BAKU, Azerbaijan, July 10. Non-bank credit institutions (NBCIs) are expected to provide only Exception, Murabaha, and Ijara products in Azerbaijan, Executive Director of the Central Bank of Azerbaijan (CBA) Shahin Mahmudzade told Trend in an exclusive interview.
The executive director shared his views on the regulatory, legal, and institutional measures taken by the CBA towards the development of Islamic finance. In addition, he spoke about the stage of preparatory work for the introduction of Islamic banking products from 2026, and which products will be launched on the market in the first stage.
"For the purpose of implementing Islamic banking, a draft of amendments to the Civil Code, the Tax Code, the laws of Azerbaijan 'On banks', 'On non-bank credit institutions', 'On state duty', 'On credit bureaus' and 'On privatization of state property' has been prepared and submitted to the relevant state bodies.
The draft amendments have been prepared taking into account international experience and have been adapted to local legislation. The goal is to implement international standards in a consistent and sustainable manner with the local legal environment. In the near future, the implementation of Islamic banking is envisaged within the framework of the 'Islamic windows' model.
After the amendments to the legislative acts on Islamic banking enter into force, the following products are envisaged to be provided by banks within the framework of the 'Islamic window' model:
Order-based contract type for production or construction — Exemption;
Sale-based, that is, purchase-sale financing type — Murabaha;
Lease-based financing type — Ijara. This product is considered an analogue of financial leasing in traditional banking activities;
Financing and deposit type based on profit and loss sharing between the bank and the client — Mudaraba;
Deposit-based product similar to demand deposit — Wadia.
At the same time, two commercial banks are currently testing Islamic financial products under the special regulatory regime under the supervision of the CBA. International Bank of Azerbaijan OJSC is testing the Murabaha product for financing movable and immovable property registered in official legal registers, and Rabitabank OJSC is testing both Mudaraba and Murabaha products. The testing period of the products is until February 2, 2027," the executive director noted.
