DR. KAIRAT KELIMBETOV
Kzakhstan is a rising star in the global Islamic financial services industry. His Excellency Nursultan Nazarbayev, First President of Kazakhstan, is one of the few leaders in the OIC countries, who have shown their commitment to providing Islamic banking and finance a level playing field, along with the conventional banking and finance. His efforts have been recognised by Global Islamic Finance Awards (GIFA) in 2014 when he was chosen to be a GIFA Laureate in Dubai. The top GIFA award – the Global Leadership in Islamic Finance Award 2014 was bestowed on him in the presence of Sheikh Mohamed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and the Ruler of Dubai. Dr. Kairat Kelimbetov, the then Governor of the Central Bank of Kazakhstan, played an instrumental role in attaining the top award for the President.
The incumbent President of the country, His Excellency Kassym-Jomart Tokayev, has affirmed the continuity of his government’s support for Islamic banking and finance in the country as well as in the wider region.
Dr. Kairat Kelimbetov is known for his advocacy for Islamic finance not only in his own country but also globally. His efforts have been recognised by various public, private and social sector organisations, as well as by GIFA Awards. He was the first governor of the Central Bank of Kazakhstan, who in real terms owned what may be termed as “the Islamic finance project” in Kazakhstan. He ensured that Islamic banking and finance was not only well-grounded nationally but was also recognised globally.
The Astana International Financial Centre (AIFC) of which he is the founding Governor is now a reality. He started it from scratch and opened its doors in 2018 for the international players to come and domicile their businesses therein. In this exclusive interview with Dr. Kelimbetov, we unfold the story of Astana International Financial Centre, and in the process attempt to know him as a leader in the global Islamic financial services industry.
ISFIRE: Dr. Kelimbetov, you have a long list of accomplishments, which makes it difficult to start an interview with you. So, we shall pick up the most recent one. The Astana International Financial Centre is now not only open for business but has also started attracting players from around the world. How do you feel about it?
Dr. Kairat Kelimbetov: Pleased… But this is only the start. I keep on reminding myself and my team that success is not just an event. It is a process. The success must continue and for this to happen we all must not stop working. There is no room for complacency.
ISFIRE: How did the idea of setting up the AIFC come about?
Dr. Kairat Kelimbetov: We are a young country, albeit with a long and rich history. Our First President has been a great source of inspiration for us. All of us in Kazakhstan, including the incumbent President Kassym- Jomart Tokayev, share his vision of making Kazakhstan an abode of excellence for financial services, including Islamic banking and finance. The idea was conceived by the First President and it came under discussion when His Excellency Nursultan Nazarbayev spoke with Sheikh Mohamed Bin Rashid Al Maktoum during the GIFA Awards Ceremony in 2014. Sheikh Mohamed Bin Rashid offered to help Kazakhstan if he wanted to build a similar financial centre. I was then serving as Governor of the Central Bank and I decided to work to convert this idea into reality. I must say that this was not possible without the help of an amazing team I enjoy the support of.
ISFIRE: What is the real value proposition of the AIFC?
Dr. Kairat Kelimbetov: We take a very pragmatic approach when it comes to doing business. We have tried to collect best practices from around the world and have modified them to suit our own unique position and to serve our clients in better ways. We wanted to emulate the success of Dubai International Financial Centre and in the process have come up with something that is the best solution for our region. Kazakhstan is a huge country that offers ample opportunities to financial firms to do business in the region. Nowadays, Kazakhstan is an inalienable part of the New Silk Road. In some sense, by promoting the AIFC we are bringing the financial services back to the region, where the industry was blooming centuries ago. The aim of the AIFC is to enhance growth and development of financial services in Kazakhstan and the region by providing services in accordance with the international standards and best practices of the leading financial centres of the world based on the principles of English common law. Governance and trust have become an important agenda for emerging markets, which is why we adopt the same principles of English Common law, according to which independent regulatory authorities with flexible regulation attractive to businesses, conduct their operations.
An independent regulator, Astana Financial Services Authority (AFSA) is one of the central elements in the AIFC model. AFSA’s underlying principles are based on fairness, transparency and efficiency to ensure the integrity of the whole financial industry’s ecosystem. AFSA accommodates the AIFC’s efforts to continuously adapt to the evolving global financial world by introducing innovative new regulations that cater to market trends and industry needs.
The AIFC Court has exclusive jurisdiction over disputes arising out of the activities and operations of the AIFC and jurisdiction in the case of other disputes in which all parties agree in writing to give the Court jurisdiction. To earn global community’s confidence in the AIFC, we have invited the most trusted, influential and well-recognised judges to come on board. This shows our commitment to the rule of law, transparency and accountability.
