Azerbaijan’s legal framework in movable property is most advanced in region

Athree-day conference entitled “Using financing opportunities to secure movable property” has begun its work in Baku on February 13. The event is attended by representatives of the Financial Market Supervisory Authority, IFC, and SECO, along with experts and representatives of the private sector.

Several issues, topics linked with crediting, financing and banking were discussed.

Asim Zulfugarov, Deputy Chairman of the Board of the Chamber of Financial Market Supervision, said at the conference that in 2018, banks in Azerbaijan issued loans worth 7.6 billion manats, 4.3 billion of which were expended for business lending.

Zulfugarov noted crediting in the country largely went up by 11 percent, and credits to businesses by 7.2 percent.

"Loans in the national currency amounted to approximately 70 percent," added Zulfugarov.

Citing the results of international studies, he noted that the formation of a national movable property register contributes to the development of the economy and expanding access to financial resources.

"For example, the experience of seven European countries shows that the formation of a registry contributed to an average lending growth rate of 8 percent. We are confident that forming a registry, accompanied with credit growth, ultimately contributes to economic development," said Zulfugarov.

Zulfugarov added that large international structures, such as the State Secretariat for Economic Cooperation of Switzerland (SECO) and the International Finance Corporation (IFC), assisted in the study of international experience to create a register of moving assets.

"Currently, the registry contains information on over 36,000 objects of movable property, including agricultural and consumer goods, among others," Zulfugarov said.

Further, head of the Baku office of IFC Aliya Azimova revealed that in 2018, more than 30,000 notifications were received in the registry of movable property in Azerbaijan.

"The registry of movable property began its work in March last year and by the end of 2018 it received over 30,000 alerts," she said during the conference.

She also added that it is necessary to create and expand products based on a new type of software.

Then, Chairman of the Association of Banks Zakir Nuriyev, touched upon the banking sector, saying that banks in Azerbaijan need a mechanism for registering cash requirements as collateral.

He also stated that during the adoption law about “The encumbrance of movable property” cash was not considered as collateral and after repeated requests, this clause had been changed, but now the question remains about the mechanism for registering cash requirements as collateral.

Additionally, he stressed that another issue is further control over the fulfillment of cash requirements as collateral and solution of these issues will greatly facilitate the access of small and medium businesses to loans.

Addressing the conference, Simone Haeberli, deputy regional director for South Caucasus at the Swiss State Secretariat for Economic Affairs (SECO), noted that financial opportunities based on movable property are quite new experience for Azerbaijan.

She said that the legislation of Azerbaijan in the application of this financial mechanism is the most advanced one in the region.

SECO and IFC provided great support in drafting the “Law on Encumbrance of Movable Property”, she noted.

The Financial Markets Supervisory Authority of Azerbaijan (FIMSA) created in 2017 supported the implementation of quite important reforms in the financial sector, she said. It is important to eliminate some nuances, she added.

This is related to the use of assets of small and medium businesses as collateral, she said.

For SECO, it is important to attract more people and parties to the use of financial resources and loans, she noted, adding that there is still work to be done in this direction.

The Azerbaijani parliament passed a law in 2017 on encumbrance of movable property, which envisages the creation of a registry of movable property.

The law will simplify the use of various equipment and other movable objects as pledge in obtaining a loan.

The registry of movable property, where information on movable objects will be stored, will allow, for example, any credit institution to check the object before it is accepted as a pledge, whether this object is a collateral object for another loan.

Under the law, a special portal will be created, with the help of which anyone can register his/her personal property and subsequently use it as collateral.

The Azerbaijani legislation does not prohibit the use of movable property as a pledge. However, credit institutions prefer not to take such a risk due to the lack of sufficient information, because it is not always possible to determine who actually owns a given property, whether it is already a subject of pledge or not.

The creation of a state registry of movable property in Azerbaijan is aimed at the development of small and medium-sized businesses in the country, facilitating business access to financial resources.