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Saturday, 31 January 2015

Islamic Financing, alternative investment source to Azerbaijani economy

The International Bank of Azerbaijan, the largest lender and the only state-owned bank in the country remains confident to promote Azerbaijan as an Islamic Banking hub in the region.
Behnam Gurbanzade, Director of the Islamic Banking Department of the IBA, spoke quite positive about the prospects of Azerbaijan’s eventful role in the Islamic finance markets.
“Developing Islamic Financing in Azerbaijan gives us an advantage to set up a center for the development of Islamic Financing in the CIS based in Baku,” Gurbanzade wrote in an e-mail to AzerNews.
“Thus, in 2015 we are planning to increase the amount of Islamic financing in Azerbaijan. To this end, an alternative banking division was set up within Bank IBA-Moscow where the Islamic Banking is also part of new duties,” he said.
The IBA concluded last year with $526 million sharia compliant assets compared to the Islamic Banking assets at the level of $220 million at the beginning of 2014.
Islamic finance has not developed well in Azerbaijan, which has a predominantly Muslim population. The IBA assists the government to draft the relevant regulation. It also plans to convert its Islamic unit into major Shariah-compliant lender after the country OKs the Islamic legislation licenses.
The Baku-based bank actively works in this direction, which is encouraging the development of Islamic Finance here. The bank currently offers Shariah-compliant products through an Islamic window introduced in September 2012, a practice which allows conventional lenders to provide Islamic financial services as long as client money is segregated from the rest of the bank.
Gurbanzada said the IBA Islamic Banking department is working on draft legislation together with consultants. “The initial documents including Islamic Financial Policies and Procedures, Operational procedures and Products and Services are under consideration,” he said.
Laws allowing Azerbaijan to OK Islamic bond offerings is expected to be passed in 2015, and the government may issue securities that adhere to Islam’s ban on interest the next year.
Speaking about the role that the Islamic bank could play in driving the banking sector of the country, Gurbanzada said Islamic Financing is considered as alternative investment sources to the economy of Azerbaijan.
“Azerbaijan and CIS markets are growing and there is a huge demand for direct investments. The IBA realizes that sources of funding should be diversified in order to secure economic safety. All this comes against the backdrop of the world financial crisis in which the liquid capital stands as the primary issue,” he noted.
Gurbanzada said the current Islamic Banking portfolio of the IBA is 386 million manats ($493 million) which is approximately 6.2 percent of the total credit portfolio.
The loan portfolio of the Bank hit 5.868 billion manats as of early January with an increase of 16.6 percent since early 2014.
IBA Islamic presented a new Murabaha card which was set up on MasterCard Gold basis. The card is for retail financing in Azerbaijan and outside of the country. “Furthermore we are also strutting Musharakah refinancing products and unrestricted and restricted Mudarabah financing. Most of products and services will be implemented after legislation development,” he concluded.
The bank, 50.2-percent owned by the Azerbaijani Ministry of Finance, holds over 40 percent of banking assets in the country and enjoys huge importance for Azerbaijan's economy. The IBA‘s reported consolidated total assets of 8.8 billion manats, aggregate capital of 1.008 billion manats and net profit of 64.5 million under audited IFRS as at year-end 2014.
(Azernews / 30 January 2014)
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