Baku, Azerbaijan, April 18
By Ilaha Khalilova - Trend:
German Development Bank KfW started exploring financing possibilities as part of the Stage 2 of the project on financing rural areas in Azerbaijan, KfW Baku Office told Trend on April 18.
"Currently the selection of a financial institution is underway. Both banks and non-bank loan organizations have a direct access to KfW's loan resources, according to the project strategy," KfW office said.
The requirement for a developed branch network in Azerbaijan's regions and well-trained personnel for granting loans in rural areas are distinguishable among other requirements on selection of candidates for obtaining a loan under KfW's agricultural project.
The cost of the project's first phase was five million euros, 3.5 million of which were distributed (1.5 million euros were allocated for Bank Respublika and two million for the CredAgro non-banking organization).
The remaining funds were meant for one more bank. The negotiations in particular were conducted with Demirbank, but they were suspended.
ParaBank's candidacy was also considered, but eventually it was decided to choose Turanbank, which was already supposed to be granted a loan within the project's second phase.
It was planned to allocate 3.5 million euros for this bank in the form of a subordinated loan to finance projects in rural areas, including the small business development in Azerbaijan's regions, with the exception of Baku, Sumgayit and Ganja cities.
However, KfW suspended this process, deciding to wait for the results of capitalization.
"The selection of a bank was delayed due to anticipated changes in Azerbaijan's banking sector. Azerbaijan's Central Bank (CBA) initially set a requirement on increasing the total capital's minimum amount up to 50 million manats as of January 1, 2014, and then this timeframe was postponed for a year. CBA recommends the banks, experiencing difficulties with fulfilling this requirement, to merge. Otherwise, their activities in the country's banking market may be limited," KfW Baku Office said.
KfW is already reviewing two options at this stage and is going to soon make a decision on one of the banks, which will be granted the second tranche of the loan [3.5 million euros].
Azerbaijan's cooperation with KfW began in 1994. The strategic directions of the bank's activity include restoration of energy, water and other infrastructures, supporting the development of the financial and banking sectors, the private sector, healthcare systems, environment, etc.
Throughout a period starting from the onset of Azerbaijan's cooperation with KfW till January 1, 2014, the country and the bank have signed 13 loan agreements worth 230.3 million euros.
The loans were involved in 10 projects; realization of six of them has already been completed.
As of January 1, 2014 there have been used 96.7 million euros, or nearly 42 percent of total funds provided by the KfW.
Azerbaijan has repaid 22.1 million of the main debt as of January 1, 2014.
KfW opened the German Cooperation House in Tbilisi in May 2012 to render services to the South Caucasus region. The bank will regulate operations in the region via the Tbilisi Cooperation House.
Translated by E.A.
Edited by S.I.