Report Sees Strong Growth Potential for Islamic Finance in Azerbaijan

The report, titled “Islamic Finance in Azerbaijan: Breaking New Ground,” was launched during the 20th IsDB Global Forum on Islamic Finance in Baku, alongside the 2026 IsDB Group Annual Meetings.

A new report released by the Islamic Development Bank Institute (IsDBI) and the International Islamic Trade Finance Corporation (ITFC) highlights significant opportunities for the growth of Islamic finance in Azerbaijan, outlining a roadmap that could transform the country into a leading regional hub for Shariah-compliant financial services.

The report, titled "Islamic Finance in Azerbaijan: Breaking New Ground," was launched during the 20th IsDB Global Forum on Islamic Finance in Baku, alongside the 2026 IsDB Group Annual Meetings. It provides a detailed assessment of the country's current financial landscape, emerging opportunities and the steps required to build a sustainable Islamic finance ecosystem.

Azerbaijan Positioned for Sector Growth

According to the report, Azerbaijan possesses several advantages that support the development of Islamic finance, including its predominantly Muslim population, investment-grade sovereign ratings and strategic location linking Central Asia, the Caucasus, the Middle East and Europe.

Recent reforms have also created momentum for the sector. The Central Bank of the Republic of Azerbaijan has introduced pilot Islamic banking products through its regulatory sandbox programme, while legal and regulatory changes continue to lay the groundwork for broader market development. Researchers believe these developments could create new opportunities for trade finance, investment mobilisation and private sector growth.

Islamic Banking and Sukuk Market Expected to Expand

The report projects that Islamic banking assets in Azerbaijan could reach approximately $2.7 billion by 2035. At the same time, cumulative ṣukūk issuances are expected to grow to around $1.5 billion over the same period, creating additional channels for financing infrastructure, businesses and development projects.

The findings suggest that a stronger Islamic finance sector could help improve financial inclusion by providing alternative funding options for individuals and businesses seeking Shariah-compliant financial products. The expansion of Islamic finance may also support Azerbaijan's broader economic diversification goals by attracting regional and international investors.

Roadmap Targets Regional Leadership

The report concludes with a phased strategy focused on strengthening regulations, developing financial products, building industry expertise and increasing public awareness of Islamic finance. Additional recommendations include enhancing institutional capacity and positioning Azerbaijan as a regional centre for Islamic finance within the Commonwealth of Independent States (CIS).

Dr Sami Al-Suwailem, Acting Director General of the IsDB Institute, said Azerbaijan is well placed to establish a credible and sustainable Islamic finance ecosystem and expressed hope that the report would serve as a practical guide for policymakers and industry stakeholders.

ITFC Chief Executive Officer Eng. Adeeb Yousuf Al Aama said Islamic finance can play an important role in supporting trade, investment and private sector development, adding that the organisation remains committed to supporting Azerbaijan's economic growth through innovative Shariah-compliant financial solutions. The report suggests that with continued reforms and industry collaboration, Azerbaijan could emerge as one of the leading Islamic finance markets in the wider CIS region over the next decade.