Kazakhstan is preparing to make a significant leap in the development of Islamic finance. The country’s financial regulator — the Agency for Regulation and Development of the Financial Market (ARDFM) — has introduced a draft law on banks and banking activities that would allow traditional financial institutions to offer Islamic banking services through a new format: the “Islamic window.”

This initiative aims to modernize the national banking system, expand financial offerings, and enhance access to Shariah-compliant products for both businesses and individuals — all without requiring banks to overhaul their core operations or obtain a separate license.

What Is an Islamic Window?

The Islamic window model enables conventional banks to provide Islamic banking services within their existing infrastructure. The key requirement is strict separation: all Islamic operations must be conducted through segregated accounts, with independent financial reporting, dedicated compliance mechanisms, and oversight by internal Shariah supervisory boards.

The approach is based on a liberal regulatory model inspired by international best practices. It allows closer interaction between Islamic and conventional units of a bank while preserving the autonomy of Islamic governance structures.

According to the ARDFM, this model opens the door for increased investor participation — including from abroad — and simplifies market entry for new players. It is expected to significantly expand access to Islamic financial services across Kazakhstan.

Key Regulatory Measures

The draft law outlines a range of tailored regulatory provisions, including:

• Minimum qualification standards for executives and members of Islamic advisory boards;
• Dedicated financial standards for Shariah-compliant operations, covering capital adequacy and profit distribution;
• Internal compliance and monitoring systems to ensure Shariah adherence;
• Transparent reporting and record-keeping for all Islamic banking activities.

The Islamic window model forms part of a broader legislative reform designed to modernize Kazakhstan’s banking sector. Officials expect the law to be submitted to Parliament in September 2025, with adoption anticipated in early 2026.

Broader Momentum for Islamic Finance

This legal reform builds on Kazakhstan’s ongoing efforts to deepen its Islamic finance sector. On January 14, 2025, the country launched Central Asia and the Caucasus’ first Shariah-compliant exchange-traded fund (ETF), listed under the Shariah Index of the International Trading System.

With these reforms, Kazakhstan is positioning itself as a regional hub for Islamic finance — fostering investor confidence, diversifying financial products, and aligning with global trends in ethical and faith-based finance.