LAW OF THE REPUBLIC OF TAJIKISTAN

of July 26, 2014 No. 1108

About Islamic banking activity

This Law determines legal and organizational basis of Islamic banking activity in the Republic of Tajikistan and creates favorable conditions for its implementation.

Chapter 1. General provisions

Article 1. Basic concepts

In this Law the following concepts are used:

- bank system of the Republic of Tajikistan - the National Bank of Tajikistan and other credit institutions performing activities in the Republic of Tajikistan;

- Islamic banking activity - implementation by Islamic credit institutions of the Islamic banking activities and transactions provided in this Law;

- the principles of Islamic financing - implementation of Islamic banking activity with observance of the standards based on the regulations of the Islamic right applied to questions of rendering banking services;

- standards of Islamic banking activity - the set of rules, approved by the Advisory board on Islamic banking services and approved by National Bank of Tajikistan according to which Islamic credit institutions perform Islamic banking activity;

- Islamic credit institutions - legal entities (Islamic banks, Islamic non-bank credit institutions and the Islamic microfinancial organizations, including "Islamic bank window") performing all or separate Islamic banking activities provided by this Law based on the license of National Bank of Tajikistan;

- conventional credit institutions - legal entities (banks, non-bank credit institutions, including the microfinancial organizations) performing all or separate banking activities provided by this Law and other legal acts of the Republic of Tajikistan based on the license of National Bank of Tajikistan;

- Islamic bank - Islamic credit institution which performs Islamic banking activity based on the license of National Bank of Tajikistan;

- Islamic non-bank credit institutions - the Islamic credit institutions having the right to perform separate types of Islamic banking activities. The list of Islamic banking activities for Islamic non-bank credit institutions is established by this Law and National Bank of Tajikistan;

- the Islamic microfinancial organizations - the Islamic credit institutions which are engaged in Islamic microfinancial activities based on the license of National Bank of Tajikistan. The amount of Islamic microfinancing is determined by National Bank of Tajikistan;

- Islamic bank window - the branch of conventional credit institution performing everything or part of Islamic banking activities based on the license of National Bank of Tajikistan;

- branch - the special structural division of Islamic credit institution which is outside its location and carrying out from her name fully or partially Islamic banking activity, having the single authorized capital and single balance with Islamic credit institution;

- branch of foreign Islamic bank - the special structural division created by foreign Islamic bank for implementation of Islamic banking activity in the Republic of Tajikistan;

- affiliated Islamic credit institution - credit institution which more than fifty percent of voting shares (shares) belong to other Islamic credit institution;

- holding company of Islamic credit institution the legal entity whom the Islamic credit institution treats or it is controlled from its party;

- affiliated society - the legal entity controlling Islamic credit institution, and also the legal entity controlled by this legal entity including the legal entity who treats this group according to regulatory legal acts of National Bank of Tajikistan;

- representation - the special structural division of Islamic credit institution which is outside its location, protecting and representing its interests without the right of implementation of Islamic banking activity;

- Advisory board on Islamic banking services - the body regulating activities of the Islamic credit institutions acting on the basis of the principles of Islamic financing;

- Committee on Islamic financial services - the body of Islamic credit institution which is responsible for compliance of the agreements (agreements) signed by them to standards of Islamic banking activity;

- leading employees - the chairman of Islamic credit institution and his deputies, the chairman of the board and other his members, the chief accountant of Islamic credit institution, the head and the chief accountant of branch of Islamic credit institution, the head and the chief accountant of "Islamic bank window" and branch of foreign Islamic bank;

- dependent person - the following persons mean:

a) leading employee;

b) member of the family of the leading employee;

c) person and members of his family who have the privilege of ownership in Islamic credit institution, and the legal entity in whom person or the leading employee have preferential share;

d) the legal entity in whom the Islamic credit institution has the preferential share which is not considered by preparation of the summary financial reporting;

e) person rendering to Islamic credit institution services as the member of the committee on Islamic microfinancial services;

- resident - the physical person or legal entity recognized as that according to the Law of the Republic of Tajikistan "About currency control and currency exchange control";

- the nonresident - the physical person or legal entity which is not resident;

- forfaiting - financing of commercial transactions by accounting of bills of exchange without obligations of the seller;

- factoring - financing under concession of monetary claim;

