ISLAMIC ALTERNATIVE

"The Islamic Bank has made a great contribution to the successful economic development of Azerbaijan. I am sure that in the coming years, this cooperation will deepen, and we will continue our successful cooperation to solve economic and social problems facing our country," Azerbaijani President Ilham Aliev said at the opening of the 35th annual meeting of the Islamic Development Bank (IDB). The president stressed that the projects being implemented in Azerbaijan by the bank justify themselves and this cooperation has excellent prospects. IDB President Ahmad Muhammad Ali is also optimistic on the prospects of relations with Azerbaijan. In an interview with our magazine, he stressed the importance of Azerbaijan as a reliable and stable partner. The head of the Islamic Bank shared his views on the current economic situation in the world, prospects for the development of the Islamic financial and banking system and the predictions and priorities of the bank for the future.

What impact did the global crisis have on member countries of the Islamic Development Bank, and which ones were better able to cope with the crisis?

It is a very difficult question. Ending the crisis requires a very long time, so today it is difficult to say which countries were least affected by the consequences of the crisis. The global crisis had the greatest impact on countries such as Pakistan and Bangladesh and the countries that received remittances from migrant workers.

The countries that have insignificant trading operations with the West (North Africa) - Europe and the US - are the least affected by the crisis.

Azerbaijan is a happy country and it has been very lucky. In 2000, Azerbaijan became the fastest developing country in the world with the highest rate of GDP growth. Therefore, it is because of the strong financial position of Azerbaijan that the country easily managed to overcome the crisis.

What steps should be taken to overcome the effects of the global crisis? And what is the need for investment banks to eliminate the consequences of the crisis?

The establishment of investment banks is proposed in the context of the Islamic banking system. In your region, there are very few Islamic banks and the volume of operating Islamic banks is rather small. In the West, the crisis had the greatest effect on investment banks, and most of them went bankrupt. Therefore, these countries need to create major investment banks, which could invest in the real economy. Thus, we could make a contribution for member countries of the IDB. The crisis led to increasing attention to the real sector. Even a country like China is trying to invest a big part of its wealth in the real economy in the form of capital investment.

How is it possible to expand the scope of Islamic banking, which was least affected by the global crisis?

First, we must separate the financial crisis from the economic one as the Islamic financial sector was least affected by the financial crisis. However, the economic crisis also affected Islamic banking.

As we know, the world crisis resulted from the formation of debts for transactions in bonds and trade on credit, while in Islamic banks it is impossible to conduct transactions on credit. From this perspective, Islamic banking is less affected by the financial crisis, but as a result of its transformation into an economic crisis, its sphere of influence expanded because the volume of trade, remittances and money transfers between countries shrank as a result. In particular, it was related to a decline in oil prices. And many of our member countries were affected by the economic crisis, so it affected the Islamic Development Bank as well.

Meanwhile, to expand the coverage of Islamic banking, it is necessary to expand awareness among the public and financial institutions. In this regard, there is great demand for courses and seminars to enhance knowledge. We, as the Islamic Development Bank, are interested in cooperation with those who want to learn about Islamic banking, financial and academic institutions, as well as NGOs.

How probable is the introduction of Islamic banking in Azerbaijan and what assistance can the IDB provide in this field?

The first step should be raising public awareness by holding seminars and conferences. And in this direction, we are ready to assist each country. If the government and financial institutions are interested, the IDB is ready to help.

In some cases, the IDB demonstrated its interest in developing Islamic banking and financing in close cooperation with concerned authorities in Azerbaijan. The IDB is very interested in this question, because it is one of the main objectives of the bank along with the objective of its development. The Islamic Research and Training Institute (IRTI), which is one of the offices of the IDB Group, provides member countries with research and training opportunities in these areas, and the IRTI is actively working with stakeholders in the country to increase awareness of Islamic banking and financing.

To what extent is the IDB Group ready to expand cooperation with Azerbaijan, in particular, with the private sector?

We are very interested and would like to expand ties with Azerbaijan, including in the private sector, which we want to do through the Islamic Corporation for the Development of the Private Sector, which is a member of the IDB Group.

