Non-bank loan organizations law bill recommended to Azerbaijani Parliament's discussion
Azerbaijan, Baku, June 1 / Trend I. Khalilova /
The parliamentary committee on economic policy recommended for Milli Mejlis to discuss law bill Non-bank loan organizations on June 1.
Deputy chairman Chingiz Asadullayev suggested extending coverage zone of this legal document by changing its name during the meeting. He suggested its using for all micro-financial organizations.
"Development of agrarian sector is very important for Azerbaijan. Micro financial organizations have wider network for financial support covering distant villages than banks having 366 branches all over the country," Asadullayev said.
The law envisages extension of non-bank loan organizations' bank functions. The Central Bank of Azerbaijan intends to set double control after adoption of the law to regulate activity of non-bank loan organizations.
The first system of control envisages regulation of non-bank loan organizations not drawing deposits but the second one accepting pawn deposits. The Central Bank decided to introduce system of deposit opening on the security of loan to ensure stability of these loan organizations.
Deposits must be received for a term not exceeding term of loan granting. Prudential requirements will differ given different risks that loan organizations face in different kinds of activity. There will be other requirements for capital and accounting of non-bank loan organizations that will receive pawn deposits. Presently, authorized capital for loan organizations was determined in the amount of 4,000 manat.
Non-bank loan organizations can give loans owing to own capital or funds drawn from financial institutes.
All operating non-bank loan organizations must use international standards of financial accounting; introduce standards of corporative governance in accordance with new legislations. They will have access to loan bureau operating under the Central Bank since 2005.
The law bill was prepared under assistance of WB specialists. ACDI/VOCA representatives participated in the working group.
There is not united formula on micro financing in the world. There are special recommendations adopted in 2001 by major donors playing on this market.
The working group under the Central Bank of Azerbaijan decided to design a law bill. This law bill will suit for players of the market, consumers of services and the state regulating institute of this sector. In practice the countries basing on these principles will leave them with time. Conclusions of Azerbaijani specialists demonstrated that life will add its corrections and these principles are not effective as they were designed by donors. Donors want to see any rules of game on the market while the market itself dictates these rules.
Roughly 32 micro financial organizations operate in Azerbaijan.
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