Show Me the Money: Finance in Central Asia

Central Asian finance might not spring to mind when thinking about which financial institutions to invest in: after all, the region has gained a bit of a reputation with defaults. Kazakhstan’s 2009 banking crisis saw three of its largest lenders (BTA, Alliance, and Temir) default on roughly US $20 billion of external debt. It was one of the largest sovereign-linked restructurings in emerging markets at the time (Eurasian Development Bank, 2012).

However, just how true is this still? In October, US Deputy Secretary of State Christopher Landau visited the region’s two largest economies (Kazakhstan and Uzbekistan), in a sign of courtship from Washington. Although the prevailing undertone in negotiations still is about natural resources (Bloomberg, 2025), the possibility of additional projects brings up the need for financing.

With the rise of Islamic finance, international cooperation and government facilitation, the region is quietly trying to beat expectations, advancing far in recent years.

Out of the Rubble

After the collapse of the Soviet Union, the emerging Central Asian nations inherited a banking system which was designed specifically for a centrally planned economy. The years that followed proved to be unstable, characterised by inflation, defaults and fraud. For example, the apparently extensive reforms in Kyrgyzstan during the 1990s resulted in three of the four largest banks being liquidated in 1999, wiping out around $70 million in assets (OECD, 2003).

Yet, in the early 2000s, things started to change for some. Resource-rich nations in the region, such as Kazakhstan, began experiencing significant windfalls in cash from commodity sell-offs, leading to rapid credit growth and real estate/asset bubbles.

Specifically in Kazakhstan, where liberalising measures were the most radical, the credit and real estate boom led to Almaty and Astana being properly integrated into the global financial system. in the first half of 2007, medium and long-term debt-creating capital inflows more than doubled, largely due to external borrowing by the banking sector (EUCAM, 2009).

Where are we now?

Credit penetration remains fairly low, but there are signs of improvement. Kazakhstan and Uzbekistan continue to provide the bulk of regional intermediation, where credit growth remains above 20% year on year (IMF, 2025), reflecting expanding consumer and SME lending amid economic growth.

S&P Global (2024) rated roughly 80% of Central Asian banks as “stable”, signalling moderate but not exuberant confidence in the sector’s resilience.

Islamic finance in Central Asia is expanding rapidly, with regional assets projected to rise from ~$0.7 bn in 2024 to over $6 bn by 2033 (EDB, 2024), driven by Kazakhstan’s regulatory reforms and strong backing from institutions like the Eurasian Development Bank and Islamic Development Bank as governments diversify funding sources and promote financial inclusion.

Equity highlight: Kaspi.kz

One of the flagship fintech projects of the region remains the Kaspi.kz. After emerging as a small open banking startup, you can now find it on most smartphones in Kazakhstan. It is not only a bank, but now a marketplace, spreading to Azerbaijan and Ukraine.

With a Revenue Compound Annual Growth Rate (CAGR) for the past ~3–5 years at about ~30%-37% (FinanceCharts, 2025), having been listed on Nasdaq in 2020; it is a highlight of the regional experiments in open banking.

Risks to keep in mind

Large state-owned banks in Uzbekistan, Tajikistan, and Turkmenistan still dominate lending, creating political-lending pressures, weak risk management, and potential contingent liabilities (IMF, 2025).

Loan books are often concentrated in extractive, construction, or state-linked sectors, tying asset quality to commodity and fiscal cycles (EBRD, 2025).

The Cordoba View

Despite its chequered post-Soviet history of defaults and bank liquidations, Central Asia’s financial sector is showing signs of systemic maturity: the region is quietly moving out of its legacy-risk discount.

International capital markets have yet to price in the region’s improving fundamentals. The rise of Islamic finance points to both financial inclusion and diversified funding, while Western engagement, such as the U.S. diplomatic overtures in 2025, could anchor external confidence.

Focus should remain on well-capitalised institutions like Kaspi.kz. These entities benefit from structural growth, network effects, and prudent capital management.