An Application of Islamic Banking Principles in Azerbaijan

• Název práce v češtině: Využití principů islámského bankovnictví v Ázerbájdžánu
• Název v anglickém jazyce: An Application of Islamic Banking Principles in Azerbaijan
• Klíčová slova: Islamic Banking
• Akademický rok vypsání: 2015/2016
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: prof. PhDr. Petr Teplý, Ph.D.
• Řešitel: skrytý - zadáno a potvrzeno stud. odd.
• Datum přihlášení: 14.06.2016
• Datum zadání: 14.06.2016
• Datum potvrzení stud. oddělením: 10.01.2019
• Datum a čas obhajoby: 19.06.2019 09:00
• Místo konání obhajoby: Opletalova - Opletalova 26, O314, Opletalova - místn. č. 314
• Datum odevzdání elektronické podoby: 10.05.2019
• Datum proběhlé obhajoby: 19.06.2019
• Oponenti: prof. PhDr. Michal Bauer, Ph.D.

Zásady pro vypracování

Hypotheses:
1. Hypothesis #1: Islamic banks report higher profitability than other banks
2. Hypothesis #2: Islamic banks are less stable than other banks.
3. Hypothesis #3: Islamic banks have less volatile profitability that other banks.

Methodology:
The thesis will mainly focus on profitability and its volatility through different time and bank groups. Stability will be
measured via Z-score and profitability will be assessed via Return on Equity. The thesis will cover a time period
from the beginning of the 21st century to ensure that the data is recent and adequate. BankScope database and
annual reports will be used as the main data sources. Hypotheses will be tested by the GMM estimators.

Expected Contribution:
The topic of Islamic Banking application in Azerbaijan has never been academically discussed before. Thus,
upon a completion, this thesis will be of a high value for Azerbaijani central and other banks as they can refer to it
in the questions related to Islamic banking application profitability.

Seznam odborné literatury

1. Awad, I. L., & Soliman, A. M. (2016). The stability of the demand for money function in Islamic and non-
Islamic monetary policy regimes. Economic Issues, 21(1), 67-85.
2. Čihák, M., & Hesse, H. (2008). Islamic Banks and Financial Stability: An Empirical Analysis [Scholarly
project]. In International Monetary Fund. Retrieved June 5, 2016, from
https://www.imf.org/external/pubs/ft/wp/2008/wp0816.pdf
3. Jan, A., & Marimuthu, M. (2015). Bankruptcy and Sustainability: A Conceptual Review on Islamic Banking
Industry. Global Business & Management Research, 7(1), 109-138.
4. Khan, M. S., & Mirakhor, A. (1990). Islamic Banking: Experiences in the Islamic Republic of Iran and in
Pakistan. Economic Development & Cultural Change, 38(2), 353.
5. Shahzad, F., Zia, A., Ahmed, N., Fareed, Z., & Zulfiqar, B. (2014). Growth of Islamic Banking in Middle
East and South Asian Countries. International Journal Of Management, Accounting & Economics, 1(3),
215-228.
6. World Bank Group. (2015, April). World Bank Group Azerbaijan Partnership Program Snapshot.
Retrieved June 5, 2016, from http://www.worldbank.org/content/dam/Worldbank/document/Azerbaijan-
Snapshot.pdf

Předběžná náplň práce

1. Introduction
2. Theoretical background
2.1 Basics of Islamic Banking
2.2 Comparative study between conventional and Islamic Banking
2.3 Differences between Azerbaijani and Iranian banking systems
3. Empirical Research
3.1 Data and variables
3.2 Methodology
3.3 Analysis of Hypothesis 1
3.4 Analysis of Hypothesis 2
3.5 Analysis of Hypothesis 3
3.6 Summary of Results
4. Conclusion

Předběžná náplň práce v anglickém jazyce

Azerbaijan is an oil producing country that has shown a sustainable economic growth since its independence

from the Soviet Union in 1992. However, recent financial crisis and the later drop in the oil prices have negatively

affected the economic stability of the country. Azerbaijani economy is heavily dependent on oil and natural gas

exports but prices have significantly decreased in recent years. As the result, the Central Bank of Azerbaijan

subsequently devalued Azeribaijani Manat by 34% in February, 2015 mainly with the purpose of ensuring non-oil

competitiveness. In December 2015 the Central Bank of Azerbaijan made another dramatic 32% currency

devaluation. As the result, many enterprises, NGOs and even some banks had to terminate their operations and

close.

While vast majority of Azerbaijani population are Muslims, Islamic Finance and Banking is becoming a very

important part of the world financial system. However, it is still unexplored by the Azerbaijani banking

representatives. Islamic Banking is a banking system based on Sharia (Islamic law). Due to the fact that Islamic

banking is based purely on Islamic principles, all of the transactions undertaken by the banks strictly follow

Islamic morals.

As Islamic Finance is gaining its popularity worldwide, this thesis will assess Islamic banking in terms of

profitability and stability. The comparative analysis between the conventional and Islamic banking will be made.

This thesis’s main purpose is to compare the performance of Islamic banks versus other banks in terms of

profitability and its volatility and stability. Moreover, this thesis will evaluate how significant is the relation between

gender, religion and a holding of Islamic bank account. Also, this thesis will bring up and discuss the potential

effects of Islamic banking application on the Azerbaijani banking system.