objects for investment, carry out assessment of activities of the entrepreneur and advise him in subsequent in course of execution of the agreement.

6. In case of issue of money under the agreement of mudarab the bank shall include in the agreement condition about prohibition on inappropriate use of money and issue of loans, loans and the credits.

7. For the purpose of proper execution of agreement obligations of mudarab bank, acting as the investor, shall receive providing from the client in the form of pledge, the guarantee, guarantee, deposit and other types of providing, stipulated by the legislation or the contract for the amount equal to the amount provided by bank under the agreement.

8. Shall be provided in Mudarab's agreement at least:

1) specifying by sight agreements;

2) depending on agreement type, the agreement may contain specifying on investment object, impossibility of early withdrawal of deposited amount, possibility of mixture of the means received from the investor with means of the third parties;

3) the size of the provided amount;

4) method of providing obligations of the entrepreneur;

5) rights and obligations of the Parties;

6) responsibility of the entrepreneur who did not fulfill or inadequate image fulfilled the obligation about indemnification, arisen during the course of performance agreements as a result of guilty or illegal actions / failure to act of the entrepreneur at the expense of the entrepreneur, including due to providing or other property of the entrepreneur;

7) procedure for profit distribution and losses so that to exclude any uncertainty for agreement parties;

8) execution by the entrepreneur of terms of the contract independently or with involvement of qualified persons;

9) accounting of use of the money received from the investor, allowing upon termination of the agreement or separate stage to determine the got profit which is subject to distribution between the parties;

10) procedure for termination of the contract.

9. The profit of each of agreement parties is determined in percentage ratio from the profit got by the entrepreneur during use of the means provided by the investor.

The procedure for profit distribution between the parties shall be determined in the agreement in advance.

If as a result of agreement performance the entrepreneur not only did not get profit, but also received losses, the investor incurs losses in the amount of the provided capital sum, and the entrepreneur in that case does not earn reward for the work. This rule for apportionment of losses is effective if losses arose not because of the entrepreneur.

If losses during the course of performance of the agreement resulted from guilty or illegal actions / failure to act of the entrepreneur, these losses shall become covered at the expense of the entrepreneur. At the same time the investor has the right to receive from the entrepreneur the amount transferred earlier under the agreement due to providing and if it will be not enough, at the expense of other property of the entrepreneur.

10. The agreement of mudarab cannot be terminated unilaterally if:

- the entrepreneur started agreement performance, and already uses means during business activity;

- agreement term did not expire.

11. Attraction of money by bank under the agreement of mudarab:

a) In financial accounting the money raised on terms of the contract of Mudarab is reflected in the Section of obligations of bank in sub-accounts of balance sheet accounts of deposits of physical, legal entities, banks and other financial credit institutes (account group 20000-20400 Charts of accounts of financial accounting in commercial banks and financial credit institutes of the Kyrgyz Republic).

b) When opening the account to the client under Mudarab's agreement, the bank shall fulfill all necessary requirements connected with identification of the identity of the client according to regulations of National Bank.

c) Accounting of the funds raised by bank under Mudarab's agreement is conducted on balance sheet accounts of bank on the main amount of funds deposited according to the agreement. Account of obligations across Mudarabe in foreign currency is kept in nominal of currencies. Analytics on personal accounts of clients are kept by bank in the special automated program, with reflection of all transactions made on the account.

d) The bank board establishes procedure, the sizes and rules of payment of the profit share which is due to clients under Mudarab's agreement. The profit amount paid under the terms of Mudarab's agreement to the client is recognized period expenses.

e) The bank makes in accounting charge of expenses under Mudarab's agreements on periodic basis (monthly or quarterly) proceeding from conditions of agreements, considering specifics and terms of recoverability of the means placed by bank in investment projects (murabakha, mudaraba, idzhara, istisna, the decreasing musharaka, etc.).

e) In case of achievement by the bank operating as the entrepreneur, positive financial results, the bank pays to the client profit share. The procedure and terms of profit distribution from Mudarab's transactions are performed in accordance with the terms of the agreement.

g) Proceeding from agreement type of the mudarab limited or unrestricted, the profit share of the client is calculated. In case of the agreement the limited mudaraba, profit share of the client will be calculated proceeding from profitability from investment into certain project, share of investments made by the client and the proportion of distribution established in the agreement. In case of the agreement the unrestricted mudaraba, profit share of the client is calculated, proceeding from profitability of bank from placement of the raised funds in the active transactions performed by bank by the Islamic principles of financing (mudarab, murabakh, istisna, ball / musharaka, fat, idzhara, etc.), for the specific period specified in the agreement in proportion to investments of the parties.

h) Mudarab's transactions on content are equated to deposit transactions and limited to the economic standard rate of K5 (The standard rate of the maximum extent of risk on deposits of physical persons), according to Regulations on the economic standard rates and requirements obligatory for accomplishment by the commercial banks and financial credit institutes licensed by National Bank. Also according to this provision the bank determines concentration risk and manages it.

i) Accounts of transactions of Mudarab join in calculation of mandatory reserve requirements according to Regulations on required reserves. When calculating liquidity rate these obligations join in the amount of obligations of bank according to the criteria specified in Regulations on the economic standard rates and requirements obligatory for accomplishment by the commercial banks and financial credit institutes licensed by National Bank.

12. Issue of money on mudarab:

a) The assets placed under the agreement of mudarab are equated to the assets bearing in themselves credit risk and, therefore, fall under all restrictions connected with placement of the credits.

When calculating coefficient of adequacy of the capital the assets placed under the agreement of mudarab are equated to assets with the risk degree according to the Instruction for determination of standards of adequacy of the capital of the banks performing transactions according to the Islamic principles of banking and financing approved by the resolution of Board of National Bank of the Kyrgyz Republic of December 28, 2009 No. 51/4 (further - the Instruction for determination of standards of adequacy of the capital).

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