Central Asia is on the brink of a transformative phase in Islamic finance, as delineated in a recent report titled ‘The Future of Islamic Finance in Central Asia.’ This comprehensive study, jointly released by the Islamic Development Bank Institute and the Eurasian Development Bank, sheds light on the potential growth trajectory of Islamic finance in the region over the next decade. As of 2023, the region’s Islamic finance assets were valued at $699 million, a mere 0.01% of global Islamic finance assets. However, with a predominantly Muslim population averaging 85% and increasingly diverse financial sectors, Central Asia is poised to become a significant player in the global Islamic finance arena.
According to Dr. Muhammad Al Jasser, President of the Islamic Development Bank, the countries in Central Asia, including Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan, are at a crucial juncture in the development of their financial systems, which could stimulate economic growth. He emphasized the region’s strong cultural foundations and the growing demand for financial instruments, which present immense potential for Islamic finance. This growth can not only bolster the development of financial systems but also address broader socio-economic challenges.
The landscape of Islamic finance in Central Asia is diverse, featuring fully-fledged Islamic banks, Islamic windows within conventional banks, takaful operators, microfinance institutions, leasing and investment companies, and Islamic fintech firms. However, the Islamic capital markets, particularly sukuk, are still developing. The origins of Islamic finance in Central Asia trace back to the 1990s when the countries joined the Islamic Development Bank Group. The Kyrgyz Republic was the first to adopt these financial systems, and today, with the exception of Turkmenistan, all Central Asian countries have established components that contribute to the growth of Islamic finance.
Kazakhstan and the Kyrgyz Republic have made significant strides in developing legal and regulatory frameworks, with Kazakhstan currently ranked 19th globally in terms of Islamic finance development according to the 2024 Islamic Finance Development Report. Despite these advancements, the region’s progress is still in its nascent stages, especially when compared to more mature markets in the Gulf and Southeast Asia.
The report identifies three primary constraints to the growth of Islamic finance in Central Asia: limited public awareness, a lack of qualified professionals, and weak legal frameworks. To overcome these challenges, the authors advocate for harmonized regulation, strategic public education campaigns, and substantial investments in professional training.
Nikolai Podguzov, Chairman of the Eurasian Development Bank, highlighted that the further development of Islamic finance in Central Asia will broaden access to global Islamic finance markets for local businesses and support regional economic growth. He noted that Islamic finance could become a powerful engine for inclusive growth and act as a catalyst for regional integration.
Central Asia’s macroeconomic indicators reveal strong growth potential. As of 2024, the region’s population reached 82 million, marking a 40% increase since 2000, and continues to grow at a rate of 2% annually. The combined GDP is now $519 billion, having grown at an average annual rate of 6.2% over the past two decades, outperforming global and other developing regions. Trade turnover has increased ninefold since 2000, while foreign direct investment has grown 17-fold.
The region is home to eighteen Islamic banks, and the report forecasts that Islamic banking assets could reach $2.5 billion by 2028 and rise to $6.3 billion by 2033. The sukuk market is also expected to grow from $2.05 billion in 2028 to $5.6 billion by 2033. Kazakhstan is projected to lead this growth, followed by Uzbekistan and Turkmenistan, as governments adopt more favorable regulations and develop institutional infrastructure to support the sector. Priority investment areas for Islamic finance are likely to include energy, transportation and logistics, manufacturing, food security, and social infrastructure—sectors critical for sustainable development.
To unlock this potential, the report calls for increased collaboration with multilateral financial institutions and Islamic banks from more established markets to facilitate knowledge transfer and product innovation tailored to local needs. This includes supporting Islamic windows in conventional banks, developing microfinance initiatives based on Sharia-compliant principles, and financing key sectors such as agriculture and renewable energy. Banks and institutions in the Gulf and Southeast Asian countries can play a crucial role in capacity building, from providing legal expertise to driving fintech innovation. This support could enable Central Asian nations to fast-track their development and integrate more deeply into global Islamic finance markets.
With supportive policies and growing demand, Central Asia stands at the threshold of becoming a new frontier in Islamic finance. This growth is set not only to meet the needs of its predominantly Muslim population but also to drive economic inclusion and resilience in an increasingly uncertain global environment. Note: This article is inspired by content from https://astanatimes.com/2025/06/central-asia-poised-for-boom-in-islamic-finance-new-report-finds/. It has been rephrased for originality. Images are credited to the original source.