Azerbaijan's microfinance sector starts to grow again

The number of microfinance institutions in Azerbaijan has started to grow again, Report informs.

The Central Bank of Azerbaijan (CBA) has issued a license to 4 non-banking credit institutions (NBCI) (Optimal Finance, Azkredit, Nas Project, and Azfinans) and two credit unions (Zirve and Total Finans) since the beginning of this year and revoked the licenses of only one credit union ("Micro Finance").

Besides, two NBCIs (FNC and Finkapital) have been established this year but have not obtained licenses yet. The current situation gives reason to believe that there is a growing interest in the microfinance sector in Azerbaijan and a revival in this area. Jala Hajiyeva, executive director of the Azerbaijan Microfinance Association (AMFA) Public Union, told Report that the economic crisis caused by the coronavirus pandemic is slowly disappearing. It increases economic activity, and the microfinance sector is not left out of this process.

"The CBA is interested in the operation of NBCIs in the financial market, along with banks. The issuance of new licenses is an indication of the growing role of microfinance institutions. Today, the main customer base of these credit organizations is in rural areas. Buyers of agricultural products are mainly restaurants and cafes. Restrictions imposed in connection with the coronavirus pandemic had a negative impact on the sector. However, this was a temporary problem. Most restrictions have already been lifted. Business is gradually returning to pre-pandemic levels, and demand for agricultural products is growing. There are already appeals from people to lend to new areas. After all, these people are more experienced in risk management and are part of a healthy customer base that microfinance institutions always need. Meeting such customers' credit needs, as a result, has a positive impact on the quality of the loan portfolio of NBCIs," Hajiyeva noted.

Bununla yanaşı, icraçı direktor deyir ki, mövcud resurlar ancaq daimi müştərilərin kreditə olan ehtiyacını ödəməyə imkan verir: "Yeni müştərilərlə işləmək üçün milli valyutada əlavə vəsaitə ehtiyac var. Bu gün BOKT-ların qiymətli kağızlar bazarında manatla borc vəsait cəlb etməsi bu qəbildən alternativ maliyyə mənbələrindən biridir. İstiqraz emissiyası vasitəsilə cəlb edilən vəsaitlər ucuz olmaqla yanaşı həmd ə daha əlçatan və az risklidir. Belə ki, xarici valyutada götürülən borc eyni valyutada da geri qaytarılır. Onun məzənnəsində devalvasiya vaxtı gördüyümüz kimi kəskin dəyişmələr olduqda çox ciddi fəsadlar doğurur. Bu baxımdan kreditləşmənin arealını genişləndirimək üçün milli valyutada vəsaitlərin cəlb olunması hazırda BOKT-lar üçün prioritet məsələdir”.

At the same time, she said that the available resources only allow regular customers to meet their credit needs: "Additional funds in the national currency are needed to work with new customers. Today, the fact that NBCIs borrow manat loans in the securities market is one of such alternative financial sources. Funds raised through bond issues are cheaper, more affordable, and less risky. Thus, a loan taken in foreign currency is repaid in the same currency. As we have observed, when there are sharp changes in its exchange rate during the devaluation period, it causes severe complications. In this regard, raising funds in the national currency to expand the lending area is currently a priority for NBCIs."