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Kazakhstan has taken a significant step in expanding its Islamic finance sector with the launch of Central Asia and the Caucasus’ first Shariah-compliant exchange-traded fund (ETF) on January 14, 2025. This initiative aims to enhance investment opportunities while adhering to Islamic financial principles.
Key Takeaways
- Kazakhstan launched its first Shariah-compliant ETF, the ITSS ticker, on January 14, 2025.
- The ETF raised $5 million during its initial offering, with shares priced at $10 each.
- The fund includes 30 major global companies that meet Islamic finance criteria.
- Daily Shariah compliance is monitored by an independent firm.
- The ETF aims to provide a diversified investment option for local investors.
Launch of the ITSS ETF
The ITSS ETF was officially listed on the Astana International Exchange (AIX) at the Astana International Financial Centre (AIFC). Each share represents an equal stake in the fund, which adheres to Islamic finance principles. The ETF successfully raised $5 million during its initial offering, with investors purchasing 500,000 shares at $10 each.
Investment Strategy and Compliance
The ETF’s investment strategy mirrors the holdings and performance of the ITS Shariah index, which comprises 30 of the largest global companies that comply with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) criteria. Notable companies in the portfolio include:
- Apple
- Microsoft
- Nvidia
- Tesla
- Procter & Gamble
- AstraZeneca
Daily Shariah compliance is overseen by Sahih Invest, an independent firm, under the guidance of Mufti Muhammad Ibrahim Essa, a recognized scholar in Islamic banking. This ensures that the fund adheres to ethical and religious standards.
Accessibility and Transparency
The ITSS ETF offers investors a diversified portfolio across various industries without the need for individual stock analysis. Shares are traded in U.S. dollars, and AIFC regulations provide tax exemptions on returns. The fund features a low management fee of 0.5%, and liquidity is ensured by market makers, making it an accessible and transparent investment option.
Advancements in Islamic Finance in Kazakhstan
Daniyar Kelbetov, chief product officer at AIFC, highlighted the significant progress made in Kazakhstan’s Islamic finance sector, noting the growing confidence among investors. A study estimates the potential of Islamic deposits and investments in Kazakhstan at approximately three trillion tenge (US $5.67 billion).
Kazakhstan’s advancements in Islamic finance have positioned it as a leader in the Commonwealth of Independent States (CIS). The establishment of Al Hilal Islamic Bank in 2010 marked the beginning of Islamic banking in the region, and the recent issuance of the nation’s first local corporate sukuk underscores the growing importance of Islamic finance in supporting the real economy.
Addressing Concerns and Misconceptions
During a recent roundtable discussion, participants raised concerns about Shariah compliance for companies included in the index. Mufti Essa addressed these concerns, explaining the evaluation process guided by AAOIFI criteria, which focuses on halal business practices and financial thresholds.
The roundtable also emphasized the importance of financial literacy in dispelling misconceptions about Islamic finance tools. Roman Goryunov, an ITS board member, stressed the need for knowledge-sharing to cultivate a financial culture that promotes accessibility and transparency in investments.
Conclusion
Kazakhstan’s launch of the ITSS ETF marks a pivotal moment in the country’s Islamic finance journey, providing local investors with a new, compliant investment vehicle. As the sector continues to evolve, the focus on education and transparency will be crucial in unlocking the full potential of Islamic finance in Kazakhstan and beyond.
Sources
- Kazakhstan Expands Islamic Finance with New Shariah ETF – The Astana Times, The Astana Times.
