Azerbaijani Banks May Launch Securitization in Several Years: IFC
Azerbaijan, Baku, 23 October / Trend , corr. I.Khalilova /"The International Financial Corporation (IFC) assists Azerbaijani banks to introduce standards for mortgage crediting, which will enable to launch securitization process," said Garth Bedford, an expert of the International Finance Corporation (IFC) on mortgage crediting in Azerbaijan and the Central Asia.
"The finance corporation cooperates with each bank in separate in order to assist to work out its own mortgage portfolio standard. Banks must have standardized document turnover to start the securitization process," Bedford said.
Each bank in Azerbaijan's market is individual and has its own mortgage program. Whereas the mortgage program is similar on the banking market in Europe and the United States. They have similar demands to clients -the rate of incomes and area of required dwelling. In Canada, banks pay 80% of the cost of real estate. The problem occurred on the mortgage market in the U.S. is that banks paid 100%.
"Azerbaijani banks should be better to pay 80% of the cost of dwelling, and 20% by client. If Azerbaijani banks want to launch securitization, it must be identical," Bedford said.
Banks will be able to introduce securitization within a year or two in the case of end of the financial crisis in 2009. IFC currently is being cooperating with banks with an aim to prepare them to the process. AMF, which is operating under the National Bank of Azerbaijan, has well mortgage crediting standards.
"The mortgage crediting is a new on Azerbaijan's market and it should not resemble the automobile crediting," Bedford said.
Involved in the project IFC countries, only in Kazakhstan, where the banking market ahead of the Azerbaijani banking system for five or six years, started in securitization, said Bedford. However, Kazakhstan has also faced problems associated with the global mortgage crisis. This happened because the issuance of Kazakh banks, mortgage loans in the long term, while the money was borrowed in the short term. As a result of the crisis, foreign investors refused to provide additional investments to these banks.
Mortgaging at AMF standards was launched in the country on 25 March 2006, whilst social mortgaging was set up on 7 February. The demand for mortgage exceeded the budget assignments and since mid-June the AMF ceased mortgage financing on its standards. In 2005-2007 the AMF received AZN 46mln form the public budget and will receive additional AZN 34mln in 2008, of which AZN 10mln has been already allocated as the first installment to refinance loan allocated so far.
At present, the mortgage portfolio on AMF standards constitute AZN 67.8mln amid total mortgage portfolio of Azerbaijani banks valued at AZN250-AZN300mln.
The credit rate fluctuated from 8% (as of IMF standards) to 18%-20% (as of commercial banks' rate) for the term of 10 to 25 years.
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