International Arbitration Centre has its own panel of outstanding international arbitrators and mediators who are familiar to international businesses for being greatly experienced, impartial, and of the highest integrity. It offers parties maximum choice and flexibility in choosing the rules and procedures they wish to use for the resolution of their disputes and offers arbitration, mediation, and other types of alternative dispute resolution services at the choice of the parties.
We are also proud to partner with the world’s largest stock exchanges, Nasdaq and Shanghai Stock Exchange, who have also become shareholders of the Astana International Exchange (AIX). Last year, Goldman Sachs became a shareholder of the AIX. Prior to that the Silk Road Fund became our strategic partner as well. The role of the AIX is to enable domestic and regional development, through the mobilisation of domestic resources and foreign portfolio flows.
“On the contrary, we take a cooperative approach by welcoming financial firms based in New York, London, Dubai and Kuala Lumpur to also have cost-effective presence in Nur-Sultan.”
The AIX is also missioned to host the large scaled privatisation program of the country’s major national companies and the first IPOs have already taken place.
We have introduced a number of incentives to businesses so that it makes sense for them to conduct their business through the AIFC. For example, all registered businesses will enjoy a tax holiday for 50 years. So, any firm registering at the AIFC will enjoy tax benefits till 2066. Besides, our Financial Centre, being a separate legal jurisdiction, enjoys a simplified labour and company registration process. Through our single-window system, the new businesses do not have to go through various government offices and departments, but rather, we have ensured that all the services are offered under one single roof. Establishment of the AIFC Expat Centre provides a one-stop-shop for visa issuance, registration and work permits. It also provides favourable entry and stay conditions for foreign guests.
In this regard, I am truly grateful to our First President and the incumbent President of Kazakhstan who have supported us in all our endeavour to make AIFC as a business-friendly regime.
“We have introduced a regulatory sandbox to ensure that technological advancements and innovations are encouraged rather than hindered at the AIFC.”
ISFIRE: Thank you Excellency, could you elaborate on why one would prefer the AIFC over other competing financial centres?
Dr. Kairat Kelimbetov: There are numerous reasons for financial firms to choose the AIFC. Number one, Kazakhstan as a country offers huge opportunities, not only within the country itself but also in the region. We are the largest economy in Central Asia, both in absolute terms and in per capita income. Domiciling a business here offers easy regional access. Number two, we are the only financial hub of its kind in the region, as no other country in the Central Asia have even embarked upon such an approach. So, we shall always remain ahead of the game. The AIFC will continue to benefit from the first-mover advantage. Number three, we are not here to compete with other financial centres. Rather, we take a complementary approach. We shall never attempt to compete with, for example, DIFC. On the contrary, we take a cooperative approach by welcoming financial firms based in New York, London, Dubai and Kuala Lumpur to also have a cost-effective presence in Nur-Sultan. It is a win-win situation when we take a complimentary view on our competitors. Our approach has already won us accolade on a global level. Global Islamic Finance Awards, for example, recognised our efforts by way of presenting us three prestigious awards at its last annual awards ceremony held in Sarajevo, Bosnia- Herzegovina.
ISFIRE: You have already pre-empted our next question. Please feed us with your success at Global Islamic Finance Awards (GIFA).
Dr. Kairat Kelimbetov: I must emphasise that the AIFC is not just about Islamic finance but rather we are a financial centre focusing on all aspects of financial business. Islamic finance, nevertheless, attracts our special attention. Back in 2016, I received GIFA Excellence Award at Jakarta in the presence of President Joko Widodo of Indonesia. This award necessarily recognised the excellent approach we had adopted to develop a state-of-the-art financial centre in the Central Asian region. Last year, the AIFC was chosen to receive Islamic Finance Advocacy Award (Institutional). It was a proud moment for me to receive this recognition in the presence of His Excellency Bakir Izzatbegovic, President of Bosnia-Herzegovina, and His Excellency Ismail Omar Guelleh, President of Djibouti. I am also happy that our Head of Islamic Finance, Alibek Nurbekov, was honoured as the Upcoming Personality in Islamic Finance. It is so good to have some of the ablest people in the field working for you!
In September 2017, we were the proud hosts of GIFA in Nur-Sultan where our First President was the Chief Guest. This was a special occasion for us as the top leaders in Islamic banking and finance from around the world visited the country. His Excellency Omer Ismail Guelleh, President of Djibouti, was bestowed upon the top award – Global Leadership in Islamic Finance Award 2017. His Excellency Nursultan Nazarbayev presented the award. In 2018, we participated in GIFA Awards Ceremony held in Bosnia-Herzegovina and received three prestigious awards.
