Baku Seeks to Become Regional Center of Islamic Banking

On February 19 Baku hosts a one-day international conference Islamic Finance: Current Status and Expectations of the Near Future, which is organized by the Institute of Economics of the National Academy of Sciences of Azerbaijan with the assistance of Turkish Cooperation and Coordination Agency (TIKA).

The conference agenda includes issues of risk management in the Islamic financial system (banking, insurance, leasing and other instruments), applying the principles of Sharia in futures operations, prospects for the development of Islamic banking in non-Muslim countries, including Russia and Georgia.

Azerbaijan is preparing for the application of Islamic Banking (IB) in full and the work in this area is entering the finish stage. OJSC International Bank of Azerbaijan (IBA) bears an ambitious idea of turning Baku into a regional Islamic financial center.

IBA is already implementing a project IB locally, which succeeded in attracting 220 million of investments. The bank has a department of Islamic Finance, which opens  the first branches outside the capital - in Sumgait, Ganja and Lankaran, with plans to further expand the network. IBA’s daughter, IBA Moscow is also ready to provide Islamic Banking services in Russia.

Promotion of IB is hampered by the lack of the appropriate legislation. The of the first quarter 2015 the Central Bank will be submitted a legislative package on the IB for the purpose of amending the legislation, including the Banking Code of the country.

Islamic Finance covers the period from 8 to 60 months. Its essence lies in abandoning percent and futures transactions. A bank or another financial institution becomes the equity participant in the project of the applicant.

Islamic Finance is open to non-Muslim population in the world, subject to the rules of Islamic Banking, which prohibits lending rates, speculation, financing gambling business, the production of alcohol, etc.

Advisor to the Chairman of IBA Moscow, Azer Safarov said that the socially oriented model of Islamic financing works on the improvement of the economy, as it does not allow financial or debt bubbles.

The global financial and economic crisis has drawn attention to the IB, despite its relative youth. Islamic banks since the late 60s of the last century work in Malaysia and almost all the Arab countries. But the main impetus to the development of Islamic Banking was given by the creation of the Islamic Development Bank and Dubai Islamic Bank in 1975. Relatively recently have emerged Islamic banks in Europe. According to HSBC, in the world there are about 300 Islamic financial institutions. -0-