Introduction of Islamic banking in Azerbaijan delayed

Business Materials 26 January 2018 13:02 (UTC +04:00)

Baku, Azerbaijan, Jan. 26

By Anvar Mammadov – Trend:

Introduction of Islamic banking in Azerbaijan is being delayed, Elshan Rahimov, chairman of the Cooperation of Azerbaijan and Arab Countries Public Association, told Trend Jan. 26.

Last summer the Association signed a memorandum of cooperation envisaging cooperation in various fields, including Islamic banking with the Islamic Corporation for the Development of the Private Sector (ICD), which is a member of the Islamic Development Bank.

The Association undertook to support this work – to carry out research, to identify shortcomings in legislation, to attract specialists and others.

Rahimov said that the work on improving the legislation continues, but at a very slow pace.

“The problem is that the financial regulator [Financial Market Supervisory Authority] does not hurry with the introduction of Islamic banking in the country, despite the fact that during the global financial crisis, the banks, activities of which were based on the principles of Islamic banking, suffered the smallest losses,” he noted.

The chairman said that the public association can't directly change the legislation.

“We can only give recommendations, mediate, but changing the legislation is a priority task for the introduction of Islamic banking in Azerbaijan,” added Rahimov.

In January 2017, the Ministry of Economy of Azerbaijan and the Islamic Development Bank (IDB) signed an agreement on the possibility of introducing Islamic financing in the country, and the preparation of an action plan began in June. The IDB provided technical assistance in the amount of $200,000 in order to prepare the legal framework for Islamic financing.

The parties determined successive steps, including the announcement of a tender to attract a consulting company that will conduct market analysis and study the possibilities of introducing the principles of Islamic banking in Azerbaijan.

Current norms of the Azerbaijani banking legislation significantly limit the use of Islamic banking products due to the unresolved issues related to double taxation, as well as restrictions (related to interest rates and their definitions, prohibitions on conducting operations in certain areas and etc.), included in these products, based on the norms of Sharia, Islamic law.

Azerbaijan joined the Islamic Development Bank in 1992. Main areas of interest of IDB in Azerbaijan are energy, irrigation, road construction and agriculture.