A recent report titled The Future of Islamic Finance in Central Asia, jointly published by the Islamic Development Bank Institute (IsDBI) and the Eurasian Development Bank (EDB), highlights the region's potential for significant expansion in Islamic finance over the next decade. As of 2023, the total value of Islamic finance assets in Central Asia amounted to $699 million, representing a mere 0.01% of global figures. However, with an average Muslim population of 85%, this area is seen as a promising hub for future growth within the global Islamic finance industry. The report identifies key challenges such as limited public awareness, insufficient legal frameworks, and a shortage of skilled professionals, while also proposing strategies to overcome these obstacles through harmonized regulation, education campaigns, and training investments.
Islamic finance has been present in Central Asia since the 1990s when several countries joined the Islamic Development Bank Group. Among them, the Kyrgyz Republic took an early lead, and today most Central Asian nations—excluding Turkmenistan—have established some form of infrastructure supporting Islamic finance. Kazakhstan stands out particularly, ranking 19th globally in terms of Islamic finance development according to the 2024 Islamic Finance Development Report. Despite progress, much work remains to fully develop the sector across the region.
Currently, Central Asia hosts a variety of Islamic financial institutions, including full-fledged banks, windows within conventional banks, takaful operators, microfinance entities, leasing companies, investment firms, and fintech organizations. Nevertheless, the development of Islamic capital markets, especially sukuk issuance, lags behind other regions like the Gulf or Southeast Asia. To address this gap, experts suggest fostering regional collaboration with multilateral financial institutions and leveraging knowledge from more mature markets.
The macroeconomic indicators for Central Asia are encouraging, reflecting robust growth potential. By 2024, the population had reached 82 million, marking a 40% increase since 2000, and continues to grow at 2% annually. The combined GDP now amounts to $519 billion, growing at an average annual rate of 6.2% over the past two decades. Trade turnover has surged ninefold since 2000, accompanied by a 17-fold rise in foreign direct investment. These trends underscore the economic dynamism that could fuel further expansion in Islamic finance.
The report forecasts substantial growth in Islamic banking assets, which may reach $2.5 billion by 2028 and climb to $6.3 billion by 2033. Similarly, the sukuk market is projected to expand from $2.05 billion in 2028 to $5.6 billion by 2033. Kazakhstan is expected to spearhead this growth, followed closely by Uzbekistan and Turkmenistan, as governments implement supportive regulations and enhance institutional infrastructure.
Prioritizing sectors such as energy, transportation, manufacturing, food security, and social infrastructure, Islamic finance aims to drive sustainable development in Central Asia. Achieving this vision requires greater regional cooperation and integration into global Islamic finance networks. Collaboration with experienced institutions in the Gulf and Southeast Asia can facilitate capacity building, technological innovation, and tailored product offerings.
Looking ahead, Central Asia holds immense promise as a burgeoning frontier for Islamic finance. With supportive policies and increasing demand, the region can not only cater to its predominantly Muslim population but also foster economic inclusivity and resilience amidst global uncertainties. Efforts toward harmonized regulation, strategic educational initiatives, and targeted investments will be pivotal in unlocking this potential and positioning Central Asia as a vital player in the global Islamic finance landscape.
