Islamic Bank Group’s portfolio on Azerbaijan reaches $1.2 bn

Baku, Fineko/abc.az. The Islamic Development Bank Group (IDB) has achieved grandmaster-level portfolio on Azerbaijan.

Today in Baku at a seminar held within the framework of WTO-related Technical Assistance and Capacity Building Program (WTO-TAP) IDB representative in the country Tamerlan Taghiyev has said that the IDB current portfolio on Azerbaijan is about $1.2 bn.

"We, as a group, transferred to financing large (with cost up to $250 million) projects in such key areas as energy, water supply and sanitation, irrigation and reclamation. The Bank does not forget about humanitarian development and support of the Government of Azerbaijan and is actively cooperating with the private sector," Taghiyev said.

In addition to the Bank, projects in the country are also financed by the Islamic Corporation for Development of the Private Sector (ICD) and the Islamic Trade Finance Corporation (ITFC).

http://abc.az

Azerbaijan develops Islamic financing

Azerbaijan, Baku, Jan. 25 / Trend /

Leyla Abdullayeva, Trend Analytic Center Expert

Azerbaijan may soon become a regional Islamic financing center and play a significant role in boosting cooperation in Islamic banking with Persian Gulf and Central Asian countries.

Islamic financing is one of the fastest growing segments of the global financial services industry worldwide. At the same time, interest in Islamic finance as a source of investment is high in our country. Many countries' interest in Islamic finance is associated with different factors, the foremost of which is the desire to attract liquid resources from the Middle East and Southeast Asia and a certain demand for financial products in accordance with Sharia law by local Muslims.

Today, Azerbaijan actively introduces Islamic financing. The independent authority of the International Bank of Azerbaijan (IBA) on Islamic banking will start its work in March, which plans to present six Islamic banking products to the market during the first phase.

The Islamic Corporation for the Development of the Private Sector (ICD) is also in talks to create the first Islamic insurance company in Azerbaijan, Takaful, which is popular in Europe, particularly in the UK. European and Central Asian countries are considered experts in Islamic financing. Most of Takaful's customers are non-Muslims in countries where the Islamic insurance market is the most developed in the world.

Ansar Leasing, organized on Islamic principles and established by the ICD, has successfully operated in Azerbaijan for three years. During this period, the company has formed a portfolio worth $15 million and the company plans to draw about $6-$7 million from its founder to expand operations. Some Azerbaijani private banks are also starting to expand the range of Islamic financing tools, introducing Ijarah (leasing) and Murabaha. One such bank is TuranBank, which plans to introduce these tools with the financial support of the Islamic Corporation.

Another bank, Nikoil, is actively introducing deposit products, which include Wadia yad Daman.

Evidently, Azerbaijani banks' interest in Islamic products is growing gradually. The amount of money that enters the market through this channel is very small in Azerbaijan, since many issues related to Islamic financing have not been yet addressed. Therefore, the successful development of Islamic finance on the domestic market will depend on the further improvement of legislation, regulatory prudential norms, and supply and demand. In the near future, it may become a subject of debate.

By developing Islamic financial infrastructure, Azerbaijan may indeed attract investments and financing from the Islamic capital market, not only from Arab countries. Alternative financial tools can be provided for Azerbaijani investors in this way. Also, the number of practicing Muslims who cannot and do not want to use traditional financial services is growing in Azerbaijan. Islamic financial tools can become the channel through which their assets can be involved in the economy.

Do you have any feedback? Contact our journalist at agency@trend.az

http://en.trend.az

Islamic banking: Kyrgyzstan, seize the hour!

Economic processes slow down across the world for recent half year. Debt crisis deepens embracing new European countries. Fitch, S&P and Moody's warn that not only banks of Spain, Greece, and Portugal are at risk but biggest backbone banks of Germany, Austria, Great Britain and France. Their bankruptcy is fraught with collapse of Eurozone.

China also concerns in a new wave of the crisis. Bloomberg Poll questioned 1,097 investors whereof 61 percent are waiting for collapse of the banking system. And only every tenth believes China will manage to escape problems.

A new world recession is looming. Some experts think that forthcoming crisis will be more amplitudinous than those which world survived in 2008. Best financial experts of Europe and America break their heads over how to elude the worst scenario.

