Press Release
Central Asia at the Crossroads of Islamic Finance Growth: Zubair Mughal
A fast-growing Muslim-majority population, ambitious reforms, and strategic investments are paving the way for Shariah-compliant banking, takaful, and sukuk markets across the region.
(October 02, 2025 (Dubai – UAE)): Central Asia is rapidly emerging as one of the most promising frontiers for Islamic finance. Although the sector is still in its infancy, with Islamic finance assets in the region amounting to just USD 699 million in early 2024 — barely 0.01 percent of global Islamic finance assets — the potential is striking. Projections suggest that Islamic banking assets will reach USD 2.5 billion by 2028 and USD 6.3 billion by 2033, while the sukuk market is expected to grow from USD 2.05 billion in 2028 to USD 5.6 billion in 2033.
Central Asia, which includes Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, is home to more than 82 million people, between 85 and 90 percent of whom are Muslim. The population has grown by 40 percent since the year 2000 and continues to expand at an annual rate of 2 percent. The region’s combined GDP reached USD 519 billion in 2024, with average annual growth of around 6.2 to 6.4 percent over the last two decades, outpacing many developing economies. Foreign trade turnover has multiplied ninefold since 2000, while foreign direct investment has increased 17-fold. This economic dynamism is fueling demand for diversified financial services, and Islamic finance is increasingly viewed as a viable mechanism for promoting inclusion, resilience, and long-term sustainability.
The landscape of Islamic finance in the region is diverse but still nascent. By 2024, there were 18 Islamic banks and 14 non-banking financial institutions in operation, along with a handful of Islamic banking windows. Supporting institutions are gradually taking root, including takaful operators, microfinance institutions, leasing companies, investment firms, and emerging fintech platforms offering Shariah-compliant services. Kazakhstan is the undisputed leader in the region, ranking 19th globally according to the Islamic Finance Development Report 2024, well above the international average. The government has set ambitious targets for Islamic finance to capture between 3 and 5 percent of the domestic market by 2025. The country has attracted Gulf-based players, such as Abu Dhabi Commercial Bank through its subsidiary ADCB Islamic Bank JSC, and Qatar’s Lesha Bank, which acquired Bereke Bank JSC in 2024. The Astana International Exchange has become an important hub for sukuk issuance and cross-listings, with the first local sukuk launched by Gamma-T SPC Limited in 2024. New regulatory amendments are expected to allow conventional banks to open Islamic windows, while Otbasy Bank, the nation’s fourth-largest lender, is preparing to launch Islamic mortgage products in 2025.
Kyrgyzstan represents another success story. It hosts one fully fledged Islamic bank and four Islamic windows, and Islamic financing there grew by an impressive 49.3 percent in 2024, far surpassing overall banking sector credit growth of 32.2 percent. With its relatively liberal regulatory framework, Kyrgyzstan currently has the highest Islamic finance penetration in Central Asia. Uzbekistan, by contrast, remains at an earlier stage, with most Islamic finance activity concentrated in non-bank institutions offering leasing and takaful. Yet the country’s potential is considerable, given its large population and rapid economic expansion. The Central Bank of Uzbekistan has recently approved regulations enabling microfinance institutions to diversify into Islamic products, while new legislation is under way to allow conventional banks to establish Islamic windows. Tajikistan has one Islamic bank in operation and another under conversion, showing steady if modest progress. Turkmenistan lags behind, with no formal Islamic banking presence, though rising demand is expected to push authorities to engage more actively in the years ahead.
Several priority sectors for Shariah-compliant investment have been identified, including energy, transport and logistics, manufacturing, food security, and social infrastructure. These align closely with national development strategies and the region’s broader sustainability agenda. Stronger ties with the Gulf Cooperation Council are also expected to boost growth, with increasing capital inflows from GCC countries and multilateral Islamic financial institutions likely to accelerate expansion. By the end of 2023, the Islamic Development Bank’s total funding to Commonwealth of Independent States (CIS) countries had reached USD 9.1 billion, with Uzbekistan accounting for 41 percent and Kazakhstan for 18 percent.
Despite this promising trajectory, challenges remain. Public awareness of Islamic finance is still limited, there is a shortage of qualified professionals with both technical and Shariah expertise, and regulatory frameworks across the region are uneven or incomplete. In some cases, Islamic banks are excluded from deposit protection schemes, which undermines customer confidence. Unequal tax treatment and underdeveloped financial ecosystems could also slow momentum if not addressed in time.
The way forward will require coordinated action. Regulatory harmonization, targeted awareness campaigns, and capacity building through education and training are essential to unlock growth. Collaboration with leading Islamic finance hubs in the Gulf and Southeast Asia will be crucial in bringing product innovation and fintech solutions tailored to the realities of Central Asia.
In this context, AlHuda Centre of Islamic Banking and Economics (AlHuda CIBE) is playing a pivotal role in driving Islamic finance forward in the region. Through training programs, advisory services, research, and international forums, AlHuda CIBE has been actively supporting governments, financial institutions, and industry professionals in building Shariah-compliant frameworks and products. Its efforts in capacity building, Sukuk structuring, Takaful product development, and awareness creation are helping bridge gaps between Central Asia and global Islamic finance markets. By fostering connections with Gulf-based investors and promoting sustainable financial inclusion, AlHuda CIBE continues to contribute to the region’s transformation into a promising hub for Islamic finance.
About AlHuda CIBE:
AlHuda Center of Islamic Banking and Economics (CIBE) is a well-recognized name in Islamic banking and finance industry for research and provides state-of-the-art Advisory Consultancy & Education through various well-recognized modes viz. We provide services in Islamic Financial Product Development, Shariah Advisory, Training, Islamic Microfinance, and Takaful Consultancy, complemented by our well-recognized publications in Islamic Banking and Finance.
We are dedicated to serving the community as a unique institution, advisory and capacity building since 2005. The prime goal has always been to remain stick to the commitments providing Services not only in UAE/Pakistan but all over the world. AlHuda has contributed to the growth of Islamic Banking and Finance in over 104 countries. Learn more at: www.alhudacibe.com
