Weekly economic review (Feb. 26-March 2)

Apple Pay, Google Pay payment services to appear in Azerbaijan

Apple Pay and Google Pay payment services will appear in Azerbaijan, Zaur Gardashov, head of Azexport portal, told Trend.

He said that there are certain legal barriers that don't allow these payment systems to fully operate in Azerbaijan.

"Our legislation is built on the basis of classical card systems, while special digital codes, tokens, are used in payments via Apple Pay and Google Pay," Gardashov said. "It is necessary to define the concept of tokens in the legislation in order to eliminate existing technical barriers and to make it possible for these payment systems to come to Azerbaijan. Maybe it will take one month and maybe six months."

Apple Pay is a mobile payments service that allows users to make payments in person, in iOS apps, and on the web. It digitizes and can replace a credit or debit card chip and PIN or magnetic stripe transaction at a contactless-capable point-of-sale terminal. It is very similar to contactless payments already used in many countries, with the addition of two-factor authentication via Touch ID, Face ID, PIN or passcode.

The service lets Apple devices wirelessly communicate with point of sale systems by using a near field communication (NFC) antenna, a "dedicated chip that stores encrypted payment information" (known as the Secure Element), and Apple's Touch ID and Wallet.

Google Pay (formerly Pay with Google) is a payment system launched by Google in 2017 as a payment method for online shopping. It took over the branding of Google Chrome's autofill feature. Google Pay would have all the features of Android Pay, and would include Google Wallet features such as requesting and sending money.

Ilham Aliyev increases salaries of employees of educational institutions

Azerbaijan's President Ilham Aliyev signed an order Feb. 28 to increase the salaries of employees of educational institutions.

According to the order, monthly salaries of employees working in educational institutions (excluding higher educational institutions), financed through the state budget, will be increased by 10 percent from March 1, 2018 to further strengthen the social protection of employees of educational institutions and state care for them.

Creditor committees to be created in liquidated Azerbaijani banks

The Azerbaijan Deposit Insurance Fund (ADIF) has applied to the court to create creditor committees in most liquidated banks, ADIF Deputy Chairman Vugar Abdullayev said.

He made the remarks at a meeting of the creditors' committee of Bank Standard JSC.

Abdullayev said creditor committees will be created in all liquidated banks in the near future, in particular, in Demirbank OJSC.

Creditor committees have been created in Bank Standard, AtaBank, Kredobank, Caucasus Development Bank and GanjaBank so far.

Currently, ADIF is engaged in liquidation of 12 banks.

One more bank may appear in Azerbaijan

TBC Kredit, a non-banking credit organization (NBCO), doesn't exclude the possibility of applying for a banking license in Azerbaijan in the long term, TBC Kredit Director Nukri Tetrashvili said in an exclusive interview with Trend.

A parent bank of the TBC Kredit, the TBC Bank, which operates in Georgia, is very interested in the Azerbaijani market, Tetrashvili said.

Azerbaijan and Georgia are neighbors and strategic partners, he noted, adding that the TBC Kredit always tried to comply with banking regulatory requirements in Azerbaijan.

For example, NBCOs are not required to create reserves when issuing loans, but the TBC Kredit still creates reserves for internal reporting, he said.

The TBC Bank's shares are quoted on the London Stock Exchange, that's why the TBC Bank always had very strict requirements for audit, financial reporting and other issues related to the TBC Kredit's activity, Tetrashvili said.

Azerbaijani banks may get tax privileges

The Azerbaijan Banks Association (ABA) intends to discuss the introduction of tax privileges for the banking sector with entrepreneurs and representatives of state organizations, ABA chairman Zakir Nuriyev told Trend March 1.

"We plan to discuss this issue jointly with the National Confederation of Entrepreneurs, businessmen, bankers, insurers and other representatives of the financial sector," he said. "If negotiations are held, I think we will be able to make a common decision. In any case, active work is being carried out in this direction."

Nuriyev has not specified exemption from which taxes is planned to be discussed.

Earlier, a source in banking circles told Trend that Azerbaijani banks offer to exempt those clients, who can not repay their credit debts, from taxes. The banks are planned to be exempted from the payment of taxes.

The source said that the matter rests in temporary or complete exemption from payment of taxes for the period of repayment of credit debts. At the same time, the source has not specified the taxes from which banks and borrowers are expected to be exempted.

According to the Central Bank of Azerbaijan, the country's credit institutions reduced the amount of the issued loans by 28.5 percent up to 11,757.8 million manats in 2017 compared to 2016.

The amount of overdue loans for the year increased by 10.5 percent up to 1,626.7 million manats. The share of overdue loans in the loan portfolio of banks and non-bank credit organizations was 13.8 percent.

NBCOs to be able to connect to “Baku Approach” to reduce problem loans’ volume

Azerbaijan's non-banking credit organizations (NBCOs) will be able to connect to the "Baku Approach" in certain cases, Chairman of the Azerbaijan Banks Association (ABA) Zakir Nuriyev told Trend March 1.

"The "Baku Approach" will be applied if a client has overdue loans in several banks," Nuriyev said. "It is unlikely that such clients in Azerbaijan will have more loans taken from the NBCOs. However, if this happens, the NBCOs, of course, will be able to get involved in this process."

The "Baku Approach" is being created by analogy with the Istanbul and London approaches, which helped to cope with the financial crises in these countries.

According to the general principles of these approaches, a bank consortium restructures problem loans and facilitates loan terms for debtors who are in a particularly difficult situation.

Nuriyev added that the ABA expects the loan portfolio of Azerbaijani banks to grow in 2018.

"Lending to the Azerbaijani economy will definitely be increased if infrastructure projects being implemented in Azerbaijan successfully work," Nuriyev said.

According to the Central Bank of Azerbaijan, the country's credit organizations reduced the volume of issued loans by 28.5 percent compared to 2016, to 11.75 billion manats in 2017.

The volume of overdue loans grew 10.5 percent to 1.62 billion manats for the year. Their share in the loan portfolio of banks and non-bank credit organizations was 13.8 percent.

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