Azerbaijan Banks Association names reasons for decline in credit investments

Finance Materials 23 August 2020 12:58 (UTC +04:00)
Azerbaijan Banks Association names reasons for decline in credit investments

BAKU, Azerbaijan, Aug. 23

By Eldar Janashvili - Trend:

A decrease in credit investments was observed in Azerbaijan's economy over the first half of 2020, the Azerbaijan Banks Association (ABA) told Trend.

"From January through June 2020, credit investments in the country's economy declined by 4.9 percent. However, this decline is only partly related to the spread of the coronavirus (COVID-19) pandemic. This is mainly because of other factors," said the ABA.

The reports of the Central Bank of Azerbaijan (CBA) noted that this is largely associated with the liquidation of four banks: Atabank, AG Bank, Amrah Bank, and NBC Bank.

"Nevertheless, as throughout the world, the pandemic has affected many areas in Azerbaijan, including the economy. Because of this, the risks of some categories of customers increased, which made it difficult to issue new loans to them," said the association.

"Another factor influencing such a reduction can be considered the fact that some entrepreneurs, fearing the volatility of the exchange rate, which could result from sharp fluctuations in prices in the oil market, prematurely closed their loans in foreign currency. So, from February of this year to early June, when oil prices returned to the level of $40 per barrel, the volume of loans in the national currency decreased by only 2.6 percent, while the loans in foreign currency decreased by 15.4 percent," the ABA noted.

"However, despite the fact that the decrease in the loan portfolio is mainly associated with other factors, the lending figures do not face impact of the pandemic and this is due to the CBA's decision to protect and support the interests of entrepreneurs. So, based on this decision, entrepreneurs and individuals employed in areas directly affected by the COVID-19 and who have mortgage loans are provided with benefits. Along with this, banks also offer prudential incentives. All this helped to significantly mitigate the pandemic’s effects in the financial sector," stressed the association.

"Lending decreased not only due to a decrease in demand during the pandemic, but also due to the work of banks in a limited mode. Nevertheless, in the second quarter of this year, the loan portfolio of all banks did not decrease, and of some even increased," noted the association.

The association also noted that banks are expanding their portfolio of consumer loans, and many of them have managed to grow the volume of their business loans.

"The total growth of business loans in these banks nominally exceeds the total growth of consumer loans by more than 10 times. In other words, banks are mainly focused on active financing of business during this difficult period," added the ABA.


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