ISFIRE: FinTech is in vogue, with hardly any conference, seminar or any professional gathering missing out a discussion, debate or reference to it. At the AIFC, how have you managed to keep yourselves on the forefront of FinTech?
Dr. Kairat Kelimbetov: We are very open to developing a conducive regulatory framework for technology firms in banking and finance. In this respect, we have introduced a regulatory sandbox to ensure that technological advancements and innovations are encouraged rather than hindered at the AIFC. Moreover, we have established the AIFC Fintech Hub, which supports Fintech start-ups in the areas of incubation and acceleration programmes, workshops and seminars, informal meetings for the Fintech community, training and Fintech courses on advanced techniques, consulting and mentoring, assistance in presenting the project to foreign partners, participation of Kazakhstani start-ups in international conferences and exhibitions. An important area of work will also be to attract successful foreign Fintech start-ups to the region and help in building partnerships with the local financial ecosystem.
“Kazakhstan is an attractive platform for the development of Islamic finance in the region. The AIFC plans to become a regional Islamic finance hub for the countries of Central Asia and the CIS by providing special infrastructure, legal and tax regime, as well as opportunities for professional development.
Working closely with the Asian Development Bank (ADB) the AIFC created a favorable legal and regulatory environment on Islamic finance and banking, takaful and Islamic capital market. For the further development of Islamic finance legislation, representatives of the AIFC joined the Technical Committee of the Islamic Financial Services Board (IFSB), as well as working groups on the development of IFSB standards.
With the technical assistance of the Islamic Bank, the AIFC is working on a Master Plan (Roadmap) of the development of Islamic finance in Kazakhstan.
To promote the AIFC as a regional hub of Islamic finance, the AIFC Advisory Council on Islamic Finance and the AIFC Central Shari’ah Advisory Board with the best international experts in the field of Islamic finance have been established.
Currently, the AIFC is forming a full-fledged market for Islamic finance. The AIFC has created the conditions for Islamic securities to be issued on the AIX: the issuance of corporate and sovereign Islamic securities (sukuk) are planned. The AIFC registered the first companies operating in the field of Islamic finance, including Islamic bank, Waqf fund, investment fund, Islamic fintech organisations, as well as legal and consulting companies.”
ISFIRE: As an emerging financial centre, what kind of challenges you face internally and externally?
Dr. Kairat Kelimbetov: I don’t think it is appropriate to talk about the challenges once you have successfully gone through them. We had our fair share of challenges that kept us busy in the last three years or so. More importantly, we are fortunate to have a very understanding government that has gone an extra mile to accommodate the AIFC in its existing regime in such a way that our businesses are governed in accordance with the best international practices and the English Common law.
I would, however, like to mention one challenge, i.e., convincing the international financial community that not only are we here but we are here to stay. This required us engaging with the players from around the world – bringing them to Nur-Sultan and visiting them all over the world. This is something that will continue for some time in future. The good news is that now we have a large number of governments, private sector organisations, regulators and other stakeholders who have started believing in the value proposition. Today, around 200 financial and ancillary services companies have been registered with the AIFC. The presence of financial institutions plays a positive role in attracting investments to the country: Kazakhstan is ranked 5th in terms of attractiveness for Islamic investments amongst 57 OIC member countries.
ISFIRE: Attracting 200 companies in a short span of time is a huge achievement. Congratulations! For the benefit of our readers can you please elaborate on what have been done in terms of development of Islamic finance and what other areas of the financial market the AIFC aims to develop?
Dr. Kairat Kelimbetov: The aim of the AIFC is to support sustainable economic growth and foster the development of financial services in the region. We focus on enhancing growth, carrying out main strategic pillars such as capital markets, asset management, private banking, financial technology, green finance, and we pay a great deal of attention to Islamic finance.
Islamic finance has a huge potential for development in the region. Since the potential market for Shari’a-compliant services in the Eurasian region is affected not only by large underserved Muslim populations (exceeding 80 million people and projected to grow up to 100 million people by 2030) but also by a direct link between Islamic finance and real economy. Asset-backed financing and the risk-sharing feature of Islamic finance could provide support for small and medium–sized enterprises (SME), as well as investment in public infrastructure. Given the prohibition of speculation and uncertainty, Islamic financial institutions enhance financial stability and provide sustainable economic growth.