In order to develop the private sector (small and medium-sized enterprises), the bank provides small and medium enterprises with funding through authorized local banks/financial institutions. This specific development tool is aimed at developing small and medium-sized enterprises in specific sectors such as agriculture, poverty reduction, emancipation of women and funding for the most neglected and affected fields in the country. In addition, the IDB Group has already undertaken extensive operations through its subsidiary companies/organizations such as the ICD and the ITFC, the UIF joint investment fund and is already involved in financing non-state (without state guarantees) projects in Azerbaijan.

Is the IDB considering simplifying procedures and conditions for financing projects in Azerbaijan, and in general, what kind of work is being carried out in this field? 

We have the same conditions for all countries and they do not change.

What sectors are more interesting for the IDB? 

We always take the priorities of the state as a basis. The bank also has strategic priorities, and the main priority is the development of human resources and education and assistance in the development of health services. We are also mindful of the needs of the country, the whole region and separate countries. In Central Asia, which is geographically isolated from world markets, preference is given to funding transportation projects. And our bank prefers financing projects to build roads and railways in Kazakhstan, Turkmenistan and Tajikistan.

We are also interested in the construction of hydroelectric power plants.

What dictated the need to establish the Islamic Solidarity Fund for Development and what are its main objectives?

In member countries of the IDB, there are many people living in poverty. Therefore, the fight against poverty is one of the priorities and objectives of the bank.

The Fund is financed by voluntary donations from countries, which will then be directed at solving the problems of poor countries.

What are the results of the bank's work in 2009 and how do you assess its activity in Azerbaijan? Has the global crisis affected the bank's financial operations in Azerbaijan and in the region at large?

In 2009, the IDB approved $201.5 million for the Canub power station through Istisna funding, and in terms of approval, this is the largest project approved by the bank in Azerbaijan since the country joined the bank in 1992. We can evaluate the bank's activities as positive, and in the context of the global financial crisis, the bank increased the scale of its projects in the region, and the above statement shows the bank's strong commitment to executing its strategy in Azerbaijan aimed at supporting the client (impact-oriented and client-faced strategy).

How do you assess the economic situation in Azerbaijan during the crisis and how has the country prepared for the post-crisis period?

This issue requires comprehensive macro-economic research and analysis, and it would be quite difficult to try to answer this broad question spontaneously. Nevertheless, in general, we can say that Azerbaijan's economy has shown some resistance to the most negative and adverse effects of the crisis. Moreover, because of carefully planned and wise intervention by the government of Azerbaijan and the Central Bank, the banking/financial sector was stable and survived.

In 2010, the Islamic Development Bank held its annual meeting of IDB governors for the first time in Baku. Why did you choose Azerbaijan as the venue for the annual meeting? And how satisfied were you with the organization of this event?

The decision on where to hold the annual meeting of the IDB was adopted by the Governing Council (the supreme body of the IDB where all member countries are represented at the ministerial level) on the advice of the Board of Directors. The starting point, of course, is an invitation sent by a member to the IDB to conduct such an annual meeting. The question is reviewed and if it turns out that a member country has all the necessary capabilities and is ready to make the necessary arrangements, the Governing Council makes a decision, taking into account the timetable agreed upon earlier.

During this annual meeting, we approved funding for new projects worth $241.4 million in some member countries. These funds are provided for new development projects in member countries such as Chad, Iran, Mali, Senegal, Burkina Faso, Sierra Leone, Togo, Lebanon and Niger.

We also approved guarantees from the Waqf Fund totalling $2.044 million for technical assistance to projects in Burundi, Ethiopia, Ghana, India, Sweden and the Netherlands.

Consent was secured for the right to participate in increasing the shared capital in Turkey's Kuwait Turkish Participation Bank (KTRB), for which $18.2 million were allocated.

The Council also approved $3.4 million to eliminate the consequences of floods in Tajikistan and for the victims of ethnic confrontation in Kyrgyzstan and of the food crisis in Nigeria.

In general, the organization of events was at a high level.

When did you first visit Baku, and what impression did the capital of Azerbaijan make on you now?

I first visited Azerbaijan in 1992. It is a big difference even if we compare the country with those years. I see great development.