IslamicFinance.de

Islamic finance is still a nascent industry in Azerbaijan, even though the country’s large Muslim population indicates great potential demand for its services. The key hurdle that limits any meaningful expansion of Islamic finance in the country is the absence of a comprehensive regulatory framework. It is therefore important to develop a full-fledged legal framework that is specifically tailored for monitoring, guiding, and supervising the Islamic banking system. Islamic finance, as an ethical form of finance, can do an enormous amount of good. Islamic finance forges a closer link between real economic activity that creates value and financial activity that facilitates it. Islamic finance can attract investors from GCC and Asia to Azerbaijan. However, the country continues to face multiple challenges, such as a lack of public awareness and a talent shortage in Islamic finance. Still, favorable regulation remains the key to Islamic finance growth in Azerbaijan.

Iran has established correspondent relationships with 230 foreign banks since January 16, following the implementation of the nuclear deal. In addition, Iran's Ministry of Economic Affairs and Finance reported that the Export Development Bank of Iran (EDBI) has begun brokerage relations with numerous banks around the world. This includes 64 banks in 20 European countries, 36 banks in 17 Asian states, four banks in Africa as well as one bank in Latin America. However, the Islamic Republic complains that it still does not have access to global financial markets. Many international banks still shy away from financing trade deals and processing transactions for fear of US penalties.

The government of Azerbaijan announced that it is in talks with the Islamic Development Bank (IDB) on application of Islamic banking instruments in the country. Deputy Economy Minister Sahil Babayev also said that the Bank is ready to provide technical assistance to Azerbaijan, which has a predominantly Muslim population. The primary scope of our model’s project has already been outlined, he added. Azerbaijan, alongside Kazakhstan, is among several central Asian countries creating a more welcoming framework for sharia-compliant banking to attract investments and financing from the Islamic capital market. Babayev faced difficulty to name the exact date of introduction of Islamic banking model in Azerbaijan, explaining it with the number of issues to be solved.

Abdolnaser Hemmati, the CEO of the National Bank of Iran (known as Bank Melli Iran or BMI), said that frozen assets of the bank at the Deutsche Bundesbank were freed. Following the move, 17 BMI subsidiaries will be able to work abroad. Deutsche Bundesbank authorized BMI’s branch in Hamburg, and the BMI’s Dubai branch has also been freed of transaction barriers previously in place under sanctions. Measures have been taken to launch the London branch of the BMI. Only a UK permit is left to be issued, he added. Mir Business Bank CJSC, a BMI branch in Moscow, can also resume its full operations, according to Hemmati. In one week, all BMI branches abroad will be operational, he stated.

Iran has four banks in Britain and will set up two new banks in London in near future, Governor of Central Bank of Iran Valiollah Seif said on Sunday. He made the remarks on the sidelines of a meeting with British Foreign Secretary Philip Hammond. Speaking to IRNA, he said the two banks to be set up are the London branch of bank Melli of Iran and Persian International Bank. In the meeting with British Foreign Secretary Philip Hammond and his entourage, the two sides studied grounds for expansion of cooperation and the history of banking cooperation as well as existing grounds for expansion of such cooperation, he said. UK delegation voiced their willingness of the British banks to come back and resume operation in Iran, he said.

Russia hopes to learn from the experience of Azerbaijan in the field of Islamic banking, said Sergey Drobyshevsky, the scientific director of the Gaidar Institute for Economic Policy in Baku. He said the presence of IBA Moscow, a Russian subsidiary of the International Bank of Azerbaijan, must contribute to this. Drobyshevsky believes it will be easier for the Azerbaijani banks and businessmen to work in Russia than the Malaysian specialists of that sphere. Behnam Gurbanzada, the director of Islamic banking at the IBA, earlier called Russia a "promising" platform to further the development of Islamic finance.

Warba Bank has announced that it successfully arranged $150 million Shariah-compliant one - year receivable backed syndicated financing facility for the International Bank of Azerbaijan. The Bank reported that it participated with a stake of $20 million in this transaction along with J.P. Morgan Bank, Citigroup, Barwa Bank, Al Hilal Bank, Noor Bank and Dubai Islamic Bank. he 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. Behnam Gurbanzade, Director of the Islamic Banking Department of the IBA, recently said that the Bank is planning to increase the amount of Islamic financing in Azerbaijan in 2015.

Caspian International Investment Company CJSC (CIIC) is a private equity investment firm founded in March 2008. CIIC's shareholders are Azerbaijan Investment Company OJSC;Aref Investment Group; Al-Ahmar Group for Trading, Industrial and General Agencies; as well as The Islamic Corporation For The Development of The Private Sector and Islamic Development Bank. The main goal of CIIC is to serve as an investment vehicle in order to receive exposure to the growing Azerbaijani economy. Orkhan Aghalarov, the acting General Manager of CIIC, said that investments into the private sector is CIIC's primary goal, and thus, the company is one of the main supporters of realization of the President's economic policy.

The International Bank of Azerbaijan has announced provision of new services to clients through the first and so far only "Islamic window" in Azerbaijan. A range of services offered by the bank includes such products of Islamic banking as Ijara, Vakala deposit, Islamic bank cards, and opening of Gard Hassan accounts. All procedures and documentation on these types of services meet the standards assigned by the Islamic financial regulator AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions).It is planned to introduce in the banking legislation the concept of Islamic banking.