Azerbaijan expects Islamic banking legislation to be adopted this year — Central Bank

The Central Bank of Azerbaijan expects a legislative package on Islamic finance to be approved this year, paving the way for local banks to officially offer Islamic banking products, Chairman of the Central Bank Taleh Kazimov said at a press conference in Baku.

Report quotes him as saying a regulatory sandbox mechanism is currently in place, under which several banks are testing Islamic finance products.

"Two banks under our supervision are already providing such services in a pilot mode. Our goal is to regulate this area based on the Islamic window approach," Kazimov said.

He explained that this model allows conventional banks to offer separate Islamic finance products. In some countries, this is also known as "alternative banking."

The Central Bank chief noted that the regulator does not rule out the introduction of a separate Islamic banking license in the future if demand proves to be strong.

"If we see truly strong demand, we may consider a separate license for Islamic banking. But at this stage, we are working through the Islamic window mechanism," he said.

Kazimov also stressed that all relevant draft laws have already been prepared and are currently in the coordination stage.

"I hope that, considering bureaucratic procedures, these documents will be approved this year. After that, all banks will be able to enter the market with both Islamic credit products and deposits," he added.