Weekly economic review (Oct. 14-18)
Expert: Situation in Azerbaijani consumer credit market is far from critical
The consumer credit market in Azerbaijan is far from critical, executive director of Azerbaijani Unibank Jalal Gasimov said.
"Of course, the development of the market and an increase in competition raises the risks," he added. "That default level now is not that one that we set in our forecasts and strategy. We realize that the level will rise. Today, the default level on consumer credit in those banks that are well aware of the way of doing business is very low. Unibank controls everything. The default level hits several percent because a team of competent professionals is working in the bank. The necessary calculations have been conducted in advance. One can understand the business and the associated risks. The necessary infrastructure was created. The expertise preceded the bank's significant growth. I hope that other banks in the country will learn, gain experience and enter into this segment of the market. From this point of view, the Azerbaijani Central Bank's control as a regulator is an additional insurance against the risks to the banking sector."
According to him, the market situation from this point of view is far from critical. "First of all, according to the CBA Central Credit Register, less than two million people used the loans for the entire period of loan delivery in the country," he said. "This is a relatively small index of the total population and its economically active part."
According to the Azerbaijani Central Bank, as of late August, there were 1,808,031 borrowers. Their data is available in the credit registry. The total number of credit data was 5,655,490.
Second, one should pay attention to another index, namely, the number of credits per one client, Unibank executive director said. "When the share of customers paying off 4-5 loans is increased in the general base, this is the first signal for the banks and the regulator to think about the possible re-financing. The number of such customers in Azerbaijan is within five percent and this is a very small figure. For example, it hits about 15-20 percent in Russia."
According to Gasimov, it is necessary to take into account national specifics. "We are aggressively distributing credit cards, which are also credit," he said. "But many do not fully ex these cards. Some customers use them only once, others do not use at all. That is, each issued credit card is a potential risk. But if the client does not use it, there is no risk. The boom observed for the last year in a payment card segment, their active issue are increasing the number of credits, formalized for one person, but one must understand that the card is a credit line opened for the customer, rather than an issued credit. Such a risk can not be compared with the risk for a number of loans already issued to one customer. From this point of view, there is no strong "overheating" in the market, but if it were, it would have shown itself in the default percentage. Currently, this segment is at a very manageable level."
The number of payment cards in Azerbaijan in August slightly reduced to 5.331 million units (by 0.8 percent compared to July). Their number increased by 10.1 percent compared to the same period in 2012
Gasimov stressed that this does not mean that the saturation of the market will never happen. "From this point of view, the teamwork of the banks and the regulator is required," he said. "I hope that we will be able to avoid unfavorable events with the help of the Central Bank as a regulator of the market and the common sense of market participants."