Islamic Finance in Central Asia Eyes US$5.6 Billion Sukuk Market

Tashkent, Uzbekistan (UzDaily.uz) — Islamic finance remains a niche instrument in Central Asia, but regional and international institutions aim to change that over the next decade, according to speakers at the annual meeting of the Eurasian Development Bank (EDB).

According to joint estimates by the EDB and the Islamic Development Bank Institute (IsDB Institute), total Islamic financial assets in the region could reach US$6.3 billion by 2033, while the sukuk market could grow to US$5.6 billion.

"Islamic finance should not be viewed as just one of the options for Central Asia. It must become a strategic priority," Sheikh Ibrahim bin Khalifa Al Khalifa, Chairman of the Board of Trustees of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) of Bahrain, said during the session.

He said that of 180 middle-income economies, only 34 have moved into the high-income category since 1990. The key difference between successful economies, such as Singapore and Taiwan, and those that remained trapped, such as Argentina and Brazil, lies in the nature of the capital they attracted: equity linked to the real economy versus debt backed by collateral.

"The same principle—risk sharing and reliance on real assets—forms the foundation of Islamic finance," Sheikh Ibrahim said.

Sami Al-Suwailem, Director General of the IsDB Institute, speaking online, said development banks must move beyond debt financing and focus on strengthening the institutional capacity of member countries.

"To achieve sustainable growth, countries must lead their own transformation," he said.

Abdullah bin Haron, Deputy Secretary-General of the Islamic Financial Services Board (IFSB) of Malaysia, said Islamic finance remains unevenly distributed across the region. Most countries rely primarily on murabaha contracts, while more sophisticated instruments are largely absent. Kazakhstan has made more progress than its regional peers by adapting its legislation, while Uzbekistan, Kyrgyzstan and Tajikistan are still in the process.

The EDB, for its part, approved its first Islamic finance transaction in November last year—an ijara financing facility for the procurement of railway wagons—and is exploring the possibility of issuing sukuk.