BAKU, Azerbaijan, October 28.
The choice of a model for the development of Islamic financing in
Azerbaijan should take into account the peculiarities of the local
market, demand from clients, and the role of the state in promoting
this direction, the Global Head of Islamic Finance at Fitch
Ratings, Bashar Al Natoor, said in a response to Trend’s inquiry during the
webinar dedicated to Islamic financing markets.


He noted that a country can consider both the creation of
Islamic windows within conventional banks and the development of
full-fledged Islamic banks; however, there is no one-size-fits-all
solution for every market. Different models are being successfully
implemented in various countries.


“So there is no one-size-fits-all, to be very honest,” Al Natoor
remarked.


According to him, the choice of approach depends on many
factors, including fundamental characteristics of the market, goals
of development of Islamic financing, and driving forces of
demand.


He mentioned, as an example, Saudi Arabia, where conventional
banks offer Sharia-compliant products through specialized divisions
_ Islamic windows- alongside fully-fledged Islamic banks.


“If you look at the bank financing in Saudi Arabia, around 85%,
roughly, of that financing is Sharia-compliant. If you look at
Kuwait, which is another story, you will find that Islamic finance
is offered only by Islamic banks, and the sector represents around
50% of the banking sector there. So you have two successful
stories, but different drivers and different fundamentals,” Al
Natoor explained.







He also highlighted the experience of Malaysia, where the state
has, for over a decade, actively promoted the development of
Islamic finance and set targets to increase its market share.


According to the Fitch representative, when determining an
appropriate model, it is important to understand what is driving
the industry’s growth: government policy and "top-down"
initiatives, or genuine demand from clients and businesses, a
"bottom-up" approach.


“So it is the business case coupled with the push, top-down or
bottom-up, and usually it's a combination of both,” he
stressed.


According to Al Natoor, when selecting a model, it’s necessary
to separately explore the market conditions in each country, as
well as the goals that the authorities intend to achieve through
the development of Islamic finance.


“So it is something that needs to be really explored on a
case-by-case basis rather than, is this the right one or the wrong
one,” he concluded.