DUBAI Nov 26 Azerbaijan's largest lender, International Bank of Azerbaijan (IBA), is working with national authorities on a draft Islamic banking law and a final version could be presented to parliament in 2014, a senior executive said.
Islamic finance has developed slowly in the former Soviet state, where an estimated 93 percent of the 9 million people are Muslim. But IBA's Islamic banking business is now growing strongly, which is encouraging authorities to take action.
"The main aim is legislation. The cabinet of ministers of Azerbaijan has already started the project together with the ministry of economic development and IBA," Behnam Gurbanzada, IBA's director of Islamic banking, told Reuters.
With strong state support, the draft legislation could be ready by May with a final version presented to parliament by the end of 2014, Gurbanzada said on the sidelines of the Global Islamic Economy Summit in Dubai.
"It covers banking, taxation...It covers some specific issues like civil law." Among other provisions, Islamic banking bans interest payments and pure monetary speculation, and the structures which it uses to achieve this can be expensive unless special tax arrangements are made.
IBA now offers sharia-compliant products through an Islamic window, but legislation would pave the way for a stand-alone Islamic banking unit, Gurbanzada added.
The bank, 50.2 percent owned by Azerbaijan's Ministry of Finance, holds 40 percent of banking assets in the country.
"By the end of 2013 we will reach $200 million of Islamic banking assets and with a goal for 2014 of around $300 million to $350 million," Gurbanzada said. The bank held $60 million of Islamic banking assets last December.
Next year, the lender plans to open four dedicated Islamic banking branches, Gurbanzada added. (Editing by Andrew Torchia)