Azerbaijan, Baku, March 6 / Trend I.Khalilova /
Decision of the supervisory board is needed for the beginning in the International Bank of Azerbaijan (IBA) of activities of a separate structure for Islamic banking, head of the working group on introduction of Islamic banking in the IBA Behnam Gurbanzade told Trend.
"Management Board has already decided to establish a separate department, and in the near future, we expect that the Supervisory Board will consider the matter," said Gurbanzade.
To date schedule, job commitments, structure, instructions for the products, staff have been prepared for activities of this structure. Gurbanov said the Department can begin work in late March - early April.
"This department will operate as a separate structure within the IBA, and have its own treasury, software. Since this is the first project on Islamic finance at this stage the structure is created as part of the main bank, and support is needed for its further development," Gurbanov noted.
In the future possibility of transforming it into a separate subsidiary is not ruled out, which will depend on the adoption of relevant legislation in the field of Islamic banking. Prior to the decision of the Central Bank of Azerbaijan, it will act within the IBA.
At the initial stage in the activities of the Department all the credit lines allocated to the IBA by a group of Islamic Development Bank, in particular, the Islamic Corporation for Development of the Private Sector (ICD), as well as the deposited funds of population and corporate customers will be used. The IBA was given a credit line from the ICD worth $40 million, part of which is used for trade financing, as part - for the financing of projects.
"Given that this line is revolving, the management of this credit line and of other Islamic financial institutions will move the structure of the IBA on Islamic finance. Although at this stage the IBA is not in talks to raise new credit lines, since we are more interested in use of local resources of population and corporate clients. It is also possible to negotiate with the state-owned companies, which are ready to make deposits in the structure on favorable terms," Gurbanzade said.
At present, the IBA has developed seven products of Islamic banking, which can be brought to the Azerbaijani market, while respecting the law. Gurbanzade said this line includes products to improve and maintain the liquidity of the bank, such as trade in financial instruments in international financial Islamic markets, products for consumer lending in the country (financing the purchase of cars, mortgages), financing the business (the bank will act as agent and counterparty to finance projects of local entrepreneurs), the financing of major projects of state companies, trade finance, two deposit products, as well as Islamic plastic cards.
According to the business plan, portfolio of the Department of Islamic finance of the IBA until the end of the year is expected to increase to 20-30 million manat. The IBA began to provide Islamic banking services in 2003, becoming the first in the country's banking market. Bank offered services in this area due to funds from the IDB Group, and at present under the Islamic financing portfolio of IBA is over 10 million manat.
A consortium of companies Salans, KPMG, Pinsent Masons and the Dar al Shariah assists in the creation of specialized structures for the provision of products and services of Islamic banking of the IBA.
International Bank of Azerbaijan was established in 1992 as the successor of the Azerbaijan branch of "Vnesheconombank". IBA holds a dominant position in the country's banking sector. The state share in charter capital of the bank is 50.2 per cent, the remaining shares are distributed among private businesses and individuals.
The official exchange rate is 0.7861 AZN to $1 on March 6.