Central Bank governor: Azerbaijan strengthening financial inclusion via digital solutions, reforms

Financial inclusion remains one of the key topics at the global level, especially in developing economies, including Azerbaijan, Chairman of the Central Bank of Azerbaijan (CBA) Taleh Kazimov said at the AlUla Conference for Emerging Market Economies in Riyadh, Report informs.

According to Kazimov, 70% of Azerbaijan's adult population already have bank accounts, which has become a significant achievement in a short time. However, challenges remain that the CBA faces, especially in monetary policy and financial stability.

"The ratio of banking assets to GDP is 42%, which indicates insufficient coverage of the economy by the banking sector, but simultaneously points to great growth potential. Today, banks control about 95% of all financial assets in the country. Another problem remains the high level of cash in circulation: the M0 indicator is 43% of M2," noted the CBA head.

He emphasized that to increase financial inclusion, the Central Bank is focused on improving regulation and infrastructure.

"We have implemented a local instant payment system and open banking services. The CBA is responsible for regulating the banking sector, insurance market, capital market, payment systems, and fintech. Such a broad mandate allows us to develop open finance infrastructure, ensuring access to banking and insurance services, capital market, and fintech solutions. This year, we began implementing the eKYC system, which will simplify access to financial services, especially for fintech startups," Kazimov noted.

From the demand perspective, according to him, the CBA is actively working on improving financial literacy by implementing educational programs.

"It's important to consider the impact of monetary policy, especially under a quasi-fixed exchange rate. The manat rate has been stable for eight years - 1.7 manats per dollar. Although traditionally interest rates are considered ineffective tools under such conditions, our experience shows the opposite. In September 2022, we launched an updated monetary policy, creating a money market and yield curve for risk-free government bonds. As a result, the volume of individual term deposits in 2024 increased by 43%. This became possible due to increased competition among banks," emphasized the CBA chairman.

Kazimov noted that the CBA's mandate covers not only macroeconomic but also financial stability, including regulation and supervision of the financial sector.

"We updated the mandatory accident insurance system, achieving 100% coverage in certain categories, including MTPL, thanks to digital channels. This year, we plan to implement a similar system for mandatory property insurance against catastrophic risks," he noted. In the capital market, last September saw the first-ever IPO of a state commercial bank, which contributed to a 40-fold increase in the number of individual investors. "Although growth started from a low base, it attracted significant new funds, including cash (M0). Notably, 98% of IPO subscriptions were made through digital channels, and today 99.9% of secondary market transactions are conducted in digital format. This is just part of the achievements in financial inclusion in Azerbaijan," Kazimov added.