The introduction of the first Shariah-compliant exchange-traded fund (ETF) in Central Asia and the Caucasus region marks a significant development in Islamic finance. On January 14, this innovative financial instrument was launched under the International Trading System’s Shariah index on the Astana International Exchange (AIX). The ETF raised $5 million during its initial offering, with each share priced at $10, reflecting growing interest and confidence in Islamic finance principles.

This new ETF provides investors with a diversified portfolio that aligns with Islamic financial guidelines. The fund replicates the performance of the ITS Shariah index, which includes 30 leading global companies meeting stringent criteria set by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Noteworthy firms within the portfolio span various industries, ensuring broad exposure for investors. Daily compliance monitoring by Sahih Invest, guided by Mufti Muhammad Ibrahim Essa, ensures adherence to ethical and religious standards, making the ETF both transparent and accessible.

Kazakhstan's Islamic finance sector has witnessed remarkable progress since the introduction of its first legislation in 2009. Daniyar Kelbetov, Chief Product Officer at the Astana International Financial Centre (AIFC), emphasized the growing momentum in the market, highlighting new financial instruments and increased investor confidence. A study estimates the potential of Islamic deposits and investments in Kazakhstan at approximately US $5.67 billion. This growth not only benefits Kazakhstan but also influences neighboring countries like Uzbekistan, where the market holds significant untapped potential for Islamic financial products.

The launch of this ETF signifies a pivotal moment for Kazakhstan, positioning it as a leader in Shariah-compliant financial services within the Commonwealth of Independent States (CIS). Madina Tukulova, Head of Islamic Finance at AIFC, stressed the importance of financial literacy and addressing misconceptions about Islamic finance tools. She noted that despite a 16-year history in the country, there is still much work to be done to fully realize its potential. Roman Goryunov, an ITS board member, echoed the need for knowledge-sharing and ensuring that these financial products are trustworthy and easy to understand.

During discussions, concerns were raised about the Shariah compliance of companies included in the index. Mufti Essa clarified that evaluations are based on strict criteria, including halal business practices and financial thresholds. He emphasized the gradual evolution of Islamic finance and the importance of patience and continued efforts to achieve full compliance. As the sector continues to grow, it underscores the positive impact of Islamic finance on supporting real economic activities and fostering transparency and trust in financial markets.