ALGIERS, Algeria, May 20. Islamic finance will see a significant growth in Central Asian in the next 10 years, Trend reports with reference to the Joint report of the Eurasian Development Bank (EDB), the Islamic Development Bank Institute (IsDBI), and the London Stock Exchange Group (LSEG).
The report was presented during the IsDB annual meetings in Algiers.
“The region of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) is dynamically changing, and its role in Eurasia and the world needs to be reassessed. The population of Central Asia is 82 million people. This is a 40% increase since 2000. It keeps growing at 2% per year. In 2024, the aggregate GDP of the Central Asia countries was $519 billion). Over the last two decades, it grew nominally at 6.4% on average. Foreign trade turnover has increased almost ninefold since 2000. Foreign direct investments have increased 17 times. For over 20 years, Central Asia has been growing faster than developing countries on average,” reads the report.
The reports says that Sharī‘ah-compliant financing, as a relatively new (more than 30 years old) and fast-growing segment of the global financial system, plays an increasingly important role in the sustainable development of the Central Asian states.
“All governments of the region are paying special attention to the development of Islamic finance. Islamic finance offers a unique opportunity for Central Asia to promote inclusive growth, financial stability, and sustainability. Overcoming challenges such as regulatory inconsistencies and talent shortages will require coordinated efforts and innovative solutions. By capitalizing on its strategic advantages, the region can position itself as a key player in the global Islamic finance industry,” reads the report.
The report reveals that Islamic finance assets in Central Asia amount to $699 million at the beginning of 2024.
“According to the Islamic Finance Development Report 2024, Kazakhstan ranks 19th in the world in terms of Islamic finance development in 2024 (i.e. above the global average) and leads the Central Asian market. The substantial untapped potential for Islamic finance in Central Asia is driven by the region's growing Muslim population, favorable economic conditions, and increasing interest in ethical investments. However, the industry faces challenges such as limited liquidity, lack of standardisation, and the need for robust risk management frameworks. Additionally, regulatory harmonisation across Central Asian countries is crucial to attract foreign investment and facilitate cross-border transactions,” the authors noted.
The report says that in the next ten years, there is a perspective for significant growth and development in the Islamic finance industry in the region, driven mainly by the Islamic banking sector and the sukuk asset class(Energy, Transport & Logistics, Industry, Food Security and Social Infrastructure are priority areas of investment).
“A baseline scenario based on the growth of financial intermediation and an estimate of the change in the share of Islamic finance in the financial sector structure was used to project the increase in Islamic finance assets in the region. This approach assumes an increase in Islamic banking assets in Central Asia to the level of $2.5 billion in 2028 and $6.3 billion in 2033,” reads the report.