1. Zakhid F. Mamedov

The Islamic Banking System: New Challenges, Problems, and Development Prospects

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Zakhid F. Mamedov

Head of Department of Science of Azerbaijan State University of Economics, Doctor of Economics, Professor

Istiglaliyat Str. 6, Baku, Azerbaijan, AZ1001

The modern problems of implementation and expansion of Islamic banking are highly relevant due to the increasing share of the Muslim population in the United States and European countries, and the growing demand for financial services compliant with the Sharia law. The banking and financial services currently provided by the Muslim industry has aroused some interest, and find themselvesin great demand among both Muslim and non-Muslim populations. Therefore, financial analysts have explicitly defined the problem of successfully integrating the principles and norms of Islamic banks into the traditional financial system. Rapid growth of the Islamic financial industry on the global scale substantiates the feasibility of its implementation in Azerbaijan.
Aim. The present study aims to examine the theoretical framework of Islamic banking, analyze the problem of expanding Islamic banking at the new stage of economic globalization, and presents basic recommendations and suggestions related to the implementation of Islamic practices in Azerbaijan’s banking system.
Methods. This study uses general scientific methods of cognition to examine the banking sector in the regions participating in the project of Islamic banking implementation. Information for the purposes of the study is obtained from the official websites of Turkish partner banks.
Results. The dynamic international expansion of the Islamic economic model has prompted the scientific and economic community to declare that it is necessary to integrate its laws and principles into the existing financial model, which will undoubtedly keep critical situations to a minimum, thus allowing for a secure financial system. In-depth examination of the banking sector in the regions focused on pioneering in implementing Islamic banking reveals a number of problems and prospects in this field. First, robust market conditions provide real opportunities for the adaptation of the basic principles of Islamic banking. Second, training of skilled personnel in the field of Islamic banking facilitates the formation of tactical and strategic plans for the development f financial institutions.
Conclusion. The Islamic model, which focuses on regulation of the banking business, has a number of specific features that facilitate the formation and expansion of banking and financial markets. Therefore, practical application of the specific features of the implemented business model that lies at the core of Islamic banking should be viewed as a promising direction for solving the problem of generating innovative banking products and services and improvement of the foundations of the modern banking practices through the diversification of risks between the participants of economic relationships.

Keywords: Islamic banking, Islamic financial system, Islamic financing, regulation of Islamic banks, Islamic Development Bank

References

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