ISLAMIC FINANCE MECHANISMS AND ENTREPRENEURIAL RE-ENTRY IN UZBEKISTAN

Abstract

Uzbekistan has seen strong economic growth and significant poverty reduction in recent years[1][2], but private entrepreneurship and job creation remain challenges. Many micro-entrepreneurs face limited access to conventional credit (only ~14% have bank loans[3]) and often avoid interest-bearing debt for religious or cultural reasons. This paper investigates how Islamic finance – based on Shariah-compliant instruments like mudarabah (profit-sharing), musharakah (joint venture), murabahah (cost-plus sale), qard al-ḥasan (interest-free loan), zakat (alms), and waqf (endowments) – can provide alternative, ethical financing for failed or aspiring entrepreneurs in Uzbekistan. Using a comprehensive literature review of academic studies, World Bank/IMF/IDB reports, and case studies from Malaysia, Indonesia, Pakistan, Bangladesh, and elsewhere, we find that Islamic finance offers inclusive, risk-sharing capital that can help re-start businesses and reduce poverty. For example, women in Malaysia saw improved business performance through Islamic microfinance[4], and Bangladesh’s interest-free microloan program Qard al-Ḥasan halved participants’ poverty incidence[5]. The analysis also highlights psychological and cultural factors: Uzbek entrepreneurs report a dislike of conventional interest and show strong religio-social support for Islamic financing[3][6]. Building on these findings, we discuss policy frameworks (e.g. allowing Islamic banking windows, using zakat/waqf funds, and regulatory support) that could adapt global best practices to Uzbekistan. We conclude that Shariah-based finance can empower entrepreneurs to re-enter business and contribute to Uzbekistan’s poverty reduction goals, while recommending further empirical research on Islamic finance implementation in Central Asia.