Azerbaijan, Baku, Oct. 6 / Trend /
Trend Analytical Center expert Leyla Abdullayeva
A three-year period of tax benefits for Azerbaijani banks, insurance, and reinsurance companies expires this year.
The law on "Raising and promotion of capital of banks, insurance and reinsurance companies" came into force on January 1, 2009. It provides a tax exemption on the profits of banks, insurance and reinsurance companies to increase capitalization until 2012.
The need for such a move envisaged accelerating the development rates of the financial sector, improving the quality of services in the banking and insurance sector, and encouraging the increase in the capitalization of the companies. The higher the level of capitalization and the more stable a bank or an insurance company, the wider its investment opportunities.
According to the Azerbaijani Central Bank, the assets of banks amounted to 13.3028 billion manat as of September 1, 011. It is the highest figure in history. The total capital of banks amounted to 2.0361 billion manat. It is also is a record. Totally, about 44 banks operate in Azerbaijan.
According to the State Insurance Supervision Service at the Azerbaijani Finance Ministry, the total amount of premiums of all companies operating in the country in January-August 2011 totaled 134, 4 million manat on the insurance market. The payments for the period were made to the amount of 36.3 million manat. Totally, there is one reinsurance and 28 insurance companies in Azerbaijan.
The Azerbaijani banking and insurance sectors avoided bankruptcy thanks to tax holidays during the global financial crisis. Many big banks and insurance companies in rest of the world collapsed.
At present, these sectors of the country still need tax remissions, however there is an acute problem with prolongation of profit tax exemption of banks and insurance companies in Azerbaijan.
Despite the fact that, in general, the growth of the banking sector is ahead of the main macroeconomic indices of the country, its current potential is still far behind the needs of the economy. The banking system faces a difficult task to become the main source of credit for the economy and a catalyst for accelerating the development of the Azerbaijani non-oil sector.
As for the insurance market, the capitalization of the Azerbaijani insurance companies is still low, and it remains a major problem for the insurance market of the country. The growth of the insurance market for 2011 is projected at 10-12 percent. According to the market participants, it can hit 30 percent.