Azerbaijan’s largest bank to accelerate creation of separate structure for Islamic banking

Azerbaijan, Baku, April 9 / Trend I.Khalilova /

In the future, the International Bank of Azerbaijan (IBA) plans to provide Islamic banking in the countries where it has subsidiaries, the first deputy chairman of the IBA, Emil Mustafayev, told Trend on Monday.

"At present, the draft decision on the opening of the Department of Islamic banking and Regulations of the new structure are presented for approval by the board of the bank. After review and approval of these documents by the IBA Board an order on the opening of a separate structure and Regulations of the new department will be presented to the Supervisory Board for further approval," Mustafayev said.

He noted that these activities will be completed in a short time. 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.

"Further advance of the registration of IBA's subsidiary bank in Qatar also depends from the opening of Islamic window. As required by Qatari law, financial institutions wishing to register subsidiaries in order to provide Islamic banking services, must first of all, have experience in this area, as well as own a separate structure in the form of "Islamic window," the IBA deputy chairman said.

IBA has plans to enter the banking markets of Qatar, Kiev (Ukraine) and Istanbul (Turkey).

"The global crisis has delayed the physical implementation of adopted decisions in this area [of expansion], but now we specifically work out documents on the Qatari direction. We are working at a legal level, to be represented in Qatar. IBA's form of presence in this market depends on Qatari regulator's decision," Mustafayev said.

Qatari direction, he said, is a promising, but at the same time, is an energy-intensive, because studying and preparing internal team are time-consuming.

"The Azerbaijani market hasn't wide experience of Islamic finance, and we would like to be pioneers in this matter," said the deputy chairman.

Moreover, in his opinion, the development of Islamic banking in Azerbaijan, will allow the IBA to create a common platform for the development of banking products and services on the principle of "shariah" in the CIS countries, and become a regional center to provide services of Islamic banking and finance. The main objective of this project is the development of the country's banking industry, the introduction of new banking technologies and the strengthening of Azerbaijan's leading position in the region.

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.

At present, the IBA has developed seven products of Islamic banking, which can be brought to the Azerbaijani market, while respecting the law. 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.

International Bank of Azerbaijan was the first among foreign banks to open its representative office not in Dubai free economic zone, but the general market. The IBA future plans include the conversion of an office in the UAE into a branch.

The IBA two offices in London (since 2002) and Frankfurt-am-Main (since 2005) in early 2008 were joined by an office in Luxembourg, and on July 31, 2008 IBA was the first among Azerbaijani banks to receive permission of the Board of Directors of the U.S. Federal Reserve to open an office in New York.

The subsidiary bank in Qatar will be the third subsidiary of the IBA financial group. The first bank, IBA-Moscow, began operations in 2002. Today it has already established itself as a financial institution with 12 offices and branches in Moscow, St. Petersburg and Yekaterinburg. In November 2006 the IBA established its second subsidiary bank outside Azerbaijan - IBA-Georgia.

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 legal and physical entities.

The official exchange rate is 0.7862 AZN to $1 on April 9.