The Principles of Islamic Finance, Its Challenges and Policy Suggestions for Azerbaijan

ABSTRACT: Islamic finance has been known as a new reality in the international financial scene and it derived close attention, especially, when financial recession occurred in 2008 which surrounded whole financial system. While conventional banks were impacted strictly, Islamic Banks unexpectedly emerged as less crisis-prone. Islamic banks’ performance through a number of ratios produces satisfactory results. General speaking, Islamic banks are well chaptalized, stable and profitable (Iqbal and Molyneux, 2005). Due to many requests and necessity in Muslim and non-Muslim countries, the practitioners of Islamic religion can make their investments based on Shariah Compaliance and many different models have been occurred. The case for Azerbaijan, nowadays, the International Bank of Azerbaijan, Amrah Bank, Nikoil Bank and TuranBank are seriously interested to introduce Islamic banking services in Azerbaijan. International Bank of Azerbaijan (IBA), the biggest bank has been conducting on studying viability and possibility of Islamic finance for the latest recent years and consequently set up working team on Islamic Banking and the procedure of offering Islamic finance throughout country is becoming an increasingly crucial and suitable topic. Keywords: Islamic Finance and Banking, Mudarabah, Musharakah. ……………………………………………………………………………………………………………………………………………………………………………………………………………………