Baku, Azerbaijan, Jan. 5
By Azad Hasanli – Trend:
Non-bank credit organizations (NBCOs) in Azerbaijan will not be able to receive loans from the Central Bank of Azerbaijan (CBA) in the near future, a source in the country’s financial market told Trend.
The CBA lends only to banks, but for the past two years, microfinance institutions have asked the CBA to lend to them as well, according to the source. After two devaluations in February and December 2015, the financial situation of the NBCOs worsened and they couldn’t borrow loans at high interest rates from banks.
In the current macroeconomic conditions, the CBA considers it inappropriate to issue loans to the NBCOs, the source noted.
“Banks were receiving loans from the CBA at 3-7 percent per annum [in 2015 and 2016], and then reselling them to NBCOs,” the source said.
“As a result, customers of NBCOs received loans at even higher interest rates. At the same time, some foreign creditors refused to lend to NBCOs because of the high risk of their closure. Thus, the NBCOs were in difficult condition of limited financing in Azerbaijan in the last few years. That’s why it was decided to apply to the CBA in order to get the opportunity to obtain loans at the CBA’s discount rate.”
Presently, the CBA is pursuing sterilization policy and reduces the money supply in the country, according to the source.
“The issuance of new loans and, thus, expansion of the money supply will be contrary to the current policy of the CBA,” the source said.
Another source in the financial market told Trend that the NBCOs cannot achieve creation of a specialized fund that would issue loans in national currency, either.
“Due to the high cost of loans in Azerbaijan, NBCOs apply to foreign creditors, but they, in turn, provide loans in foreign currency, which is also unprofitable for the NBCOs,” the source said. “In Azerbaijan, there is still no effective mechanism that would allow foreign financial institutions to issue loans in national currency. If a fund for lending to microfinance institutions had appeared in Azerbaijan, this would have helped NBCOs to improve their situation. However, negotiations with the Financial Market Supervisory Authority haven’t yielded any results yet.”