Central Bank�s participation in banking is not felt, Natig Jafarli

Baku/27.05.19/Turan: "Economic expert Natig Jafarli believes that stability has now come in the banking sector of Azerbaijan.

In an interview with the "Cetin Sual" program of Turan, Jafarli noted the presidential decree on solving problem loans to individuals as a basis.

"In general, banks were allocated more than 1 billion manat of funds. This made it possible for banks to create a monetary base, go to additional financial sources. The positive moments in the bank reports are due to the fact that they wrote off toxic loans," he said.

At the same time, the expert believes that the fundamental and institutional problems of banks remain. In his opinion, the most important of these is the lack of competition in the banking sector, which leads to high credit interest rates, short-term loans.

"All this does not allow the banking sector to turn into a locomotive of the economy. If you look at the dynamics of the last 3-4 years, especially after the two devaluations of 2015, citizens' confidence in banks decreased significantly, which showed itself in a decrease in the volume of deposits in banks, Jafarli said. - However, starting from last year, it can be observed that the process of reducing the volume of deposits has stopped. The main reason for this is the stabilization of manat, the administrative retention of the national currency, a high percentage for deposits in national currency, about 9-10 percent. All this gives reason to say that confidence in banks is insignificant, but is being restored."

According to him, to create competition in the banking sector, the legislative base should be improved.

"Azerbaijan does not feel the participation of the Central Bank in the life of the banking sector. Regardless of the level at which the discount rate is located, this does not affect credit interest. For example, in 2014, the discount rate in Azerbaijan was at the level of 3%, and business loans were all exactly at the level of 20-25%. Then the discount rate was increased to 15%, but the interest on business loans did not change. Currently, the discount rate is at the level of 9%, again, nothing changes," said Jafarli.

As a negative impact on the conditions of competition in the banking sector, the expert called the moment that this sector is in the hands of several groups of oligarchs.

"Azerbaijan should learn from this experience the experience of Georgia and Russia and allow foreign banks that are interested in our country to enter its market. However, the lack of a stable legal framework, a fair judicial system and competition conditions stops foreigners. If strong foreign banks come to our country, then credit interest rates will decrease, opportunities for long-term loans will be formed. All this is important for business," said Jafarli.

According to him, the official position is that Azerbaijan does not allow foreign banks in terms of the financial security of the country.

"However, despite the well-known relations between Georgia and Russia, several Russian banks operate in Georgia. I think that our oligarchs are afraid of competition with foreign banks and therefore do not want to put them in the Azerbaijani market. Ordinary citizens of Azerbaijan lose from this," N.Jafarli stressed. -71D-