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Leasing sector in Azerbaijan needs preferential state financing

Business Materials 13 May 2011 17:37

Azerbaijan, Baku, May 13 /Trend, I.Khalilova/

Azerbaijan Association of Leasing Companies (AALC) plans to appeal to the Government with a proposal for an access to preferential resources of the State in order to solve the financing problems of the leasing sector, said Thursday the head of the Association Elchin Ahmedov said.

Because of the lack of funds, some leasing companies have suspended funding. Today the leasing companies attract financing from local banks, and the level of capitalization of companies do not allow them to directly borrow loans from foreign banks or international financial institutions. Most of them have registered capital in amounts of up to one million manat.
High rates of bank loans (18-22 percent), taking into account the margin of the leasing companies, lead to a rise in the cost of leasing. In addition, banks provide loans for up to 18 months while the average duration of lease contracts is two to three years. The limit of risk on one borrower also does not allow banks to increase lending to leasing companies.
In this regard, market participants consider inevitable the support of the leasing market in the country by the State.
AALC appealed with a proposal to provide leasing companies an access to preferential loans of the National Fund for Entrepreneurship Support (NFES) under the Ministry of Economic Development, as well as to the resources of the Agroleasing State Leasing Company.

"Today the access of companies as agents to funds of NFES which is intended to finance small and medium businesses on favorable terms is still an open question," said Ahmedov.
"The development of leasing would receive a significant boost in the case of an access to public funds, and given the great need for this, we intend to appeal to the government," said the head of the Association.
A total of 22 leasing companies have been officially registered in Azerbaijan, but really 11 leasing companies and banks offering leasing services operate.
As of 1 January 2010, the amount of leasing portfolio in the country totaled $187 million, while in 2009 it was $208 million, in 2008 - $209 million.
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