Banks in Azerbaijan tend to increase in number
Currently 44 banking organizations function in Azerbaijan, but their number is keen for increase. The National Bank of Azerbaijan is going to provide licenses to two new banks, Pasha Bank and Eurasia, by the end of 2007. In addition, operation departments of the Foreign Trade Bank of Russia are planned to be opened in Azerbaijan this year. The existence of many banks and the increase being observed in their number testify that currently the banking sector is one of the mostly developed sectors in Azerbaijan after oil sector and also is the most sustainable sector from the point of view of dependence on world oil prices.
Increase of the number of banks will lead to health rivalry among credit unions and it means more qualitative services will be delivered to the population.
Rivalry at the market requires from Azerbaijan banks to expand the list of services and improvement of technologies. Many of them began rendering leasing operations, mortgage and consumer crediting. Aspiring to maintain the level of incomes from loan, banks increased the amount of crediting the production, trade and services and more actively developed the retail business. Last year experienced intensive increase of the banking retail business in branching out of the banks, use of new loans, boosting rivalry at the deposit market. The last was possible thank to increase of confidence towards banks by the population: amount of deposit increases compared to last year.
Moreover, the situation at the high-quality service markets has become tenser (transactions with plastic cards, urgent money transfers, etc). It gave a serious impulse not only to the development of the these operations, but also technical upgrade and re-equipment in all spheres of the bank activities - new technologies, software and logistics.
These are only part of examples. The National Bank of Azerbaijan (NBA) continues establishing new ceilings of improvement for the local banks.
Factors increasing the assets are the development of economy, increase of the Gross Domestic Product (GDP) of Azerbaijan, which will reach approximately 30%-40% a year, reforms in the banking sector and other relevant measures. Over the first three years assets of Azerbaijan's banking system are expected to increase to AZN 10bln.
Introduction of Deposit Insurance System (DIS) was a significant event for the clients of the bank. DIS stimulated depositors to trust credit organizations. Now, the banks which joint Deposit Insurance Fund (DIF) also became more attractive or clients from the standpoint of deposit safety guarantees. Some 30 banks became the members of the DIF, but the list can be still extended every day. The specific weight of deposits which have been put to these banks makes up 98% of the total deposits in banking sector. Statistics shows that economically active part of population more and more prefers commercial banks which offer more high-quality services and profitable rates along with reliability.
The 'money culture' of the population has increased. The level of the financial education has risen because many people are interested in operating their monies. The direction for the retail development taken by many banks caused the increase of the variety of the bank products. Moreover, the demand of the existing and potential bank clients has increased for the information on these products. The increase tendencies in the bank deposits by the physical entities are continuing as long as the economic situation is stable in the Country. As much as the high oil prices are in existence, the profits of the population will be growing and accordingly the people will keep their monies in the banks and the amount of the deposits by the physical entities will increase in the future.
Azerbaijan's soon entering WTO can enable flow of financial services of the leading trans-national bank holdings to Azerbaijan's internal market. It is not ruled out that a range of local private banks will be put under control of strategic foreign investors. All this will inevitably lead to further increase of competitive pressure upon Azerbaijani credit organizations.
Improvement of international competitiveness is the key task of Azerbaijan's banking system. Its successful development will in many respects depend on ability of Azerbaijani banks not only to increase the available competitive advantages, but also to achieve new ones. However, the potential of their development has almost expired. Mastering of new methods and tools of financing of capital basis increase will enable retaining Azerbaijan's banking sector as a national institute