An exploratory study on the issues and challenges of Islamic banking industry in the Republic of Tajikistan

Abstract

The Republic of Tajikistan (RT) is strategically positioned to become a leading market for Islamic banking and finance (IBF) in the Central Asia Region (CAR) to serve the national interest. Recognized as one of the fastest-growing markets for IBF, the country has made significant strides toward industry development through regulatory initiatives and legislative reforms. Despite the promising growth potential, the Islamic Banking (IB) industry may face challenges that may hinder its development in the country. This study aims to explore the issues and challenges of the IB industry and solely concentrates on the RT with focus on the post-introductory phase of IBF. Given the limited body of research on this topic, especially from a qualitative perspective, the study aims to fill the gap by drawing practical visions from semi-structured interviews with eleven bankers, experts, and academicians familiar with the local financial market. The obtained data is thematically discussed and analyzed and the findings highlight critical areas for improvement, including; (1) Dealing with influencing factors on adopting IB; (2) Effectively positioning IB in the local financial market; (3) Presenting the unique features of IB; (4) Practicing effective Shari’ah governance (SG); (5) Implementing good corporate governance (CG); (6) Developing the ecosystem of the local financial market; (7) Enhancing legal and regulatory frameworks; and finally, (8) Other challenges, opportunities and the way forward. This study provides valuable insights for stakeholders, offering practical recommendations for better decision-making and fostering a deeper understanding of the unique challenges facing the IB industry in the country. Finally, the findings contribute to the existing literature on IB and serve as a foundation for future research in this emerging field.