Islamic Finance in Kazakhstan – The Future Hub of Islamic Finance in the Central Asia

By Mamunur Rashid

 According to Malaysia Islamic Finance Marketplace, Zawya Islamic and Thomson Reuters, Islamic finance has been growing at a double-digit rate since the start of the new millennium.  In this article the author discusses the potential of Islamic Finance in Kazakhstan, and its role in the success of Islamic Finance in Central Asia.


Islamic Finance is considered as an alternative financial system that is based on Islamic shari’ah promoting a superior form of ethical and social financial transformation mechanism, shared values and sustainable development. The system prohibits the use of traditional interest rates, promotes profit and loss sharing in investment and financing, and, more importantly, considers the customers as “partners” in business. Financial instruments are designed to fit the above-mentioned goals for the shorter- and longer-terms. Multiple authorities including internal and centralised shari’ah advisory boards monitor the innovation in financial instruments and their performance. Countries in the Middle East, Southeast Asia, North Africa, and South Asia are leading in development of comprehensive halal ecosystems for the users of Islamic finance. Islamic finance has received much attention after the recent global financial crisis while the system has been extraordinarily resilient to risk. Experts have given credits to Islamic finance systems for an embedded risk management system as such the Islamic financial managers have carefully screened investment based on risk adjusted benefits. More countries are gradually registering their interest towards Islamic financial system, and the system has experienced tremendous development from several fronts including banking, equities investment, Islamic bonds (sukuk), mutual funds, microfinance, and insurance (takaful).


Source: Compiled by the writer from various sources 

Figure 1 & 2: Timelines of Development of IF in Kazakhstan


Kazakhstan has been in the frontier leading Islamic finance development in the Central Asian region. Above timelines are self-explanatory. There has been a rapid progression since 2009, the year of the first established legislation for Islamic finance industry, to become the Islamic hub of Central Asia. By 2020, Kazakhstan wants its Islamic banking industry to reach 3-5% of its total banking assets. To achieve this vision, the country has already laid down rigorous plans combining regulatory initiatives for Islamic banking, insurance, leasing, sukuk, and microfinance, and has set-up supporting institutions to shift to the next gear of development and enhancement. Astana has given a clear signal to that direction in 2015 by bringing meaningful amendments to the existing regulations. Capital requirements for chartering a new bank has been brought down by 50%, conversion from conventional to Islamic mode of financing has been streamlined, and a centralised Shari’ah board (Council for Islamic Financing Principles) has been activated. Initiatives are taken by National Bank of Kazakhstan to develop halal ecosystems that combine prudential regulations, financial institutions, consumers, and cross-border relations. Positive outcomes have started appearing as well: Thomson Reuters investment outlook (2015) ranked the country in the 5th position out of 57 OIC member countries as a top tiered Islamic investment destination, and a similar survey was conducted in 2014 that ranked Astana 5th on the regulatory initiatives and integration. At present, the country has seen an Islamic bank, Al Hilal Bank, a Sukuk issuance, an Islamic microfinance mostly for the agricultural financing, Islamic leasing firm, and an Islamic insurance (Takaful) firm. Internationally active banks such as the Al Baraka Group and MayBank Group have shown interests to be active in Islamic finance markets in Kazakhstan. With a 17.5 million Muslim population, which is almost untapped, Astana can expect some positive changes in the coming future.

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About the Author

Mamunur Rashid holds a PhD in Behavioural Finance, and currently is an Assistant Professor of Finance, and the Deputy Director of the Centre for Islamic Business and Finance Research (CIBFR), at the University of Nottingham Malaysia Campus. He has been teaching International Finance, Financial Economics, Islamic Capital Markets, and Corporate Finance for the last twelve years in different countries. An active researcher, Dr Mamunur publishes widely in financial economics, Islamic economics, investor behavior, and corporate social responsibility, and has presented papers in 25 international conferences. In 2016-17, Dr Rashid has co-edited a special issue for International Journal of Mamunur has worked on several corporate and government projects. Mamunur Rashid can be contacted at: [email protected]


1. Annual report of Al Hilal Bank Islamic Bank JSC (2015)
2. A new frontier of Islamic Finance – Thomson Reuters Islamic Finance country report of Kazakhstan.
3. Kulchmanov, A., Hassan, M.K. & Rashid, M. (2016). Contingency theory approach to risk management practices in Islamic banks: A case study on Kazakhstan, International Journal of Islamic Business, 1(2), 35-67.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.