BAKU, Azerbaijan, May 2. One of the main funding sources for the microfinance sector is capital market financing. However, the cost of financing through bonds remains high for non-bank credit institutions (NBCIs), Trend reports, referring to the report called "Strategic Framework for the Microfinance Model" by the Central Bank of Azerbaijan (CBA).
According to the data, the high cost of bond financing for NBCIs is mainly due to their risk profile.
The report notes that the emergence of broadly operating NBCIs and the granting of wider operational permissions to them, along with stricter regulatory and governance requirements, will enhance the resilience of financial institutions. This will lead to their perception by investors as lower-risk financial entities and thereby create the conditions for reduced financing costs.
Additionally, the CBA plans to revise the regulations on bond issuance for broadly operating NBCIs and for banks that meet certain requirements regarding the size of their microcredit portfolios under the "Rule on the Maximum Volume of the Issuer’s Bond Issuance."
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