Azerbaijan to develop new strategy on banking sector

By: Aynur Karimova

Azerbaijan aims to draft a new strategy for developing the banking sector with a view to support entrepreneurship in the country.

The relevant issue was discussed at a meeting of the presidium of the Association of Banks of Azerbaijan and Chairman of the Central Bank Elman Rustamov.

The sides exchanged views on drafting the new strategy for preparation of an action plan of Azerbaijani banksfor 2016, the definition of strategic objectives, corresponding to the current market conditions and requirements.

A special attention was paid to the improvement of the quality of banking services rendered to the population and protecting the interests of the population.

Works are underway to improve the access to finance, develop new programs and projects to support small and medium-sized businesses.

Currently, some 42 banks with their 758 branches operate in Azerbaijan.

The dramatic drop in the price of oil in mid 2014 has made Azerbaijan’s banking sector suffer the most, since banking capital is dependent on energy revenues.

Azerbaijan’s booming economy almost solely relied on the oil and gas sector in the last decade, but in recent years, the government has made a concerted effort to diversify the economy. Realizing that the energy boom cannot last forever, the state began to direct its hydrocarbon revenues to grow the non-oil sector and efforts to boost the banking sector have become part of the state strategy.

Banks operating in the country have been growing rapidly – aided by the government to overcome the 2008-2009 global financial crisis – with the CBA giving additional liquidity to banks that needed it. The country’s banks avoided serious damage and bankruptcy thanks to state support through banks for infrastructure projects, and direct state support for large borrowers with payment difficulties.

Later, the CBA set higher capital requirements for banks bringing the capital floor up to 50 million manats ($47.6 million) to force bank consolidation and reduce risks. Larger banks meant larger loans to support the development of the economy, especially by switching focus to financing retail and small and medium-sized enterprises.


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