Microcredit in Azerbaijan will expand

At the end of last week, finished the seventh microfinance conference in Baku. Within its framework, many of the key issues in this rapidly developing sector of financial services were considered. The discussions were attended by representatives of many countries - the United States, Uzbekistan, the Netherlands, Georgia, and others.

In Azerbaijan microfinance today covers approximately 5% of the population. It is expected that this market will double the number of clients (currently just over 500 thousand) and the volume of lending (in May 2014 it stood at 1.22 billion manat or 1.4 billion USD. These data were provided by the executive director of the Microfinance Association Jala Hajiyeva. it is noteworthy that a decade ago microfinance loan portfolio amounted to only 12 million manat.

The topics discussed at the conference dealt with almost all aspects of the development of this market. So, on the second day of the conference discussion focused on customer complaints and participants in this market, ways to address emerging issues in the lender-borrower. Discussed was also the role and importance of financial literacy in bringing to the average standard of living of the poor.

Despite the impressive growth, the microfinance market has, in particular, a lot of problems in Azerbaijan, and this was considered at the meetings and on the sidelines of the conference.

Contrary to popular belief, microcredit is not a simple business. In particular, there is high cost of this type of lending in Azerbaijan, where one borrower service costs about 259 manat. As you know, it's short-term financing. But the monthly average interest rate for microcredit is high - 2.5% to 3%. The immediate task is to reduce this to 2%.

It is very important to work with a credit registry which makes it easy to evaluate the borrower. CBA reduced the cost of queries in the credit registry. However, this sector needs serious support from the CBA, which, by the way, is the monitor of its development. There are some positives: the "ceiling" of microfinance that has increased to 16 thousand manat, while the level of bad loans is relatively low (below 3%).

It is worth noting that the line between consumer credit and micro-credit is blurred. But one characteristic of microcredit is obvious. It is intended primarily for projects that create new (albeit small) value added. In the section “Microfinance and loans for construction and repair of property” preference is given to those borrowers who not only build their own housing, but also going to use, say, the first floor of a building under construction at any business. Credits, as became clear from the statement by the representative of Agrarkredita, are issued in several tranches, and the bank is ready to help the borrower, and in designing the house and the cost estimate. Demand for housing, particularly in rural areas, is constantly growing. With 70-80 thousand new families arising annually in the country, access to the new housing get 13-14 thousand people. By the way, an integral part of these projects is energy saving.

Particularly interesting reports appeared in the section "Financial decisions: the role of investors and financial coverage." It is particularly emphasized the importance of financial literacy of the borrower access to a wide range of foreign investors as lenders and borrowers. In the world there are many who are ready to come to the support of microcredit. In particular, well known is support by the World Bank, the EBRD, the ABA, KfW and dozens of already specialized institutions. New opportunities here are also opened by network partnerships in frequency through MIXmarket

Microcredit in Azerbaijan will be expanded. And the evidence of this is the recent connection of Pasha Bank, the largest investment bank in the country, to micro finance. And it is seldom mistaken in choosing priorities.

On the sidelines they said that the more problems with the country's oil revenues, the greater should be lending to small and medium-sized businesses, including, and through microcredit. This business is always a mainstay of the economy.  -0--