The First Shariah-Compliant Index Fund in Kazakhstan: A Step Towards the Growth of Islamic Finance
On January 14, 2025, trading in shares of the first Shariah-compliant index fund in the region, ITS Shariah ETF (ticker ITSS), began in Almaty. This event marked an important milestone in the development of Islamic finance in Kazakhstan and Central Asia, where the halal finance market continues to expand.
Why is this important?
Kazakhstan holds a leading position in Central Asia in terms of Islamic financing, accounting for 68% of all operations in the region (according to the Eurasian Development Bank). The launch of the ITSS ETF, managed by IPS Capital, opens new opportunities for investors seeking to work within the principles of Shariah.
What makes Shariah finance unique?
Islamic financing is based on strict principles:
- Prohibition of riba (usury): Profit from interest on capital is not allowed.
- Investments in the real economy: Funds are directed to companies operating in "halal" sectors, such as IT, construction, non-alcoholic beverages production, etc.
- Ethical standards: Companies associated with alcohol, pork, gambling, and other haram (prohibited) activities are excluded.
As noted by Mufti Muhammad Ibrahim Essa, Chairman of the Shariah Board at IPS Capital, Islamic investments attract not only Muslims but also non-Muslims. The primary reason is the resilience of the Shariah model, which has proven its stability during periods of economic uncertainty.
ITSS ETF Composition and Monitoring
The fund's portfolio includes 30 of the largest international companies that meet Shariah standards. Each company undergoes regular checks to ensure its financial metrics align with the following criteria:
- Debt-to-equity ratio — no more than 30%;
- Haram income share — no more than 5%;
- Core business must be "halal."
Interesting fact: In January 2025, Google was excluded from the index due to non-compliance with these criteria.
Prospects for Islamic Finance in the Region
According to Mufti Essa, Kazakhstan has significant potential for the development of halal finance. The Astana International Financial Centre (AIFC) offers favorable conditions for Islamic investment companies, making Kazakhstan an attractive platform for regional and international players.
The launch of the ITSS ETF is an important step towards enhancing financial inclusion and attracting investors from neighboring countries such as Uzbekistan and Kyrgyzstan. These markets, despite high demand, have yet to develop a full-fledged infrastructure for Islamic finance.
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