Almost a decade after the 2016 debut of the Astana International Financial Centre (AIFC), there has been some progress for Kazakhstan’s aspirations to be a global marketplace – with Islamic Finance Head Madina Tukulova confident that achievements so far pointing to promising growth ahead.
Total volume of investments attracted through the AIFC platform in 2024 amounted to US$3.1 billion, including US$2.1 billion in portfolio investments on the Astana International Exchange (AIX) and US$1 billion from AIFC participants. Since its inception, the AIFC has facilitated a total of US$14 billion in investments – mainly conventional
Madina noted that Astana’s ranking rose four spots to 62nd in the 2024 Global Financial Centers Index published by China Development Institute in Shenzhen and Z/Yen Partners in London. Though Astana led the ranking for central Asia – ahead of Budapest, Istanbul, Prague and Warsaw – it trailed the Middle East financial powerhouses of Dubai (16th) and Abu Dhabi (35th).
“I think we’re just at the beginning stage, to be honest,” Madina told IFN Investor. “We had to work with domestic market players with issues of different instruments because not all of them have a clear understanding about how to deal with Islamic finance.
“They know about conventional and traditional instruments, and they think Islamic instruments should be cheaper than the conventional ones. Because we had no culture of Islamic investments yet, we had to explain that it’s not necessarily cheaper but another structure.”
As the literacy groundwork gained momentum, AIFC noted strong underlying demand for Islamic finance. Madina said a post-COVID-19 survey by CSQlaw Kazakhstan, with feedback from over 12,000 people, indicated a demand as high as US$2 billion for Islamic deposits among Kazakh Muslims who owned conventional financial products but would prefer Islamic deposits.
The same survey suggested demand to the potential of US$4.3 billion among Kazakh Muslims who responded that they were already avoiding conventional financial products, which they considered as contravening Islamic principles.
The potential for the AIFC’s growth is clear, based on such demand from the “Kazakhstan people, who are willing to have more Islamic financial instruments”.
She credits the first wave of investors who embraced the country’s Islamic financial products without prior experience, calling them “the kind of brave people” who were needed, alongside leaders such as AIFC Governor Renat Bekturov, who previously chaired the AIX.
“There is only one Islamic fund for now, and one company with a collective investment scheme license which also has an Islamic window to establish and manage Islamic funds.”
To further grow the Kazakh model of an Islamic-embedded financial center, the AIFC was working to educate the market on the incentives in place for Islamic products, such as exemption from value-added tax and corporate income tax, Madina added.
“We also have an agreement with the Central Bank of Kazakhstan and with the regulator of the mainland where Islamic financial institutions can work with residents and corporates using any currency, including the local currency.”
The other strategy would be to incorporate more elements of Shariah governance into AIFC policy, Madina said.
