Despite having a predominantly Muslim population of 94%, Uzbekistan has yet to adopt Islamic banking, which has gained popularity in many Muslim-majority countries, including those in the Gulf and Southeast Asia

Abstract
Despite having a predominantly Muslim population of 94%, Uzbekistan has yet to adopt Islamic banking, which has gained popularity in many Muslim-majority countries, including those in the Gulf and Southeast Asia. The absence of Islamic banking in Uzbekistan is an intriguing phenomenon, given the growing prevalence of this alternative banking system in Western cities like London and New York with expanding Muslim communities. Similar to Turkey, which also has a significant Muslim population but where Islamic banking is still in its early stages, Uzbekistan may face challenges due to the population's prioritization of financial benefits, product diversity, and quality of service over adherence to Shari'a principles.
The implementation of Islamic banking in Uzbekistan is hindered by several factors, including the lack of trust in Islamic banks' compliance with Shari'a principles and safety, which may be partly due to the limited understanding of how these banks operate and negative media and academic coverage of bad practices. It is unlikely that Islamic banking will become a sustainable alternative banking system in Uzbekistan, and instead, it may remain an additional or complementary banking system. Nevertheless, its assets and share are expected to increase over the next decade. Therefore, understanding the factors that affect the adoption of Islamic banking in Uzbekistan is a critical research area that can inform policymakers and practitioners in the banking sector.
To address this research gap, this dissertation analyzes the factors that influence the adoption of Islamic banking in Uzbekistan. Specifically, the study employs a mixed-methods approach that includes a survey of Uzbekistanis and a case study of an Islamic bank in a neighboring country to explore the perceived benefits, risks, and trust factors that shape consumers' decision-making processes. The findings of this research contribute to the understanding of the challenges and opportunities facing the adoption of Islamic banking in Uzbekistan and can inform strategies to enhance the viability of Islamic banking as a complementary or alternative banking system.
The emergence of Islamic banking as an alternative to conventional banking has garnered significant global attention in recent years. With its foundation rooted in Shariah law, which governs all aspects of economic, social, and political life in Islam, Islamic banking promotes profit and loss sharing between the bank and its clients, while prohibiting interest (riba). Despite the growth and development of Islamic banking worldwide, Uzbekistan's predominantly conventional banking system has yet to offer any Islamic banking services, despite having a Muslim population representing approximately 90% of the total population. The lack of Islamic banking services in Uzbekistan presents an opportunity to explore the potential benefits of its implementation, including promoting financial inclusion, encouraging entrepreneurship, and increasing investment and attracting foreign capital.
This dissertation aims to investigate the potential for Islamic banking in Uzbekistan and its positive impact on commercial banks by examining the perception of households towards Islamic banking and analyzing its potential benefits in commercial banks. To our knowledge, there are few studies conducted on this topic in Uzbekistan, and thus, we referred to literature about Turkey, a country that also struggles with the development of Islamic banking. However, most research on Islamic banking in Turkey has focused on other aspects, making this study one of the first to investigate the appeal of Islamic banks to customers and potential customers in Uzbekistan.
The paper will begin with a discussion on the development of Islamic banking in Turkey, followed by a review of the relevant international literature on the factors influencing the decision to use Islamic banking services. We will then introduce our data acquisition and processing methods, present our findings, and discuss their implications. The paper will conclude with a summary of our results and suggestions for further research.