Azerbaijan, Baku / corr Trend I.Khalilova / Azerbaijan's cooperation with the German bank for development KfW began in 1994. The strategic directions of the bank are the rehabilitation of energy, water infrastructure, support to development of financialm, banking and private sectors, health, and environment. The bank's portfolio on Azerbaijan exceeds €180mln.
Trend 's interview with Roland Siller, KfW Vice President for Europe and Caucasus, spoke about further policy of the bank and directions of cooperation with Azerbaijan.
Question: Is KfW expected to expand its portfolio on Azerbaijan, which is lower than other international financial institutions' portfolio by several times?
Answer: The portfolio can be increased. Before setting up our activities in Azerbaijan, the situation in the country left much to be desired. However, now the country's economy is growing and we will allocate only 'soft' loans, and can a lot under on risks. We are a banking group and present a ban for development, but we also have commercial bodies which can allocate big funds undertaking themselves responsibility and possible risks.
Question: Is this issue discussed with the Azerbaijan Government?
Answer: Not yet. However, we will continue moving in this direction, because KfW is eager to expand its cooperation with Azerbaijan. We will discuss new ideas and proposals with our partners.
Question: To what extent does the Azerbaijan Government's proposal on the third loan for small and medium scale business through the National Fund for Support to Entrepreneurship seem acceptable for KfW?
Answer: We have positive results and good projects like the German-Azerbaijani Bank, Azerbaijani Micro-Finance Bank, which is co-founded by KfW's daughter company DEG. Over 95,000 loans have been issued via these projects.
Future proposals by Azerbaijan should be studied in detail and afterwards it will be possible to say any idea. Our objective is to improve financing large portion of population and small and medium-scale business in Azerbaijan. For instance, under the Azerbaijan Micro Finance Bank the portfolio comprises €75mln and these funds were allotted to projects with the budget of upto €10,000 each. It is so good that small entrepreneurs timely return their loans and quantity portfolio is the best of all.
Question: What new products could KfW offer Azerbaijan and did you discuss further directions of further cooperation with financial bodies of the country during your visit to Baku?
Answer: We have new proposals and products for Azerbaijan, which we coordinated. These are agriculture loans and the bank will allocate €50mln in this respect. We also plan to assist to small and medium-scale business to improve efficiency use of energy. The Fund for Deposits Security, which will defend depositors with small deposits in the banks could be a good example for our cooperation in the financial sector.
Question: When is the bank expected to commence financing the country's agriculture sector? To what extent is it possible to carry out financing through local banks?
Answer: We have held an examination into the project and approved it at the bank. By next summerа we are planning to issue the first loans. To carry out financing we intend to select separate financial institutes, which will receive sub-coordinated loans, so that they could take into consideration these funds in their capital and use for issue loans for rural people.
Question: What amount of financing can be provided for every financial institute with the consideration of small amount of KfW loan for rural financing? What could say about its mechanism?
Answer: Indeed, this is an inconsiderable sum. We will begin from small sums and even want to work with the institutes from the non-sector - non-governmental organizations, which have relevant experience in this sphere. It can be a non-bank credit organization, which will develop itself or be on the way of becoming a bank.
Question: Why did not KfW use the services of the banking sector of Azerbaijan, which has well expanded network in the regions?
Answer: The point is that now not all commercial banks are prepared to work in rural area and only one bank voice such an intention. As the final decision is still to be taken, I cannot name the bank or other institutes, which will be attracted to rural financing.
Question: How does KfW intend to use the small and medium entrepreneurship to improve the system for efficient energy use in Azerbaijan?
Answer: It can be small and medium-scale businessmen, who want to save electricity through applying new energy saving technologies. In accordance with other countries' experience, first of all Russia and Germany, we finance owners of apartments and houses who want to replace windows with firmer ones, install doors with better isolation to retain heat. As the prices of energy resources increase, it is possible renovate the houses at a loan of €5,000-10,000. Thus, that is more profitable for people rather paying big funds for electricity.
The financing will be carried out through banks which are interested in this product. We have not set up talks on this tool, whereas during the visit to Baku I stressed this efficient project during the meeting with the governmental officials.
Question: During the meeting in Baku with the Azerbaijani Minister for Economic Development we proposed to KfW's participation in financing projects on re-processing of industrial and communal wastes in the country. Could you inform about the bank's experience in this field?
Answer: We have large experience in the sphere of re-processing garbage and industrial wastes. A project with the budget of €600mln was implemented in Turkey in small cities on water, sewerage and garbage processing. This is a tremendous experience that we want to give to Azerbaijan. We offer Azerbaijan not only financing, but also the establishment of a functional structure which would serve all public utilities.
The project is discussed with Azerenerji.