Kazakhstan has adopted legislation designed to facilitate Islamic banking, and at least one Islamic bank has started operations in Kazakhstan. Islamic banking is based upon traditional Islamic law, which forbids the taking of interest, the making of profit without risk, and profiting from "sinful" businesses such as pornography. The legislation in Kazakhstan forbids such activities for Islamic banks and also requires each Islamic bank to have an independent "Council on the principles of Islamic finance" to rule on bank policies and specific transactions. Islamic banking practices use complex combinations of transactions, each permitted by Islamic law, to mimic common conventional banking transactions, such as loans bearing fixed interest rates and repayable on a fixed date. Stable income and manageable principal obligations from credit-worthy borrowers can ensure that a bank will receive high ratings from leading international credit rating agencies and, thus, can satisfy the requirements of Kazakhstan's bank regulators. The formal difference between Islamic banking transactions and the conventional transactions that they mimic could lead to differing treatment for taxation. To provide a level playing field, Kazakhstan has amended its Tax Code to provide for equal treatment of economically equivalent Islamic and conventional banking transactions. Adjustments have also been made to bankruptcy legislation, reflecting the unavailability of deposit insurance for Islamic banks and the special nature of investment deposits in Islamic banks. There are controversies among Islamic law scholars as to whether or not various practices used to mimic conventional banking transactions are unlawful because they violate the spirit of Islamic law. This creates what is called "Sharia risk", the risk that a transaction will be found unlawful after it has been concluded, with consequences highly unfavorable for a party.
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