BAKU, Azerbaijan, May 2. The Central Bank of Azerbaijan (CBA) has revealed the factors limiting the development of the microfinance sector, Trend reports via the CBA's Microfinance Model Strategic Framework document.
The main factors limiting the development of the microfinance sector include the lack of formation of microfinance as a specific subsector of the financial sector, the limited resource base and variety of key microfinance institutions, insufficient risk-sharing mechanisms that are not adapted to the characteristics of the microfinance sector, as well as weaknesses in the identification system for self-employed individuals and family farms, which are one of the main customer segments of microfinance.
It has been noted that the absence of a defined microfinance segment in the legislation also limits the possibilities for the implementation of encouraging prudential and state policies in this field.
"The current situation makes it difficult to form specialized microfinance institutions focused on small business lending. This, in turn, limits the effective implementation of government policies regarding self-employment and micro-enterprise development.
The fact that the majority of the portfolios of key microfinance institutions, such as non-bank credit institutions (NBCIs), consist of consumer loans indicates the necessity of incorporating the concept of 'microcredit' into the legal framework and conducting a policy that encourages this direction," the document added.
Stay up-to-date with more news on Trend News Agency's WhatsApp channel