The Islamic banking sector, based on ethical principles codified some 1,400 years ago, represents roughly $1.7 trillion or 70% of total Islamic finance assets, with commercial banking accounting for the majority.

Digitalization is providing a major boost to this form of banking, which has the potential to grow to $3.8 trillion in assets by 2023—with an average projected growth rate of 10% per year, according to the 2018 Thomson Reuters Islamic Finance Development Report.

The launch of the Astana International Financial Centre (AIFC) on July 5, 2018 has helped accelerate the country’s development of its domestic and regional Islamic finance market. The ambition is to increase Islamic banking assets from 1% to 3% of the country’s total banking assets by 2025.

“We are already number one for Islamic finance in all the post-Soviet countries, which speaks highly of Kazakhstan, and we see it as having huge potential for growth,” says Alibek Nurbekov, Head of the Islamic Finance Department at AIFC. “Islamic finance is seeing double-digit growth around the world right now, so our plan is to build on our leadership and continue to attract new investors.”

Common Islamic finance transactions include profit sharing between a bank and customer (mudharabah), joint venture investment partnerships (musharakah), leasing (ijarah), safekeeping (wadiah) and “cost plus” (murabahah), in which a requested item is purchased by a bank that then charges the buyer the cost plus their profit, paid in fixed installments, rather than charging interest as with a conventional loan.

Such AIFC initiatives are already making an impact, with Kazakhstan rising from 31st to 24th in the Global Islamic Finance Report’s Islamic Finance Country Index in 2018. Kazakhstan now holds the lead position in Islamic Finance among the nine post-Soviet countries, according to ThomsonReuters and DinarStandard’s Global Islamic Economy Indicator.