The $6bn opportunity: How Islamic Finance could reshape Central Asia’s Financial Landscape

The Eurasian Development Bank (EDB), the Islamic Development Bank Institute (IsDBI), and the London Stock Exchange Group (LSEG) have published a joint report on the future of Islamic finance in Central Asia. The report was unveiled during the 19th IsDB Global Forum on Islamic Finance: Digital Transformation and Financial Inclusion, held as part of the Islamic Development Bank (IsDB) Annual Meeting and Global Forum for Islamic Finance in Algiers, Algeria.

Central Asia, the EDB’s core region of operations, comprises five rapidly evolving economies—Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. With a population of 80 million people (a 40% increase since 2000) and an annual growth rate of 2%, the region is experiencing robust economic expansion. In 2024, the aggregate GDP of Central Asia reached $519 billion, having grown at an average nominal rate of 6.4% over the past two decades. Foreign trade turnover has surged ninefold since 2000, while foreign direct investments have increased 17 times, outpacing growth in many other developing regions.

Despite this progress, Islamic finance remains underdeveloped in Central Asia. The region currently hosts only 18 Islamic banks and 14 non-banking financial institutions, alongside limited Islamic banking windows. In 2023, total Islamic finance assets in Central Asia stood at $699 million, representing just 0.01% of the global Islamic finance market—despite the fact that 85% of the region’s population is Muslim.

The report highlights significant growth potential for Islamic finance in Central Asia over the next decade, particularly in Islamic banking and the sukuk market. Key projections include:

• Islamic banking assets are expected to rise to 2.5 billion by 2028 and 6.3 billion by 2033.
• The sukuk market is forecast to expand to 2.05 billion by 2028 and 5.6 billion by 2033, with key opportunities in energy, transport & logistics, industry, food security, and social infrastructure.

Kazakhstan is anticipated to lead this growth, followed closely by Uzbekistan, given their strong banking sectors, favorable demographics, and economic trajectories.

The report provides actionable insights to accelerate the adoption of Islamic finance in Central Asia, including:

• Regulatory harmonization to facilitate cross-border Sharia-compliant transactions.
• Capacity building to enhance expertise in Islamic finance among regulators and financial institutions.
• Product innovation to expand offerings beyond traditional banking.
• Awareness campaigns to promote Islamic finance among businesses and consumers.
• Strengthening Partnerships for Islamic Finance Advancement.

This collaboration underscores the shared commitment of the EDB, the IsDBI and the LSEG to foster Islamic finance in Central Asia. By combining their expertise, the institutions aim to support the region’s financial sector development through best practices, innovative solutions, and strategic investments.

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/

The Eurasian Development Bank (EDB) is a multilateral development bank investing in Eurasia. For more than 18 years, the Bank has worked to strengthen and expand economic ties and foster comprehensive development in its member countries. By 2025, the EDB’s cumulative portfolio comprised 305 projects with a total investment of US $16.5 billion.