With that in mind, we have worked closely with the Asian Development Bank to create a favourable legal and regulatory environment on Islamic finance and banking, takaful and Islamic capital market. We have created conditions for Islamic securities to be issued on the AIX and the first sukuk issuances are in the pipeline. Up to date, AIFC has created a legal framework for the Islamic financial industry in accordance with the best Islamic finance practices and principles.
We are further developing the Islamic finance ecosystem and currently in the framework of the IsDB Technical Assistance Grant we are developing Kazakhstan’s Islamic Finance Master Plan. Besides, our close cooperation with the IsDB Group is supported by the AIFC’s role as the IsDB Governor office for Kazakhstan, as I am the official representative of Kazakhstan in the Board of Governors of the IsDB Group, which allows us to effectively coordinate the IsDB projects in Kazakhstan. In addition, President of the IsDB Group Dr. Bandar Hajjar is the member of the AIFC Management Council.
To promote the AIFC as a regional hub for Islamic finance, we have established the AIFC Advisory Council on Islamic Finance. The Council includes top-notch and highly reputable international experts with a great expertise and vast experience in the field of Islamic finance. We have also launched the AIFC Central Shariah Advisory Board which consists of renown Shari’a scholars and who will further enhance the credibility of the industry. For the further development of Islamic finance legislation, representatives of the AIFC joined the Technical Committee of the Islamic Financial Services Board (IFSB), as well as working groups on the development of IFSB standards.
As a result, the initiatives undertaken by the AIFC in the promotion and development of Islamic finance have improved the ranking of Kazakhstan from the 31st in 2017 to the 24th in 2018 according to the Global Islamic Finance Report’s (GIFR 2018) Islamic Finance Country Index. I am proud to say that Kazakhstan holds the leading position in the Islamic Finance sector according to Thomson Reuters and Dinar Standard’s the Global Islamic Economy Indicator among the nine post-Soviet countries. We are pleased with the developments so far, and we are looking into the future with an optimism.
ISFIRE: If we may quote Forbes Magazine, it states: “[AIFC] has everything. It wants to be everything.” Don’t you think that it is a bit too ambitious?
Dr. Kairat Kelimbetov: Ambition breeds progress. I don’t think we are overly ambitious though. Having said that, the statement by Forbes Magazine dramatises our situation. We have never claimed to have everything, and we don’t want to be everything. As I said earlier, we focus on six areas, i.e., Capital Markets, Asset Management, FinTech, Islamic Finance, Private Banking and Green Finance. It is also true that this is something we have never tried in Kazakhstan before. We were encouraged by the success of similar financial centres in the world, and we believe that we can do it best in our own region. As the strongest economy in the region, we are all out to build a global city in the form of Nur-Sultan. The AIFC will feature prominently in this success story.
ISFIRE: One thing that impresses everyone is the quality of your team and their dedication to the work. How have you managed to develop such a wonderful team?
Dr. Kairat Kelimbetov: Kazakhstan is blessed with high-quality human resources. There is a world-class Nazarbayev University in Nur-Sultan. Also, right from the beginning we decided to invest in our people. The investment is paying off, as my staff is respected for their professionalism and commitment to work. This is part of our plan to develop a new breed of young and energetic professionals in banking and finance. For the purposes of developing human capital and forming pool of professionals in different aspects of financial market, we have established the Bureau for Continuing Professional Development. The Bureau has selected top programmes from international certification and education institutions and organises trainings for local community and professionals. We also collaborate with top institutions specialising in Islamic finance trainings such as Bahrain Institute of Banking and Finance (BIBF), Chartered Institute for Securities and Investments (CISI), Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), General Council for Islamic Banks and Financial Institutions (CIBAFI), Cambridge Institute of Islamic Finance (CIIF), Finance Accreditation Agency (FAA), Islamic Research and Training Institute (IRTI), and International Centre for Education in Islamic Finance (INCEIF).
ISFIRE: Any message for the professionals in Islamic banking and finance?
Dr. Kairat Kelimbetov: Islamic finance provides additional sources of financing, investment portfolio diversification, enhances financial inclusion and fosters innovative and entrepreneurial spirit in financial services industry. During the recent global financial crisis, Islamic banks showed greater resilience and stability compared to conventional banks due to the nature of Shari’a principles applied by Islamic banks. In this regard, Islamic banking and finance industry is becoming one of the essential elements of the global financial architecture. I would like to advise the professionals in the field to remain committed to the cause of Islamic banking and finance. This is certainly going to pay dividends to your investment in the profession.