- the bill of exchange (bill of exchange) - the document submitted by Islamic credit institution (or from her name), equated to cash and, returned by the creditor to the borrower without payment or the written order about payment of certain amount to the third party, becoming effective after receipt of this document by the borrower;

- clearing system - the system of clearing and interbank settlements based on monetary mutually test claims and obligations;

- professionally competent and reliable person - physical person, which:

a) it was not imprisoned according to the court verdict in making of intentional crimes (including having corruption nature) and not connected with its religious or political actions;

b) it was not declared the bankrupt court within the last seven years;

c) it was not deprived by court of the right to hold certain positions or to be engaged in the certain activities connected with the actions which are not concerning its its religious or political interests;

- the investment account - the account by means of which the Islamic credit institution accepts money according to the principles of Islamic financing for the purpose of investment taking into account the obligation of complete return of means and under condition:

a) distributions of net profit or profit and losses respectively between person representing money and Islamic credit institution;

b) payments or not payments of means;

- the Islamic credit - the amount which is provided to the client by Islamic credit institution according to the principles of Islamic banking activity and can have or not have payment terms of the main amount, profit, lease or for services;

- the Islamic deposit or savings - the money and other values of physical persons and legal entities transferred to storage to Islamic credit institution on the terms of complete return with profit or without profit to the owner of the deposit or its representative on demand or to agreed time frames in the following types and with respect for the following principles of Islamic financing:

a) term deposit - the money transferred to Islamic credit institution which can be used by Islamic credit institution on permission of the investor or at discretion as investment means on the terms of trust management. These funds can be withdrawn after the expiration provided by the agreement;

b) savings deposit - the money transferred to Islamic credit institution to storage with the right of their use to the investment purposes. Removal of these means is allowed in case of observance of the conditions provided by the agreement;

c) on-demand deposit - the money transferred to Islamic credit institution which can be removed the investor at any time;

d) depositary storage - storage of assets of the client in Islamic credit institution without the right of their use;

e) the investment deposit - the money given by the client of Islamic credit institution in the form of the deposit with right to use on the conditions provided by the agreement;

- the income or profit - concerning determinations "the Islamic credit", "the investment account", "the Islamic deposit or savings" includes different forms of profit, the dividend or benefit, rent (markup), and also commission charges or gifts which are subject to payment or representation to Islamic credit institution or from Islamic credit institution;

- supervising powers over other legal entity are power of the person which:

a) directly or indirectly, through one or several owners, is the person controlling or owning 25 or more percent of voting shares and shares of legal entities;

b) has opportunity to elect most of heads of legal entities;

c) has other supervising powers determined by National Bank of Tajikistan.

- preferential share - share of direct or indirect participation of person having independently or by means of someone, or together with one or several persons more than 10 percent of the authorized capital or voting shares of Islamic credit institution, or the preferential share determined by National Bank of Tajikistan;

- prudential regulations are the economic regulations established by National Bank of Tajikistan for the purpose of regulation of activities of Islamic credit institutions which observance is obligatory for execution by Islamic credit institutions;

- external audit - the independent check of financial accounting and the financial reporting performed by the local or foreign auditor;

- lease - acquisition by Islamic credit institution of the equipment or other property according to the request of the client and provision to his client in lease (employment) for agreed time frame.

Article 2. Legislation of the Republic of Tajikistan on Islamic banking activity

The legislation of the Republic of Tajikistan on Islamic banking activity is based on the Constitution of the Republic of Tajikistan and consists of this Law, other regulatory legal acts of the Republic of Tajikistan, and also the international legal acts recognized by Tajikistan.

Article 3. Coverage of this Law

1. Operation of this Law extends to all banks, non-bank credit institutions and the microfinancial organizations having the license of National Bank of Tajikistan for implementation of activities on the basis of the principles of Islamic financing.

2. Operation of this Law does not extend on:

- state bodies;

- the credit institutions which do not have the license for implementation of Islamic banking activity;

- the credit unions performing the activities according to the Law of the Republic of Tajikistan "About credit unions";

- the commercial organizations which are not credit institutions.

Article 4. Islamic banking activities and other transactions of Islamic credit institution

1. Treat Islamic banking activities which can perform Islamic credit institutions:

1) attraction and acceptance of Islamic deposits, savings or maintaining investment accounts of physical persons or legal entities;

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