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Azerbaijan ratified law on non-banking credit organizations

Business Materials 25 December 2009 16:57 (UTC +04:00)

Azerbaijan, Baku, Dec. 25 / Trend I.Khalilova A.Huseynbala /

Today the Azerbaijani parliament has adopted the bill "On non-banking credit organizations" in the third hearing. Parliamentary Economic Policy Committee Chairman Ziyad Samadzade said that   the bill on non-banking credit organizations was amended after the second hearing.

The committee has made over 61 amendments to the bill after the first hearing. The bill seeks to improve population's access to financial resources, particularly in the regions, support small business, reduce poverty and strengthen the legal framework of non-bank credit organizations (NBCO), as well as to support the microfinance sector in Azerbaijan.

The bill envisages establishment of two types of NBCO - having the right to receive a security deposit while giving loan and without this law. In the previous version, the security deposit could be made only in cash, but in the last version it is included in cash and in non-cash form.

The security deposit is a new understanding for the country's financial system, and the credit organizations can receive it on the basis of special permission of the Central Bank of Azerbaijan.

Henceforth, the minimum capital requirements for non-bank credit organizations in Azerbaijan will be more compared to credit organizations not having such permissions.

NBCOs may issue secured and unsecured loans; the borrower's movable and immovable property may be security for the organization.

Non-profit credit organizations, which can operate only in the form of fund, will not have access to the NBCO. NBCO may be established by international organizations from countries that have agreements with Azerbaijan, and such funds may not engage in commercial activities. Today, the investors are interested in the establishment of a credit institution in the country. However, they expect the adoption of a law that would lay the legal basis for the activities NBCO.

NBCO may allocate loans through its own capital or funds borrowed from  the financial institutions.

According to the law, all existing NBCO will have to apply international accounting standards, implement corporate governance standards. In addition, they will have an access to the credit bureau, acting under the Central Bank since 2005.

The bill was prepared with the assistance of World Bank specialists, and the representatives of ACDI/VOCA participated in the working group.

Today 31 microfinance organizations function in Azerbaijan, including 18 non-bank credit organizations established by international organizations, one state non-banking credit organization Agrar-Credit and the rest - the banks involved in microfinance. Today, microfinance organizations have 256,000 active customers, and the total loan portfolio is 150 million manat.

On Dec. 25, the official exchange rate is 0.8033 manat to $1.

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