'They are forced to take small consumer loans'

The escalating debt situation in Azerbaijan is raising concerns as the population and businesses grapple with mounting financial obligations. Recent data reveals that the collective debt owed to banks in the country has surged to approximately 22 billion Manats. This debt is distributed across various sectors, with 54.2% attributed to business loans, 29.9% to consumer loans, and 15.9% to mortgage loans.

In recent months, these figures have seen a notable uptick. For instance, in August alone, business loans swelled by AZN 199.1 million, consumer loans by AZN 156.5 million, and mortgage loans by AZN 86.6 million. As of May 31, 2023, the total loan portfolio of banks had already reached 20 billion 659 million 269 thousand Manats, reflecting the persistent growth trend.

While some experts express reservations about the burgeoning consumer loan segment, Member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, Rufat Guliyev, contends that this expansion is a natural consequence. He points out that the growth in consumer loans has been particularly pronounced in recent years, accelerated by the aftermath of the COVID-19 pandemic. Guliyev, in an interview with Turan, said that this phenomenon reflects the improvement of people's financial well-being and aspirations. He emphasizes that individuals typically take on loans they can repay, highlighting the responsible borrowing habits of the population.

Nonetheless, Deputy Vahid Ahmadov raises concerns over the increase in consumer loans, indicating underlying societal issues. Ahmadov asserts that a significant portion of people's earnings, including salaries and pensions, is being allocated towards basic expenses like clothing and food, compelling them to resort to small consumer loans.

Ahmadov underscores the need for a reassessment and increase in wages and pensions to alleviate this financial strain. He acknowledges that while inflation remains in check, it still contributes to the rise in consumer loans, as individuals require larger sums of money to purchase goods compared to previous years.

In contrast, Ahmadov advocates for creating an environment conducive to business loans, which can foster economic growth and job creation. He underscores the significance of expanding access to business loans to stimulate employment opportunities.

Economist Rashad Hasanov also weighs in on the situation, noting that while the loan portfolio has grown, attention must be paid to the types of loans experiencing the most significant increases. Hasanov, in an interview with Radio Azadlig, emphasizes  that consumer loans have surged, whereas business loans have largely remained stagnant compared to 2022 levels. He attributes the increase in consumer loans to inflation, which necessitates larger loan amounts to maintain purchasing power.

The data reflects a complex economic landscape in Azerbaijan, where the expansion of consumer loans is seen both as a sign of improving well-being and a symptom of underlying economic challenges, including inflation and income disparities. The balance between fostering economic growth and managing debt burdens remains a critical challenge for policymakers.