German bank may provide Azerbaijani bank with first guarantee in autumn

Business Materials 11 July 2011 18:40 (UTC +04:00)

Azerbaijan, Baku, July 11 /Trend, I.Khalilova/

German development bank KfW has completed assessing Azerbaijani Bank of Baku - the only candidate to receive the first guarantee via the Credit Guarantee Fund (CGF), acting in Azerbaijan, the KfW's Baku office said. The guarantee is supposed to be provided under a credit line of German CommerzBank.

KfW manager on financial projects Herald Higner visited baku on July 3-9," the office of the German bank said.

KfW's final decision on providing the guarantees will be taken in late September during the next visit of the mission of the bank. An agreement is likely to be signed with Bank of Baku.

The agreement on financing the Fund created by KfW was signed August 14, 2006 at the Azerbaijani-German intergovernmental negotiations in Bonn, and an intergovernmental agreement on financial cooperation on establishment of GCF in Azerbaijan was signed by the country's President June 5, 2007.

In August 2008, KfW signed a contract with Azerbaijan's Ministry of Economic Development on beginning the activity of a consultant of the Savings Banks Foundation for International Cooperation (SBFIC) of Germany as a manager.

The KfW finance manager also intends to discuss in Baku the issue of financing the services of the Fund's consultant in connection with the expiration of the contract with SBFIC. Given that the Economic Development Ministry of Azerbaijan has refused to pay these costs from the Fund of Research and Specialists, it is currently being considered to attract funding from other sources.

Andreas Franke, technical manager of the German-Azerbaijan Fund (GAF), said earlier that the guarantee can be given to a partner bank of the German-Azerbaijan Fund (GAF) for Small and Medium Business, such as the Bank of Baku, Bank Respublika, UniBank, Para Bank, Demirbank and AGbank.

The GAF's main condition is that the attracted funds be directed to the development of small- and medium-sized enterprises in the GAF business scheme, or banks will have to generate the same amount of portfolio allocated to this sector.

The Fund should cooperate as an accounting account in the KfW headquarters. The consultant will monitor Azerbaijani banks and act as a guarantee before the KfW.

The KfW rendered Azerbaijan 4 million euro for the establishment of the fund, 3.75 million of which will be as guarantees and 0.25 million as payments to consultant.

Guarantee of the LGF can be given in amount of up to 90 percent of the amount of the loan, the remaining 10 percent, respectively, will be under the bank's own risk.