International Bank of Azerbaijan (IBA) is reportedly gearing up to establish a stand-alone Islamic banking business in order to more than quadruple its Islamic financing business in the country.

The move by IBA follows Azerbaijan’s decision to approve Islamic banking law scheduled to come in force by next spring, reported Reuters.

IBA Islamic banking director Behnam Gurbanzada said: "IBA is working on developing new products as well as establishing a platform for a separate, fully sharia-compliant unit."

With over 40% of banking assets in Azerbaijan, IBA has so far provided $180m in Islamic financing. The investment is expected to touch $750m within a year, once the law is passed.

The lender currently provides sharia-compliant products through an Islamic window, which allows conventional lenders to provide Islamic financial services as long as client money is set aside from the rest of the bank.

IBA believes that a stand-alone Islamic bank will strengthen the appeal of Islamic banking among retail clients in Azerbaijan, which has 93% of Muslims in the overall population of 9 million.

IBA is also considering setting up a strong domestic Islamic banking platform for use with its subsidiaries in Russia, Georgia and Qatar.

"Azerbaijan shows considerable promise to become a hub for Islamic banking in the region and has great potential to cooperate with Russia and all other CIS (Commonwealth of Independent States) countries which are interested in Islamic banking," Gurbanzada added.

The Azerbaijan’s Ministry of Finance owns a 50.2% stake in IBA.