The Islamic Globe has learned that major legislative changes are essential for the future of Islamic banking in Azerbaijan, according to the director of a leading accountancy and consultancy firm's Azerbaijani operations.
Hikmet Allahverdiyez, director of Moore Stephens in Azerbaijan, told The Islamic Globe that unless banks are allowed greater freedom to invest across the economy, Islamic finance will fail. Azerbaijani banks can only provide "a limited set of Shari'ah compliant products" to retail customers and have little to offer the wholesale market he explained: "Core Islamic financial products offering long term investment financing opportunities - Musharakah, for example - remain unattainable because legislation prohibits banks to invest in the capital of other commercial entities, except for insurance and leasing companies."
In a further blow to the future of Islamic banking in the South Caucasus nation, Elman Rustamov, chairman of the Central Bank of Azerbaijan announced late last year that the CBA has no plans to develop Islamic banking within the next two to three years
Since Kauthar Bank, Azerbaijan's only fully Shari'ah compliant bank, had its license suspended last October for failing to meet the minimum capital requirements of the CBA, the only Islamic banking options for the country are provided by Amrahbank, where Allahverdiyez spent two years as chairman of the audit committee, Nikoil and Turanbank.
While Amrahbank, 49% owned by Bahrain-based International Investment Bank, has been working with Ernst & Young to develop an Islamic banking program, Nikoil and Turanbank are only offering "the so-called 'Islamic window'", said Allahverdiyez, meaning all they are doing is accepting interestfree deposits from personal customers.
Azerbaijani's secularism is another impediment to Islamic banking, Allahverdiyez said. "There is no single legislative document regarding Islamic banking [and] in general it is difficult to expect a full-fledged Shari'ah compliant legislation in such an extremely secular country where, for instance, female students and schoolchildren are forbidden to cover their heads with Hijab."
© The Islamic Globe 2011
