nCa Report
Three prominent financial organizations have released a comprehensive study examining the prospects for Islamic finance across Central Asia, presenting their findings at a major international forum in Algeria’s capital.
The Eurasian Development Bank (EDB), Islamic Development Bank Institute (IsDBI), and London Stock Exchange Group (LSEG) collaborated on the report, which was presented during the 19th IsDB Global Forum on Islamic Finance in Algiers. The forum, focused on digital transformation and financial inclusion, took place alongside the Islamic Development Bank’s annual meeting and global finance gathering.
The full report is available for download on the websites of Eurasian Development Bank’s Think Tank. https://eabr.org/en/analytics/special-reports/the-future-of-islamic-finance-in-central-asia/
Central Asia presents a compelling economic narrative. The five-nation region—encompassing Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—has demonstrated remarkable growth momentum over recent decades. Home to 80 million people, the region’s population has expanded by 40% since 2000, continuing to grow at 2% annually.
Economic indicators paint an equally impressive picture. The region’s combined GDP reached $519 billion in 2024, reflecting an average nominal growth rate of 6.4% over the past twenty years. International trade has experienced explosive growth, with foreign trade turnover increasing ninefold since 2000. Foreign direct investment has proven even more dramatic, surging seventeen-fold during the same period and outperforming many comparable developing regions.
Despite this economic dynamism and the fact that 85% of Central Asia’s population is Muslim, Islamic finance remains surprisingly underdeveloped. The region currently operates just 18 Islamic banks and 14 non-banking financial institutions, supplemented by a limited number of Islamic banking windows.
The numbers tell a stark story: total Islamic finance assets in Central Asia reached only $699 million in 2023, representing a mere 0.01% of the global Islamic finance market. This figure highlights the enormous disconnect between the region’s demographic profile and its financial sector development.
The report’s authors see substantial opportunity ahead, particularly in Islamic banking and sukuk markets. Their projections suggest dramatic expansion over the next decade:
Islamic banking assets could reach $2.5 billion by 2028, potentially growing to $6.3 billion by 2033. The sukuk market shows similar promise, with forecasts indicating growth to $2.05 billion by 2028 and $5.6 billion by 2033.
These bonds are expected to find particular application in energy projects, transport and logistics infrastructure, industrial development, food security initiatives, and social infrastructure programs.
Kazakhstan appears positioned to spearhead this growth trajectory, with Uzbekistan following closely behind. Both countries benefit from robust banking sectors, favorable demographic trends, and positive economic momentum.
The report outlines several critical steps to accelerate Islamic finance adoption across Central Asia. Regulatory harmonization emerges as a priority, aimed at streamlining cross-border Sharia-compliant transactions and reducing bureaucratic barriers.
Capacity building represents another cornerstone of the recommended approach, focusing on developing Islamic finance expertise among both regulators and financial institutions. The authors emphasize the need for product innovation to expand beyond conventional banking offerings, coupled with comprehensive awareness campaigns targeting businesses and consumers.
The report also stresses the importance of strengthening partnerships to create a more integrated approach to Islamic finance development across the region.
This joint initiative reflects the three institutions’ shared commitment to advancing Islamic finance in Central Asia. By pooling their respective expertise and resources, the EDB, IsDBI, and LSEG aim to support comprehensive financial sector development through proven best practices, innovative solutions, and strategic investment approaches.
The collaboration signals growing international recognition of Central Asia’s potential as an emerging market for Islamic finance, despite its current underdevelopment relative to the region’s demographic and economic characteristics. /// nCa, 23 May 2025