BAKU, Azerbaijan: Azerbaijan may soon become a regional Islamic financing centre and play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries.
Islamic financing is one of the fastest growing segments of the global financial services industry worldwide. At the same time, interest in Islamic finance as a source of investment is high in the country, reported Azerbaijan’s news agency, Trend.
Many countries’ interest in Islamic finance was associated with different factors, the foremost of which was the desire to attract liquid resources from the Middle East and Southeast Asia and a certain demand for financial products in accordance with syariah law by local Muslims.
Today, Azerbaijan actively introduced Islamic financing. The independent authority of the International Bank of Azerbaijan (IBA) on Islamic banking would start its work in March, which planned to present six Islamic banking products to the market during the first phase, it stated.
The Islamic Corporation for the Development of the Private Sector (ICD) was also in talks to create the first Islamic insurance company in Azerbaijan, takaful, which was popular in Europe, particularly in the UK. European and Central Asian countries were considered experts in Islamic financing.
Most of takaful’s customers were non-Muslims in countries where the Islamic insurance market was the most developed in the world.
Ansar Leasing, organised on Islamic principles and established by the ICD, had successfully operated in Azerbaijan for three years.
During this period, the company had formed a portfolio worth US$15 million and the company planned to draw about US$6 million to US$7 million from its founder to expand operations. Some Azerbaijani private banks were also starting to expand the range of Islamic financing tools, introducing Ijarah (leasing) and Murabahah.
One such bank was TuranBank, which plannned to introduce these tools with the financial support of the Islamic Corporation.
Another bank, Nikoil, was actively introducing deposit products, which include Wadia yad Daman. Evidently, Azerbaijani banks’ interest in Islamic products was growing gradually.
The amount of money that entered the market through this channel was very small in Azerbaijan, since many issues related to Islamic financing had not been yet addressed.
Therefore, the successful development of Islamic finance on the domestic market would depend on the further improvement of legislation, regulatory prudential norms, and supply and demand.
In the near future, it might become a subject of debate.
By developing Islamic financial infrastructure, Azerbaijan might indeed attract investments and financing from the Islamic capital market, not only from Arab countries.
Alternative financial tools could be provided for Azerbaijani investors in this way. Also, the number of practicing Muslims who could not and did not want to use traditional financial services was growing in Azerbaijan.
slamic financial tools could become the channel through which their assets could be involved in the economy. — Bernama