At the end of 2012, the International Bank of Azerbaijan (IBA) is going to introduce six new Islamic banking products. It offers new investment opportunities, but also arouses concern about growing influence of Islam over the country’s society.
The biggest state-owned bank – the International Bank of Azerbaijan – has been conferring with major consulting companies while planning to implement bank tools compliant with Sharia. The law of Azerbaijan does not allow a full range of Islamic banking facilities. Consultations with Ernst&Young/Baker McKenzie, PricewaterhouseCoopers/Salans or Ekvita /Islamic Finance Advisory Assurance Services are to aid in creating products not violating current regulations and, at the same time, in planning future amendments within the law. The pro-Islamic alterations in the banking sector of Azerbaijan will be implemented step by step. The first six products entering the market do not need legislative changes. There will be, however, 50 more. “It is clear that the introduction of the Islamic banking in Azerbaijan should be gradual and should not violate the constitution and banking legislation,” said Behnam Gurbanzade, the head of IBA’s working group on Islamic banking.
Thus far, only one bank offering a whole spectrum of such products – Kovsarbank – was operating in Azerbaijan. However, in January 2010, the Central Bank of Azerbaijan revoked its license for breach of the country’s banking regulations. The most significant difference between Islamic and Western banking system is prohibition of usury, meaning payment of high interest rate credits. Within the Islamic banking system, money cannot be lent for endeavours going against the Quran , for instance: alcohol or arms industry. Furthermore, a creditor shares benefit as well as loss from investments. Although new solutions would decrease risk connected to credits and help small and medium companies, there are serious concerns over Islam growing its influence over Azerbaijani society.
Translated by KD