MANAMA: International Bank of Azerbaijan (IBA), the country's biggest lender, plans to raise $150 million through an Islamic syndicated loan early next year and double its Islamic banking assets by the end of 2013, according to a senior executive.
Behnam Gurbanzada, IBA's director of Islamic banking, said the bank planned to sign a mandate in January and close the deal in April.
The one-year private syndication would be the first of its kind in Azerbaijan and would help IBA cater to the estimated 93 percent of its 9 million population who are Muslim.
The bank is in talks with a number of Gulf-based lenders to manage the syndication. Gurbanzada did not disclose their names.
IBA, 50.2 percent-owned by Azerbaijan's Ministry of Finance, holds a 40 percent share of banking assets in Azerbaijan. It offers sharia-compliant products through an Islamic window, which follow religious principles such as a ban on interest and on pure monetary speculation.
IBA plans to increase its Islamic banking assets to $120 million by the end of 2013 from $60 million currently, Gurbanzada said.
"We are planning to increase Islamic banking activity with the help of our subsidiaries and reach $500 million in assets in 2015."
This would help the bank launch products domestically and prepare it for future expansion across neighbouring and other countries, where it sees opportunities for Islamic finance.
"IBA would like to create a strong platform for Islamic banking in Azerbaijan and use it for implementation with its subsidiaries in Russia, Georgia and in Qatar," Gurbanzada said.
Plans to have an Islamic banking subsidiary in Qatar by the end of this year await regulatory approval.
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Growth would be driven by new products including small business lending, vehicle and real estate financing and financing of export-related activities.
Managing private clients' assets through wakala, or agency agreements, could grow to $30 million in 2013, Gurbanzada said.
"We are also working on the retail market and inviting private clients to participate in wakala deposit pools. At present we have received a bid for $3.5 million."
IBA is also working to attract a $15 million wakala deposit from the Islamic Corporation for the Development of the Private Sector, a Jeddah-based multilateral financial institution, in order to finance small- and medium-sized businesses.
Also planned are Islamic debit cards based on an interest-free loan concept and Islamic financing cards with credit limits based on fixed monthly commissions.
At present the bank is not considering a dedicated subsidiary for its Islamic banking activities but it could explore a spin-off when changes to banking legislation are passed, Gurbanzada said. "I suppose sooner or later we should come to this significant point".
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