Market penetration of Islamic finance in Kazakistan is still low. However, Kazakhstan is developing its services and activities to position itself as the region’s leading hub for Islamic Finance. The establishment of the Astana International Financial Centre (AIFC) in 2018 has accelerated the country’s advancements of domestic Islamic banking, takaful, insurance, and capital markets. The main goal is to increase the Islamic Finance sector. Specifically Islamic banking assets, from 1% to 3% of the country’s total banking assets by 2025.
The AIFC activities
The AIFC adopted the Master Plan (Roadmap), which provides measures for developing Islamic finance activities in Kazakistan regarding legislative changes and others. Moreover, the AIFC plans to issue Sukuk—Islamic financial certificates defined by the AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) in the next two years.
In another vital initiative, the AIFC has started working with the Islamic Development Bank (IsDB). They are cooperating to create a favorable regulatory system around Islamic finance, takaful, and the Islamic capital market. This partnership has created a chance for Islamic securities to be issued on the AIX (Astana Stock Exchange), and the first Sukuk issuances will be released soon.
Islamic Banking and Finance
Because of several initiatives of the authorities of Kazakhstan, currently, there are 2 Islamic banks operating in Kazakhstan. Both Al Hilal Bank and Zaman Bank were previously commercial banks but got permission from the National Bank of Kazakhstan (NBK) to convert into an Islamic bank in 2016.
In February 2016, the first project related to the Ijarah product (Islamic leasing) was successfully implemented in Kazakhstan by the Development Bank of Kazakhstan. In addition, Al Hilal Islamic Bank offered different services by launching Islamic banking products for individuals in 2017. Additionally, an Islamic leasing (Ijarah) company – Kazakhstan Ijara Company; an Islamic mutual insurance company – Mutual Insurance Company Takaful; and a multifunctional Islamic financial organization – Al Saqr Finance started to operate fully in Kazakhstan. There is no unified Islamic finance law in Kazakhstan. Therefore, Kazakhstan’s general banking, securities, and other relevant legislations are the ones that regulate domestic Islamic finance transactions.
Many initiatives made by AIFC and the government are already affecting the country’s status. Kazakhstan raised from 31st to 24th in the Global Islamic Finance Report’s Islamic Finance Country Index in 2018. Currently, Kazakhstan takes the top place in Islamic Finance among the nine post-Soviet countries.
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