Expert: New microcredit market could be created in Azerbaijan

A market for securities backed by microcredits could be created in Azerbaijan, Piotr Korynski, an expert in the field of microfinance, stated at the 12th Conference on Investment and Sustainable Development in Microfinance, organized by the Azerbaijan Microfinance Association (AMFA) Public Union in Baku, Report informs.

According to the expert, microfinance institutions in Azerbaijan previously raised foreign investments in foreign currency and used those funds to issue loans to borrowers. When macroeconomic instability or shocks occurred, borrowers faced difficulties repaying their funds. The recovery of the sector after such issues took ten years.

"In reality, this should not have happened, but such incidents always occur. Azerbaijan is not the first country to face such problems. The main lesson is that funding should, at minimum, be raised in local currency. This is essential to prevent a repetition of what occurred," Korynski noted.

He highlighted that Azerbaijan could consider a mechanism in which microfinance institutions first issue loans and hold them in their portfolios for a certain period, such as three months. The expert further said that they would then sell 80% of the loans to a specialized entity that pools them and issues backed bonds for investors.

Korynski also pointed out that before launching such a mechanism, it is necessary to implement a pilot project, assess its technical operation, and examine the risks associated with the bonds in greater detail. After that, the securities could be offered to investors.