Orients’ treasure

While they are reflection on the Islamic financing gathers pace. Islamic banks survived the crisis with minimal losses showing sufficient high growth at 15-20 percent per year. Experts believe that Islamic model of economy may become a decision of problems emerged from the global financial crisis. Today over 400 world financial institutions practice Islamic banking and their annual turnovers make up around $1 trillion. Deutsche Bank reports the volume of Islamic finances will almost double up to $1.8 trillion by 2016. Standard & Poor's expects increments of assets at the level of $2.8 trillion.

In a short, the system proves its value. Many countries of Old and New World realized this and the U.S. Switzerland, Great Britain and Germany have begun launching Islamic financing model.

Islamic financing is operating in Kyrgyzstan for 5 years and it demonstrates its value in practice. Share of Islamic financing in June 2011 reached 5 percent of all banks credit resources of the republic. And it will increase up to 10-12 percents by 2015 according to experts.

A lawyer never goes to law himself

“Islamic banks across the world successfully got over crisis as they rest upon other principles distinct from traditional credit activities,” an adviser on business development to the Board of Directors of EcoIslamicBank OJSC, Shamil Murtazaliev, tells.

He says that Islamic economic system bans profiteering, bank interest rates and any enrichment without creation of a real commodity or an actual cost service.

He notes money in Islamic economy is not a commodity but just means of exchange. A profit can be fairly earned only through trade or through partly risk-taking. “Islamic economic system pays special attention to human relations and moral principles of economic relationships that must contribute into prosperity of the society in whole, not separate individuals. A principle of social fairness is cornerstone of Islamic principles,” the banker says. He believes the world will realize the supremacy of Islamic economic system over economic model of speculative capital.

The difference of Islamic banking from traditional one is absence of loan interest. There are other financial and profit earning instruments.

“Murabahah, mudarabah, sharika”

These are major financial operations in Islamic banking. Murabahah means a particular kind of sale, where the seller expressly mentions the cost he has incurred on the commodities for sale and sells it to another person by adding some profit or mark-up thereon which is known to the buyer. Mudarabah is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. Profits generated are shared between the parties according to a pre-agreed ratio. Sharika means partnership between a bank and a client and the profits are shared among the parties on the basis of their participation or on a pre-agreed ratio and the losses are shared on the basis of equity participation.

Besides, Islamic economy bans activity which is in conflict with Sharia: alcohol, drugs, gambling business as well as bonds, bank lending and investments into companies whose loan indebtedness is a major source of financing.

Golden rain

Kyrgyzstan has done a lot to launch Islamic banking but it is ahead to do more. Financiers plan to implement Islamic assurance, Islamic paper securities and other financial instruments. Improvement of legislation and political will of the Government are needed to do that.

“This will help to attract investments of richest countries of Arabia, Malaysia and other Muslim countries into economy of the republic,” Shamil Murtazaliev believes. “Representatives of 57 countries work in Islamic Development Bank (IDB) and there is a country competition among them where everybody lobbies interests of his state. Kyrgyzstan joined Islamic Development Bank recently and it is important to push forward interests of the republic for further development of Islamic banking”.

Dozen of largest IDB countries controls 70 percents of world energy resources and has accumulated substantial funds there. And now they are needed to make use of them including outside their countries within diversification of the economics.

In this context Islamic banking for Kyrgyzstan, having great potential for attraction of investments, must be considered as one of priorities in development of the banking sector of the country.

http://eng.24.kg/

Amrahbank signs next agreement with Islamic Trade Finance Corporation

Baku, Fineko/abc.az. Azerbaijan’s Amrahbank has cemented its relationship with the International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank (IDB) Group, with the second $1.5 million trade finance agreement.

Speaking on the occasion, ITFC Chief Executive Officer Waleed Al-Wohaib stated that as a recognized provider of trade solutions for its member countries’ needs the ITFC announced its second cooperation experience with AmrahBank.

“This cooperation fulfills ITFC’s primary goal of catering for the needs of SMEs which have reflected AmrahBank’s commitment to this end. AmrahBank exhibited sound financial discipline and proved itself to be efficient in the utilization of our line of financing. With this in mind, we have taken the decision to reinforce our cooperation with AmrahBank, increasing our financing by 50% to reach $1.5 million," he said.

Amrahbank Chairman of the Management Board Emil Mammadov said that the agreement opens the doors of new opportunities and collaboration between our two institutions in finding new trade finance solutions for the benefit of Small and Medium Enterprises (SMEs).

