The Impact of Islamic Finance on Kazakhstan’s Ties with the Muslim World
On October 12, Kazakhstan and the United Arab Emirates signed a $6.1 billion agreement to expand bilateral cooperation and to implement more than 20 projects across a wide range of economic sectors. The UAE’s involvement in Kazakhstan has been steadily increasing over the last few years, especially following the establishment of the Astana International Finance Centre (AIFC). Launched in 2018, AIFC aims to bridge the economies of Central Asia, the Caucasus, Europe, China, and the Middle East by becoming an international financial hub for investors to promote domestic and regional economic development. AIFC inaugurated the first platform in the region to grant access to investors and developers to Islamic finance.
Islamic finance is gaining substantial interest among investors in international financial centers, experiencing a 15 to 25 percent annual growth rate. In addition, Islamic financial market assets account for $2.5 trillion globally and are expected to rise to $3.8 trillion by 2023. Islamic finance must comply with Sharia law, making it an attractive outlet for investors in predominantly Muslim countries in the Middle East and North Africa as well as South and Southeast Asia. Not only is Kazakhstan’s implementation of Islamic finance attractive for investors from these regions, but it also serves as an essential building block for bolstering economic relations and trade ties with these countries.
The penetration of Islamic finance in Central Asia remains low, but Kazakhstan plans to broaden its activities to reach 3 percent of the country’s total banking assets by 2025. Alibek Nurbekov, Head of the Islamic Finance Department at AIFC, noted that the use of English as its main language, the practice of British common law, and the launching of Islamic finance grant the institution unique advantages in attracting more diverse investors from a wide range of economic sectors and countries. However, Islamic finance is gaining traction in Europe as well. London and Luxembourg, two key global financial institutions are major hubs for Islamic finance and regularly issue Islamic bonds. Kazakhstan’s integration of Islamic finance in AIFC will elevate its appeal and allow it to compete with the most advanced and well-established global financial institutions.
Since AIFC launched its Islamic finance branch, Kazakhstan has benefitted from increased economic cooperation with predominantly Muslim states from around the globe. Kazakhstan’s participation in the Organization of Islamic Cooperation (OIC) highlighted to Gulf states its potential for investment. In recent years, bilateral agreements between Kazakhstan and the UAE have yielded $2 billion in direct investment, which has reached over 350 different companies across the country. Similarly, Kuwait became one of the first countries to invest in Kazakhstan’s nuclear energy program.
Kazakhstan has also been improving its economic relations with predominantly Muslim countries across South and Southeast Asia, since it incorporated Islamic finance into its framework. Kazakhstani ambassador to Pakistan, Barlybay Sadykov, urged Pakistani investors to consider Kazakhstan because of the strong religious relationship between the two countries. Furthermore, Islamic finance in Kazakhstan is drawing interest from countries in Southeast Asia. Kazakhstan and Malaysia are mulling an Islamic banking partnership. Kazakhstan is also working with Indonesia to develop the halal industry in Central Asia. Kazakhstan’s development of Islamic finance infrastructure showcases to these countries that Kazakhstan adheres to practices of socially responsible investment under Sharia law, prompting an influx of investment and trade flows from these countries.
Trade between Kazakhstan and predominantly Muslim countries has spiked recently; an indicator that improved economic relations and the introduction of Islamic financing have granted Kazakhstan global recognition for its investment potential.

The Astana International Finance Centre has illustrated Kazakhstan’s considerable potential for Islamic finance. AIFC’s implementation of Islamic finance will allow the institution to compete with well-established financial centers, such as Hong Kong, London, and Singapore. In addition, Kazakhstan’s intention to bolster its economic relations with predominantly Muslim countries in the Middle East and Asia has received welcome reception. Bilateral agreements and trade relations between Kazakhstan and the Gulf States and Asia have improved in the past years and the growth of AIFC will contribute to closer relations. Though the influence of Islamic finance in Kazakhstan’s financial services industry may be modest, its potential to serve as a catalyst for closer cooperation with the Muslim world could have far-reaching implications.