Fitch considers consumer credit volume limit in Azerbaijan as normal
Baku, Azerbaijan, March 6
By Abbas Akhundov - Trend:
Fitch Ratings considers the consumer credit market volumes limited by the Central Bank of Azerbaijan (CBA) in the country as normal, Associate Director of the Agency Dmitry Vasilyev told Trend on March 6.
"Today the Azerbaijani banks are moving away from corporate lending to retail business," he said.
"There are several reasons why retail is growing faster than the corporate segment," he said.
"It is difficult to find good corporate borrowers. Second, retail is profitable because the rates are higher. Third, the penetration of retail loans was historically less than corporate. There is a part of the population, which is not covered by banking services. The loans can be given to them and the volume of the portfolio can be increased."
"The Central Bank of Azerbaijan's recent decision on consumer lending limiting does not contradict this trend," he said.
"The regulator must minimize the risks for the system to be controlled and no problems to occur as a result of this rapid growth," he said. "The goals of the banking sector and the regulator differ. The sector must be rapidly developed. It must increase profit. The regulator needs a risk level at an acceptable level. There is no contradiction here. This is a normal practice. This situation is observed in many countries."
The Central Bank of Azerbaijan toughened the rules in the field of consumer credit by increasing the requirements to ensure the commitments and the requirements for the banks to stop issuing unsecured loans without a statement of earnings of the borrower since mid-December 2013. The Central Bank also increased the requirements on overdue consumer loans from two to five percent and introduced a new classification of overdue loans as of February 1, 2014.
Translated by NH
Edited by CN