Micro-finance Association issues loans worth 20B manats

The Azerbaijan Micro-finance Association (AMFA) has issued loans to 5 million people in the amount of 20 billion manats ($11.84 billion) until today.

AMFA Executive Director Zhalya Hajiyeva made the remarks at the 5th Investors’ Fair, titled “Future of Micro-finance in Azerbaijan: Difficulties and Opportunities” on October 6.

AMFA was established in 2001and its main mission is to strengthen the potential of microfinance organizations in the country and create conditions for joint rational activities within the interests of the microfinance community.

“These loans were mainly provided to customers living in rural areas, for the development of agriculture,” she said.

Hajiyeva went on to say that the devaluation of the national currency has led to a significant increase in the volume of unreturned loans, both in the banking and microfinance sectors, adding that investors and lenders working in the microfinance sector today prefer a more cautious approach.

She stressed the important role of the creation of the Credit Guarantee Fund in facilitating entrepreneurs' access to financial resources itself, as well as increased competition in the financial market.

Establishment of the Credit Guarantee Fund, on a decree signed by President Ilham Aliyev on September 15 will provide a guarantee for entrepreneurs’ manat loans taken out in authorized banks.

The Fund will also provide subsidies on a part of the interest rate on loans in cases and the order determined by the head of state.

Speaking at the event, Vusal Gasimli, Executive director of the country’s Center for Analysis of Economic Reforms and Communication said that microfinance organizations of Azerbaijan should expand the list of their services with microinsurance, micro-collections and transfers. Gasimli mentioned that micro finance organizations should also actively use financial technologies (fintech) in their work.

“If micro finance institutions do not start using financial technologies, will not use other tools [microinsurance, microassemblies, etc.], then we will not be able to reduce the costs of microfinance organizations, in this case their loans will no longer be attractive for businesses and households,” Gasimli stressed.

Further he stressed that the announcement of 2018 in Azerbaijan as a year of rapid economic development is a positive signal for investors.

He underlined three important events happened in Azerbaijan over the past month including the signing of a new Contract of the Century, the decisive speech of the President of Azerbaijan from the UN tribune on the territorial integrity of the country and improvement of Azerbaijan's positions in the Global Competitiveness Rating of the World Economic Forum (WEF).

Chairman of the Association of Microfinance of Azerbaijan (AMFA) Suleyman Kalyashev, taking his turn emphasized that microfinance organizations of Azerbaijan need to expand their yield on manat loans.

Addressing the event, the Chairman touched upon the global crisis and added that the devaluation of the national currency happened in Azerbaijan and in order to weaken its effect on borrowers micro finance institutions have restructured their loans, wrote off penalties for late payments, and carried out a number of other activities.

Among the measures that can stimulate the development of the micro finance market, Kalyashev noted the need to review the legislation on non-bank credit organizations and modernize the procedure for judicial decision to repay loans.

Attending the event, Zakir Nuriyev, Head of the Association of Banks of Azerbaijan (ABA) stressed that the liquidity of the banking sector of Azerbaijan exceeds 4 billion manats ($2.37 billion).

He went on to say that micro finance organizations, non-bank credit organizations, leasing companies will now be able to attract liquid funds from the domestic market in Azerbaijani manat.

The head of the Association noted that by the end of the year a mechanism of open inter-bank auctions will be prepared.

“The plan of such auctions has already been created, the final version will be developed and approved in the near future, after which the mechanism of distribution of liquid funds accumulated in the banking sector, liquid funds between market participants will work, and in 2018 all financial institutions will have access to this mechanism. Thus, the institute of distribution of liquid funds among the market participants will work,” Nuriyev said.

Further, Deputy Executive Director of the Financial Market Supervisory Body (FMSB) Asim Zulfugarov said that to date, 123 non-bank credit organizations operate in the financial market of Azerbaijan.

"Since the beginning of the FMSB’s activities, we have done a lot of work to improve the banking sector. A number of actually inactive financial organizations and companies that do not meet the requirements of the regulator left the market,” Zulfugarov explained.

Micro finance is a type of activity related to the provision of financial services, as a rule, to start-up small business entities, which implies more free access of small enterprises to sources of financing.

Micro finance refers to an array of financial services, including loans, savings and insurance, available to poor entrepreneurs and small business owners who have no collateral and wouldn't otherwise qualify for a standard bank loan.

The goal of micro finance is to create a highly dynamic and efficient system of lending to small enterprises to further stimulate the production and distribution of goods and services, and to help start-up entrepreneurs in acquiring the experience of making a profit and accumulating capital.