BAKU, Azerbaijan, February 20. The Central Bank
of Azerbaijan (CBA) plans to submit a draft amendment to
legislation on Islamic banking to the government soon, Shahin
Mahmudzade, Director General of the CBA, said in an exclusive
interview with Trend.
According to him, the relevant draft amendments to the Civil
Code, the Tax Code, and the Laws of Azerbaijan ‘On Banks,’ ‘On
Non-Bank Credit Organizations,’ ‘On State Duty,’ ‘On Credit
Bureaus,’ and ‘On Privatization of State Property’ have been
submitted for legal review.
"Following their adoption, the next stage will involve
establishing a prudential regulatory framework to address the risks
arising from the implementation of Islamic financial products,”
Mahmudzade emphasized.
The Director General also tackled the matter of VAT implications
for Islamic financial dealings.
He noted that financial services provided under alternative
(Islamic) banking operations are intended to be subject to the same
tax regime as conventional banking services, thereby ensuring tax
neutrality between conventional and Islamic banking activities.
According to Mahmudzade, this approach is reflected in the draft
legislative amendments currently under preparation and will be
submitted to the relevant state authorities shortly.
Islamic banking represents a financial framework that aligns
with Shariah principles, which explicitly forbid interest,
excessive uncertainty, and investments deemed unethical, such as
those related to alcohol and gambling. Rather than providing loans
with interest, it focuses on risk-sharing, profit-and-loss sharing,
and transactions grounded in tangible assets. It champions
investing that is ethical, socially responsible, and rooted in
fairness.
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