In Azerbaijan, credit unions have decreased threefold over the past seven years. Reasons…

Recently, three credit unions in Azerbaijan were removed from the market. The Central Bank (CBA) revoked the licenses of the "Abbas," "Amin," and "Azərmaliyyə" credit unions. As a result, the number of licensed credit unions in the country has dropped to 36.

It is reported that the number of credit unions in Azerbaijan has sharply declined in recent years. In 2017, the number decreased from 109 to 76, in 2018 from 76 to 61, and in 2019 from 61 to 45. Subsequently, their number fell further to 39.

So far, it has not been possible to get comments from the organizations whose licenses were recently revoked. However, various credit unions have previously expressed grievances in the local media.

They claim that their most significant issue is the reduced access to financial resources compared to earlier times. They stated that recently, they could only work with the Entrepreneurship Development Fund (EDF) under the Ministry of Economy. Additionally, they emphasized that there have been no legislative changes for credit unions: "The law is outdated. Credit unions are treated as if they are second-class entities."

According to the Central Bank's semi-annual report, the share of non-bank credit organizations (NBCOs) in the total credit portfolio is only 1.6%.

In these organizations, loan amounts range from 100 AZN to 150,000 AZN, with interest rates varying between 15% and 40%.

Some analysts believe that NBCOs are being squeezed out of the financial market and that favorable conditions are not being created for them.

However, according to the Central Bank’s statement to "Turan," NBCOs' total assets increased by 13% from the beginning of the year, reaching 854 million AZN: "In the first half of the year, non-bank credit organizations earned 129 million AZN in interest income and 43.9 million AZN in non-interest income while incurring 16.9 million AZN in interest expenses and 60.3 million AZN in non-interest expenses. Thus, they achieved an operating profit of 95.7 million AZN. In the same period last year, this figure was 33.8 million AZN."

It was noted that on November 15, the "Rules for Prudential Regulation of Non-Bank Credit Organizations" and the "Rules for Managing Credit Risks in Non-Bank Credit Organizations" were approved. "These rules introduced new qualitative requirements. Regulatory requirements related to credit risk assessment and the calculation method of the effective annual interest rate on loan agreements were established for NBCOs."

Economist Rashad Hasanov told Radio Azadliq that significant progress has not been made in the development of NBCOs recently: "These organizations generally demonstrate unprofessional operations, and most of them have serious issues in their credit portfolios. Weak oversight at the right time has led to problems in a significant portion of their portfolios. In some NBCOs, non-performing loans reach 40–50%."

R. Hasanov believes that revitalizing this sector is a critical need: "The capital markets are underdeveloped, and alternative financial instruments are almost non-existent. Under such conditions, the complete collapse of a segment that provides even a small degree of financial flexibility is undesirable. It would be better to implement a robust strategy for the development of non-bank credit organizations in the next stage. Relevant institutions should be strengthened, and their financial resilience should be increased."