Banking Sector of Azerbaijan does not Correspond to Volume of Economy WB Experts

Business Materials 9 January 2007 16:54

The World Bank states the inadequacy of the banking sector of Azerbaijan with the volume of the economy of the country, Trend reports with reference to the WB Strategy with Azerbaijan (2007-2010).

Presently 44 banks function in the country, with 18 banks with the participation of the foreign capital and two braches of the foreign banks.

Many banks have received support from the International Finance Corporation and European Bank for Reconstruction and Development, and the quality and variety of the services of these banks are raised gradually. However, the aggregate banking capital relevant to the GDP at the end of 2005 equaled 18%, which is lower by 30-40% than the level in the countries with transition economy in the Central Europe.

After the assessment of FSAP held jointly by IFC and the WB in 2004, new laws were adopted in Azerbaijan On banks and On National Bank of Azerbaijan, and according to them, the accountability and independence of the National Bank were ensured. As stated in the report of the WB, presently the International Bank of Azerbaijan possesses 49% of the assets of the whole banking system of Azerbaijan while the conduct of FSAP assessment, this figure equaled 53%. It is considered as a positive factor in the development of the private banking sector. The WB experts consider that the domination situation of the International Bank of Azerbaijan should be reduced by improving the business climate and the capacity of the banking sector will support the international competition.

The WB recommends strengthening the activities of the banks as a mediator in financing small and medium enterprises and population in the rural areas.

The main fact is the support for the rural area to find an access to the financial services, which will allow opening new workplaces and fostering the commercial activities.