No great need to introduce Islamic banking in banking sector in Azerbaijan

No great need to introduce Islamic banking in banking sector in Azerbaijan

Azerbaijan, Baku, June 11 /Trend, I.Khalilova/

There is no great need to introduce Islamic banking in the banking sector in Azerbaijan, the chairman of the State Securities Committee of Azerbaijan Rufat Aslanli said.

"Islamic financial instruments are also introduced in financial markets in American and European continents working in the classical form of financial services, but perhaps this is due to high demand, said Aslanli. - In neighboring countries in the region Islamic instruments are introduced in connection with this demand for funding and to meet the interests of investors."
The functions of state and religion are separated the Constitution of Azerbaijan, so the banking sector is regulated by the classical form. "From this point of view, I think that there is not great need for the implementation of Islamic investment instruments in Azerbaijan," said the head of SSC.

According to Aslanli, if the Islamic instruments are introduced through investment funds and it will be within the law, we are not going to differ the religious belonging of investors.

Already the first institute operates Azerbaijan, which expressed a desire to operate under Sharia rules. Kauthar Bank - the only bank in Azerbaijan, which works on the principle of "Islamic banking", but it has not yet proceeded to full activity upon Sharia law. The existing banking law does not allow to operate on these principles, so the main activity of Kauthar Bank is related to operations with securities.

Texnikabank also begun to explore opportunities in the Azerbaijani legislation providing banking services on the Sharia principle.

Currently, the Central Bank of Azerbaijan (CBA) is continuing to study the practice of supervision on Islamic banking, but has not begun the preparation of legislation in this direction, Rena Melikova the director of CBA law department said dormerly.

"Today it is not a priority of our activities. Azerbaijan is a secular state, and in principle applies the same rules that are introduced in the traditional banking sector, meet many, but perhaps someone wants to work in the service of Islamic banking, and likes other spheres, we study it, because it is really different from classical," said Melikov.

The Central Bank plans to consider introduction of Islamic banking within the overall development strategy of the banking system and to assess how it is profitable for the Azerbaijani economy, said earlier CBA chairman Elman Rustamov.  

The Central Bank prefers classical form of the banking sector development, Rustamov said.

Islamic Development Bank (IDB) is also ready to help build the Azerbaijani bank that operates on the principles of Sharia law, in particular, to provide technical assistance in drafting regulations, said the head of IDB regional representation Nik Zainal Abidin. At this stage, Caspian Islamic Investment Company was established, which is attended by Islamic Corporation for Private Sector Development (part of the IDB Group), Azerbaijan Investment Company and the companies from the Middle East.

Regional director believes that this joint company will operate on Islamic principles.

IDB is also ready to participate in the establishment of an Islamic bank in Azerbaijan, but to do so, such an initiative should be made by the Ministry of Economic Development and Ministry of Finance.

There are 47 banks in Azerbaijan, with 23 of them involving foreign capital.

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