German bank to allocate agricultural loan to single Azerbaijani bank

Business Materials 24 August 2012 14:39

Azerbaijan, Baku, Aug. 24 / Trend I.Khalilova /

German development bank KfW under the second phase of the agro-financing project for rural areas in Azerbaijan, plans to allocate a loan only to one bank which would be Turanbank, the KfW Baku office told Trend on Friday.

"Currently preparation work is underway and a loan agreement is expected to be signed before the end of the year," the office spokesperson said. The loan will amount to 3.5 million euros.

Turanbank will be given a subordinated loan to fund projects in rural areas, including small business development in the regions with the exception of Baku, Sumgait and Ganja.

In the first phase of the project, Bank Respublika and non-bank credit organisation CredAgro were selected. Bank Respublika received 1.5 million euros, CredAgro - two million euros.

Among the requirements for the selection of candidates for a loan under this agricultural project of KfW, a well-developed branch network in the country's regions and trained staff for loans in rural areas were important.

The cost of the first phase of the project is five million euros of which 3.5 million euros were distributed. The remaining funds were intended for another bank. In particular, negotiations were conducted with Demirbank, but they were suspended. Also ParaBank's candidacy was considered, but in the end, the choice fell to Turanbank, which will receive a loan in the second phase of the project.

Funds of the second phase of the project as in the first phase will be allocated as subordinated loans. Such loans are included in the Tier II capital of banks, but their resources are intended for lending in rural areas

Loan terms are similar to the terms of bank financing through the German-Azerbaijan Fund.

Turanbank was established in 1992. To date, out of 12 bank branches, six are located in the regions, namely Ganja, Sumgait, Tovuz, Zagatala, Agstafa and Khachmaz.

The bank has 26 shareholders, of which five are legal entities (21.54 per cent) and 21 - individuals (78.46 per cent).