Azerbaijan, Baku / Trend / The boom in the Azerbaijani economy over the past few years has contributed to the increase of community income. Today the difference between income and expenses is increasing progressively in favor of the first.
According to the State Statistics Committee, in January to April 2007 the net income of the Azerbaijani populations had exceeded $4.7bln, which is 37% more compared to 2006. During this period available income has exceeded $4.2bln, or 39.2% more compared to the previous year. The per capita available income was more than $500 with an increase of 37.6%.
Every month 40% of people manage to save vacant funds. The savings policy of the Azerbaijani population over the past period is inclined more towards the banking sector, which has restored its confidence in the recent years. Therefore the banks have grown and consolidated. In May 2007 the deposit basis of Azerbaijani banks was more than 6% with an increase of 6% in January to May compared to the annual increase of 65% over 2006. As of 1 June 2007 the amount of banking deposits and savings of juridical persons and individuals at the National Bank of Azerbaijan made up almost $2.6bln compared to $2.5bln as of 1 May and $2.5bln as of 1 January 2007. Over $1.1 of this amount fell upon deposits in manats and the rest in foreign currency.
The community confidence towards the banking deposits could increase considerably in connection with the adoption of the law on Insurance of Deposits with respect to protecting the community banking savings from the threat of bankruptcy and other financial cataclysms. Such protective systems provide security for the activities of financial organizations in many countries and their application in Azerbaijan is met with understanding by the commercial banks. In accordance with the law adopted, the Fund for Insurance will be established in Azerbaijan with the participation of financially healthy banks which fulfill all the requirements relating to capital, level of liquidity and observation of other prudential standards.
The Fund for Individual Deposits Insurance is likely to set up its activities in Azerbaijan in August 2007. At present the National Bank of Azerbaijan is selecting banks to be in the Fund. A list of 19 banks, selected by the Fund has been compiled. These are the banks which do not pose any doubt for the National Bank of Azerbaijan. Their capital is over $11.5mln.
The Fund will be formed at the expense of initial membership fees to the amount of around $12,000 per member, simultaneous payments by every member in the amount of $235,000, as well as calendar payments in accordance with the law on Insurance of Deposits - 0.15% of average daily remainder of protected deposits (in relevant currency) per quarter in the first year of the Fund's activities and 0,125% per quarter in the following years.
The law also enables the Fund to attract capital at the expense of long-term liabilities, as well as grants and other aid. The German bank KFW has planned to allot a $5mln credit to the Fund,
In accordance with the law, should the banks face problems, the holder can receive its compensation. In particular, the deposits, placed by 1 January 2008 in the amount of less than $4,700 will be compensated in the full amount. On 1 January 2010, the sum of a deposit that is to be compensated fully will be increased to $7,000 and from 2010 to almost $9,500.
The law is of great significance for the economy and population, because it is the time when active changes take part in the banking system and its authority and public confidence increases. To ensure the security of increasing deposits, it is necessary to adopt this law. Similar laws exist in almost 100 countries in the world.
(Leyla Abdullayeva, an expert of Analytical Center of Trend )
