Azerbaijan preparing for first Islamic bonds issuance - Central Bank governor

BAKU. June 17 (Interfax) - Azerbaijan, together with the Islamic Development Bank (IDB), is preparing for the issuance of the first sukuk - the Islamic equivalent of bonds, Central Bank of Azerbaijan (CBA) Governor Taleh Kazimov said on Wednesday at a forum on Islamic finance organized as part of the 51st annual meeting of the IDB group in Baku.

"In order to create a favorable environment for the introduction of sukuk instruments in Azerbaijan, we are implementing a joint project with the Islamic Development Bank. This project will allow the formation of a solid legal and regulatory framework, build the capacity of financial institutions in the field of Islamic finance, create monitoring and evaluation mechanisms and, as a result, carry out the first sukuk issuance in Azerbaijan. This will serve to further diversify our financial sector," Kazimov said.

The CBA is preparing amendments to the Civil Code, the Tax Code and the country's financial legislation in order to ensure the application of Islamic financial instruments, he said.

"Given the current level of readiness of market participants, at the initial stage we will introduce the 'Islamic window' model, and at the next stage, after assessing demand, we will make a decision on full-scale application. We are also actively using the 'regulatory sandbox' registry to test products that comply with Sharia principles," he said.

Azerbaijan is developing sustainability-oriented Islamic financial instruments, he said. "Islamic finance is an important tool for inclusive economic development and can play a significant role in the formation of sustainable financial systems in the context of global economic transformation," he said.

For the successful development of Islamic finance in Azerbaijan, progress is needed in two key areas.

"Firstly, improvement of the legal framework and ensuring transparency of the regulatory environment is required. Secondly, it is necessary to form and develop professional human capital that will ensure the effective functioning of the Islamic finance system," he said.