BAKU, Azerbaijan, October 7. Azerbaijan is working to exempt Islamic finance operations from value-added tax (VAT), said Rustam Tahirov, Director of the Sustainable Development Department of the Financial Sector at the Central Bank of Azerbaijan (CBA), Trend reports.
Speaking at the II Azerbaijan Halal Business Forum (AZHAB), Tahirov stated that several key factors are needed to fully realize the potential of Islamic finance in the country.
“First, it is essential to create a level playing field between conventional and Islamic financial services. This requires adapting financial regulations to the specific features of Islamic finance products. At the same time, harmonizing taxation for Islamic financial operations is crucial. We know that some financial services are exempt from VAT, and it is important to apply the same principle to Islamic finance operations. Currently, we are working on this together with the relevant state authorities,” Tahirov said.
He emphasized that the second critical element pertains to the enhancement of human capital through capacity development and workforce training initiatives.
“Our discussions with the State Bank of Pakistan and other partners revealed that even countries with more experience in this field face a shortage of specialists in Islamic finance. As a country newly entering this sector, we must implement comprehensive training programs with international partners, including the Islamic Development Bank, so that bank staff can manage these products effectively. This is a critical issue, and we will continue our work in this area.
Third, financial institutions must strengthen their ability to manage risks arising from Islamic banking operations, as these risks differ in certain aspects from conventional finance. Banks need to be equipped with the appropriate tools to manage these risks.
Third, financial institutions must strengthen their ability to manage risks arising from Islamic banking operations, as these risks differ in certain aspects from conventional finance. Banks need to be equipped with the appropriate tools to manage these risks.
Finally, an equally important factor is ensuring compliance with international standards when establishing the regulatory and supervisory framework for Islamic finance and banking. Adherence to standards set by the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is crucial for transparency, trust, and stability among market participants.
Collaboration with central banks of regional countries and international organizations is also an integral part of this process. We believe that these factors will play a decisive role in unlocking the full potential of Islamic finance and banking in Azerbaijan,” the CBA official concluded.
To note, the Azerbaijan Halal Business (AZHAB) Forum 2025 has commenced in Baku. The two-day event, organized by the Small and Medium Business Development Agency (KOBİA) under Azerbaijan's Ministry of Economy, centers on the theme "Halal industry as a source of resilience in a rapidly changing world."
The forum seeks to cultivate investment and commercial alliances, facilitate the exchange of experiences, and draw foreign investment to Azerbaijan. It convenes representatives from local and international institutions, industry specialists, entrepreneurs, academics, and global organizations.
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