ALGIERS, Algeria, May 20. Kazakhstan is expected to be the main driver of growth in Islamic assets in Central Asia, reads the joint report of the Eurasian Development Bank, the Islamic Bank Institute and the London Stock Exchange Group.
It was presented during the IsDB annual meetings in Algiers, Trend’s special correspondent reports.
“With reported total Islamic finance assets of $699 million in 2023, or 0.01% of total global assets, Central Asian nations still make a modest contribution to the industry. This is despite the large average share of the Muslim population, which constitutes 85% of the total population in these countries. The region is served by full-fledged Islamic banks, Islamic banking windows, takaful operators, microfinancing, investment, leasing companies, and Islamic FinTechs. However, Islamic capital market instruments are developing more slowly than Islamic financial institutions,” reads the document.
The report reveals that each Central Asian country has different sectors contributing to their overall Islamic finance industries.
“In terms of regulatory frameworks and legal environments, the region is relatively nascent compared to highly developed Islamic finance markets. Among the Central Asian countries, Kazakhstan and Kyrgyzstan have made significant progress in establishing their regulatory and legal frameworks for Islamic finance.
Despite the developments in the region, challenges exist. Key challenges facing the regional Islamic finance industry include limited awareness, a shortage of talent, and the need for harmonisation of regulatory frameworks. Additionally, regional opportunities exist that can bode well for the region’s Islamic banking and finance industry,” says the document.
Overall, the authors note that Islamic finance offers a unique
opportunity for Central Asia to promote inclusive growth, financial
stability, and sustainability. Overcoming these challenges will
require
coordinated efforts and innovative solutions.
“By capitalising on its strategic advantages, the region can
position itself as a key player in the global Islamic finance
industry. In conclusion, it is expected that the industry in the
region will continue to grow, with
projected ṣukūk assets of $5.6 billion and Islamic banking assets
of $6.3 billion by 2033. Given the demographics as well as economic
growth and size of the banking industry in each of the five Central
Asian nations, Kazakhstan is likely to be the main driver of this
growth, followed by Uzbekistan and Turkmenistan.
This assumes that the governments in the region will actively work to create a facilitative environment for Islamic finance, putting in place appropriate regulatory regimes and other elements of the supporting ecosystem of the industry. These projections are also aligned with the experiences of other emerging Islamic finance markets,” the report says.