Azerbaijani credit organization prepares draft project of agricultural bank

Azerbaijan, Baku, Jan. 28 / Trend I.Khalilova/

Non-bank credit organization Agrarcredit submitted to the Azerbaijani Finance Ministry, its main shareholder (owns 99.9 percent), a five-year draft project of the agricultural bank, the government said.

Establishment of the Agricultural Bank is planned on the basis of Agrarcredit

"Agrarcredit proved the necessity of establishing such bank and its readiness to transfer to the bank," source in the government said

At present, the need of country's agricultural sector in the financial resources hit one billion manat, with the annual need in grants worth 239 million manat, which explains the inevitability the agricultural bank. It is not necessarily to carry out distribution of the resources through the agricultural bank. It is possible to involve other active banks to service agricultural sector

The bank suggests several sources to attract financial resources to meet the requirements of the agricultural sector - from public funds attracted deposits by the agricultural bank and loans from foreign donors

The relevant agencies annually proposed construction of five refineries, each requiring investment worth 10 million manat, five canneries - 20 million manat  to ensure the development of the agricultural sector

Agrarcredit also indicates areas to be developed as priority due to their high profitability. In particular, the organization gives preference to the development of viticulture, which can be 10 times more profitable than, for example, grain growing.

In 2009, total agricultural production increased by 3.5 percent, including plant growing products (4 percent), animal products (2.8 percent)

At present, 50 percent of the Azerbaijani population is engaged in agriculture. It is necessity to invest in rural areas for the development of the agricultural sector to prevent such a strong influx of villagers in the capital

The Azerbaijani Ministry of Economy Development, Agriculture Ministry and the Central Bank of Azerbaijan (CBA) proposed to the Government to transfer Agrarcredit in the agricultural bank. The Finance Ministry offered basis for establishing such financial institution

First this will be a state bank, thereafter it is expected to be privatized

The sides discussed possibility of transferring to foreign investors 50 percent share in the capital of the new bank and the remained 50 percent can be distributed between the local private sector and the state 25 percent each. The state share in the bank will be privatized in the future.

The European Bank for Reconstruction and Development (EBRD) was interested in buying a 25- percent package and 1 share of the newly establishing agricultural bank before the global financial crisis was intensified. The International Finance Corporation and German Development Bank KFW are also interested in the agricultural bank. The consultations with these financial organizations were postponed temporarily

At present Agrarcredit is functioning on the basis of limited license

Agrarcredit's authorized capital hit 18.5 million manat. Shareholders of the credit organization will decide issue on further capitalization  

Agrarcredit's assets hit roughly 26 million manat, loan portfolio 16 million manat. In 2009 its revenues hit 120,000 manat

The Azerbaijani Finance Ministry is the main shareholder and owned by 99.9 percent of shares and the rest - distributed between Azersigorta state insurance company and Irrigation and OJSC Water Management

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