“That will enhance the productive and active role that SMEs play in a domestic business market and help them grow into larger and more significant businesses, and hereby contribute in the development of Azerbaijan economy,” he added.

The ITFC commenced operations on 10 January 2008 with an authorized capital of $3 billion.

As a member of the Islamic Development Bank (IDB) Group, the ITFC inherited the pioneering mantle of its trade finance expertise and its application of innovative Islamic finance products developed over a period of more than 30 years to develop markets and trading capacities to help the member countries of the Organization of the Islamic Conference (OIC) do business more effectively amongst themselves and with the rest of the world.

Amrahbank is one of the oldest (est. in 1993) and leading commercial banks of Azerbaijan. It offers wide range of retail and corporate banking products and services such as the opening of current accounts, plastic card services, documentary operations, retail and business loans, currency exchanges, local and international money transfers, utility bills and mobile operator subscription payment services, interbank deposits and loans, business consultations and other banking services. Recent strategic partnership with the Bahrain based International Investment Bank (through 49% shareholding), has played a key role in further development of various spheres of Amrahbank’s activity such as corporate governance, international cooperation, array and quality of products & services, etc.

http://abc.az

Azerbaijan to introduce Islamic banking

The chairman of the Central Bank of Azerbaijan has addressed the Islamic Development Bank's (IDB) board of governors, meeting in Baku.

Elman Rustamov

Elman Rustamov told the board meeting that Azerbaijan had withstood the global economic crisis well.

"We achieved great success both in the financial and economic spheres. It is not surprising that international organizations and financial structures highly appreciate our economic achievements. FITCH has recently raised our rating to investment level. This was a success for Azerbaijan's economic and financial system," Rustamov said.

He said that the meeting of the IDB board of governors would promote Azerbaijan's collaboration  with Islamic financial structures.

"We also intend to use the services of the Islamic financial system in Azerbaijan in the future," the head of the Central Bank said.

"This issue will be considered in the future. Azerbaijan is different for its tolerance, so why not demonstrate this tolerance in the banking system? But I would like to repeat once again that the country has no legislative base to move to this system."  

The economic systems of the Islamic states have shown a good level of resistance to the world financial crisis, IDB President Dr Ahmad Mohamed Ali Al Madani told the board meeting.

"This was possible because of the good financial system which is gaining influence in the world. The assets of the Islamic banks have grown to 30% in the world banking structure and we expect the total capital of these banks to increase to $1 trillion by the end of 2010," the bank chief said.

The president of the bank hoped that the governors' meeting would decide on further steps to develop the Islamic banking system as part of the world banking structure.

1news.az

IBA to introduce Islamic banking in Azerbaijan

The International Bank of Azerbaijan (IBA), the country`s leading bank, plans to introduce Islamic banking in the South Caucasus republic, its board chairman, Jahangir Hajiyev, has announced.

He noted, however, that the measure can be enacted no earlier than in 2010.

According to Hajiyev, the interest in banking based on Islamic canons is increasing the world over following the financial crisis.

The IBA board chairman emphasized that, currently, there is no bank in the entire Commonwealth of Independent States (CIS) properly enforcing Islamic banking laws, though the issue remains in the spotlight.

``In Russia itself, high-level discussions are underway on creating such banking,`` said Hajiyev.

He added that it remains to be determined whether Islamic banking will be applied independently or within the IBA.

Islamic banking refers to a system of banking that is consistent with the principles of Islamic law. Sharia prohibits the payment or acceptance of interest fees for the lending and accepting of money, as well as investing in businesses that provide goods or services considered a violation of its principles.

Link: http://www.azernews.az/site/shownews.php?news_id=15153

'Azerbaijan is reaching out to Islamic finance'

The Muslim Central Asian countries (CIS) including Azerbaijan are fast opening up to the global Islamic finance market.

