Baku: Azerbaijan is set to establish a legal and regulatory framework for the issuance of Islamic bonds, known as sukuk, marking a significant development in the country’s financial sector. This initiative is being developed in collaboration with the Islamic Development Bank Institute (IsDBI) and is based on a request from the Central Bank of Azerbaijan (CBA).

According to Azeri-Press News Agency, the project will involve the creation of a legislative base to regulate the issuance of sukuk and other Islamic finance products. This will include strengthening the risk management capacity of financial institutions and establishing a monitoring mechanism to track the growth of Islamic finance in Azerbaijan. Ultimately, the project aims to facilitate the country’s first sukuk issuance.

The initiative will also include an assessment of Azerbaijan’s current capital market and a benchmark study drawing from the experiences of countries such as Malaysia, Indonesia, Bahrain, the UAE, Kazakhstan, Turkey, and Saudi Arabia. This will lead to the development of a National Sukuk Framework, as well as Shariah and corporate governance regulations. The entire implementation process is expected to span a period of 15 months.

This move is anticipated to increase capital inflows, broaden the investor base, and support the financing of infrastructure projects in Azerbaijan, thereby enhancing the country’s financial landscape.