Azerbaijan, Baku, June 29 / Trend /
Leyla Abdullayeva, Trend Analytic Centre Expert
Accelerating the processes of establishing the first credit bureau in Azerbaijan was caused by the urgent needs of the growing banking sector to exchange the information on problem loans.
The International Finance Corporation (IFC) on the basis of the agreements with the Azerbaijani Central Bank has advanced with preparations for introducing the institute of the credit bureaus in the country. A memorandum of intent is expected to be signed with potential shareholders of the first credit bureau in Azerbaijan on July 5.
Increasing lending volumes for legal and physical entities in Azerbaijan led to the need to improve the reliability of credit operations, to reduce credit risk by establishing a system for collecting and sharing the reliable and accurate information about customers of banks. Indeed, the banks which decided to give loans to the population face the main problem. They have no idea who will appeal them to get loans. By reducing bank risks, it will be possible to make loans more affordable for consumers and small and medium-sized businesses. They will play a role in the country's economy.
According to the Central Bank, Azerbaijani banks increased the lending to the economy by 3.1 percent in the first quarter of 2012 and by 22.7 percent during the year. During the reporting period, the country's banks gave loans worth 10.263.2 billion manat. Most loans are given to households in Azerbaijan (34.3 percent), the sphere of trade and services (28.2 percent) ranks second, the construction sector (8.4 percent) ranks third.
Therefore, as far as the credit market develops and expands, the availability of information about borrowers in terms of their creditworthiness, solvency and experience in dealing with other banks becomes important for banks to prevent the growth of bad loans. The credit bureaus usually have a debtor's credit history, including information on all payments of this citizen. Thanks to this information, which the bank can obtain in credit bureaus in case of necessity, it can consider the reliability of the debtor.
According to the Central Bank, for the first quarter of 2012 the volume of overdue loans and advances amounted to 663.9 million manat (6.5 percent of total volume of loans), which is 23 percent more than in the first quarter of 2011. Despite the simultaneous increase in lending, the total profits of the banking system amounted to 49.31 million manat during this period, or 1.52 percent more than the corresponding figure for the first quarter of 2011. Consequently, the growth of bad loans reduces the profits of domestic banks.
Besides the negative information about clients (violations of the schedule of payments on the loan, delinquency, etc.), a credit bureau collects positive information, which reflects the client's payment discipline, timely fulfillment of credit obligations contained in the contract. Over time, depending on the level of risk of a borrower, the banks may establish differentiated interest rates, that is, lending rates for a borrower with a high level of risk will be substantially higher.
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