The Muslim Central Asian countries (CIS) including Azerbaijan are fast opening up to the global Islamic finance market. After many years of brutal Soviet rule, Azerbaijan, the oil-rich Caspian country with a population of about 9 million and a member of the Jeddah-based Islamic Development Bank (IDB), is reaching out to Islamic finance, especially in the wake of the near collapse of the global conventional banking system as underlined by the credit crunch and the international financial crisis. More importantly, Baku - the capital - is in the process of reviewing its legislation with a view to introducing laws to facilitate Islamic banking in the country. Faig Mammdov, special adviser to the chairman of the International Bank of Azerbaijan (IBA), Jahangir Hajiyev, focuses on the current developments and future prospects for Islamic finance in the country and region. In expressing the current state of Islamic finance in Azerbaijan, Faig Mammdov said: “At the moment there is no stand-alone Islamic bank in Azerbaijan because there is no legislation that could authorize or license such a bank. There are a number of products based on Islamic financial principles which are being offered by some banks in the country. But as a system of financial management, it is still in its infancy. There is no Islamic banking law yet in the country, but legislators are currently reviewing the existing banking and allied legislation to see how Islamic banking could best be incorporated and regulated in Azerbaijan. The Central Bank of Azerbaijan is also studying the experiences of other countries, including the UK, which has, over the last year or two, established Islamic banking in their jurisdictions”. He also provided his assessment to the level of demand for Islamic financial products in Azerbaijan. “Azerbaijan has a Muslim majority with a population of just under 9 million. It is also a major oil producer and exporter in the region. There has been a long Islamic microfinance tradition at a community level for many years, but there is definitely a demand these days for Islamic financial products such as Murabaha, Ijara and Sukuk. Being the largest bank in the country, IBA wants to lead the process of offering Shariah-compliant financial products in the country”.  “Last year we signed a $20.5 million financing facility with the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the IDB Group. The proceeds of this facility are being used to disburse Shariah-compliant financing to small-and-medium-sized enterprises (SMEs) in Azerbaijan. We also have several such relationships with other Islamic financial institutions abroad, especially in the GCC (Gulf Cooperation Council) countries and Turkey. The bank is also currently involved in a study on the possibility of issuing a corporate Sukuk (Islamic bonds or securities), which would be the first one in the country. We hope to finish the study and consultation by this summer, and plan to issue a Sukuk sometime later this year with the help of overseas Islamic financial institutions including those in Saudi Arabia”. Faig Mammdov said about his current involvement in offering Islamic finance products to his customers. When He was asked about if he had any plans  to expand into the Middle East, his answer was: “Yes we are already expanding into the GCC countries. We recently opened a representative office in Dubai. In March this year, IBA Chairman Hajiyev led a delegation from the bank to Qatar. Following negotiations with the Central Bank of Qatar and the Qatar Financial Centre (QFC), the bank received approval to open an IBA branch in Doha and a license to establish a stand-alone subsidiary bank in Qatar with a capital of $10 million. We expect to open in Qatar not a conventional bank, but an institution which will exclusively operate in accordance with Islamic banking principles. We also have a branch in Moscow and in Georgia, which means that we can also service clients there who may wish to access Islamic finance in the near future”. In presenting the numbers of other Azerbaijani banks are offering Islamic finance products, he said: “There are some 43 banks in Azerbaijan. IBA is the largest with a capital of over $5 million; government agencies own 50.2 percent and the rest is owned by local corporations, individuals and some senior bank managers. The bank is earmarked for full eventual privatization”.  Moreover, he talked about the length of time he thinks it will take for the Islamic banking legislations to be enacted: “We are moving one step at a time. We have already introduced certain Islamic financial products which do not conflict with our existing banking regulations. We want to demonstrate how Islamic financial products work in practice and in the real economy, and show their success to the government, the business sector, ordinary consumers and investors. This will pave the way for building a more complex structure including more sophisticated Islamic financial and capital market products. In this way, I believe, Islamic finance will flourish in Azerbaijan. It is an important educational process for all, and we welcome the cooperation of such institutions as the IDB”. At the end, Faig Mammdov expressed his predictions about the products that he thinks will be popular in his market: “There is a huge demand for housing finance in particular. We are in the process of launching an Islamic mortgage based on Murabaha and Ijara contracts. They are the easiest to introduce under the current legislation. We are also in discussions with Turk Capital in Bahrain, an affiliate of Kuwait Turk Participation Bank in Istanbul, which in turn is a subsidiary of Kuwait Finance House (KFH). Turk Capital, in fact, has recently set up a joint Islamic investment and finance company in Azerbaijan with a government entity in Baku. IBA is also the largest trade finance bank in the country so we see a huge market for commodity Murabaha business in the future” . Link: http://www.cibafi.org/NewsCenter/English/Details.aspx?Id=3229&Cat=0