A new phase is beginning in Azerbaijan's banking sector. International rating agency "Moody's" reports that "Islamic windows" based on Islamic finance principles will start operating in the country from 2026.
This model aims to offer citizens interest-free financial products, structured on the basis of profit sharing and risk distribution. The new system's goal is to both expand banks' revenue sources and increase public access to banking services.
In a statement to Modern.az, economist Natiq Jafarli noted that Islamic banking has today become a widely applied model not only in the Middle East but also in Western countries.
“One of the international centers of Islamic banking, however strange it may sound, is considered to be London. Large financial institutions operating in accordance with Islamic principles exist in this city,” he stated.
According to the international agency's report, Azerbaijan is already working on forming the relevant legal framework for this issue. Starting next year, amendments will be made to the Civil Code, the Law "On Banks," and the Tax Code, and financial operations based on Islamic principles are planned to be exempt from value-added tax. Following this, commercial banks will be allowed to offer special products through "Islamic windows."
According to Natiq Jafarli, the attractive aspect of this model is not just the interest-free credit system: “One of the main advantages of Islamic banking is transparency, risk sharing, and its basis in real economic activity. If these principles are applied in Azerbaijan and generate public interest, it will both revitalize the banking sector and strengthen competition among banks.”
Moody's analysts also believe that the development of Islamic finance is a growing trend in the region, and Azerbaijan is taking a significant step in this direction, following Kyrgyzstan and Uzbekistan. If the process is successfully completed, a completely new chapter will open in the country for financing infrastructure projects through interest-free loans and Islamic bonds called "sukuk."