Islamic banking regulation in Azerbaijan to prevent money outflow abroad

Business Materials 14 June 2011 17:16 (UTC +04:00)

Azerbaijan, Baku, June 14/ Trend, N. Ismayilova /

Azerbaijan's Nikoil Bank has been able to attract 120,000 manat within Islamic banking services since May, Business Development Department official Anar Yusifzade said.

The products reflects savings account, which does not carry interest, and funds can be taken from the account at any time.

"The portfolio on this product is constantly changing," Yusufzade said.

He said it is hard to assess the potential of the Azerbaijani banking market on Islamic banking products as the introduction of most products runs counter to Azerbaijani legislation. He said amendments to the law would give impetus to growth of interest in Islamic banking products.

"Due to the fact that we offer our customers the most primitive products, many are not interested in investing their funds in Azerbaijan and take them to other countries where the legislation allows Islamic banking," he said.

Nikoil Bank is the first Azerbaijani bank rendering similar service. Earlier International Bank of Azerbaijan, Amrahbank, Turanbank, Texnikabank voiced their intentions to render Islamic banking services.

Nikoil Bank has been operating in Azerbaijan since 1997 after the founding of the Nikoil Azerbaijan Investment Company (AIC Nikoil). Since 1998, AIC Nikoil has been a shareholder of the Ulpar commercial bank. Topaz Investments purchased a controlling stake in Nikoil AIC in 2008. Nikoil Bank's shareholders are: Topaz Investments - 53.1 percent; CAIC Nikoil - 28.7 percent; Uralsib-Invest - 13.9 percent; and the ISR Holding - 4.3 percent.

The official exchange rate is 0.7882 manat to $1 on June 14.