IDB considers possibilities of assisting Azerbaijan in development of Islamic banking

Business Materials 11 February 2014 20:11 (UTC +04:00)

Baku, Azerbaijan, Feb. 11

By Emin Aliyev - Trend:

Proposals on creation of legislation in the Islamic banking sphere will be presented to Azerbaijan's Milli Majlis (parliament) before October 2014, the head of the Islamic Banking Department at International Bank of Azerbaijan (IBA), Behnam Gurbanzade said in an interview with Azernews newspaper.

"A working group of representatives of the Central Bank, the IBA, the Ministries of Economy and Industry, Finance and of Taxes and the Cabinet Ministers will be established to prepare the amendments to the existing legislation and introduce regulation of banking on Islamic principles," he said.

The existing legislative norms in the banking sphere significantly restrict the opportunities for using Islamic banking products due to unsolved issues regarding the double taxation, as well as, restrictions in these products (such as, restriction on interest rates and their definition, bans on conducting operations in particular spheres, etc.) which are based on Sharia norms and Islamic law.

Gurbanzade said the Islamic Development Bank (IDB) has already received an official request from the government of Azerbaijan for such assistance.

"At the moment the request is under consideration. An IDB mission will visit Azerbaijan in February 2014 for the preparation of a decision on awarding of a relevant grant. If a grant decision is made following this visit, the bank will determine an adviser for the government on the issue - it can be both IDB officials and drawn specialists. The grant amount and its term have not been determined yet," he added.

IBA started rendering Islamic banking services in 2003, becoming the first in Azerbaijan's banking market. The bank has been providing services in this area with the resources attracted from the Islamic Development Bank group.

Last year a consortium of Salans, KPMG, Pinsent Masons and Dar al Shariah companies was assisting IBA in the creation of a specialised structure for rendering products and services of Islamic banking.

The IBA was founded in January 1992 as the successor of the Vnesheconombank's Azerbaijani branch.

The IBA holds a leading position in the country's banking sector. The bank's main shareholder is the Azerbaijani government which owns a 50.2 percent share. The remaining shares of the bank are owned by private individuals and legal entities.

Translated by E.A.