Azerbaijan, Baku, Oct. 7 / Trend, A. Akhundov /
Restricting access to finance can be a major obstacle to the growth of enterprises in Azerbaijan, WB report "Access to finance: measures on eliminating limiting obstacles".
According to the report, the banking sector, which is the main source of financing for small and medium-sized enterprises, is not well developed yet. Small and medium-sized enterprises ensure more than 65 percent of their investments through domestic sources.
"The share of loans delivered to the private sector amounted to nine percent in the country's GDP in 2004, while in 2012 it increased to 24.5 percent, which is less than the same index in the countries with high average income (72 percent in Bulgaria) and the regional countries ( 32.8 percent in Georgia)," the statement said. "The competition in the banking market is limited (33 percent of the assets are owned by the International Bank of Azerbaijan). This creates difficulties in the access to finance. As a result, small and medium-sized enterprises face high costs for loans (15-17 percent) and are deprived of their opportunities to draw long-term funds.
Thus, banks prefer granting loans to large and stable enterprises," a statement said.
Moreover, the non-banking financial market offering the limited opportunities for small and medium-sized enterprises is poorly developed.
"The shortcomings in the regulatory framework of the banking sector, credit infrastructure and legal framework in the field of bankruptcy also create obstacles for the companies to raise funds," a statement said.