BAKU, Azerbaijan, October 29. The Central Bank of Azerbaijan (CBA) has gradually tightened requirements for payday loans over the past three years to prevent excessive borrowing by individuals, governor of the Central Bank of Azerbaijan (CBA) Taleh Kazimov said, Trend's correspondent reports from the event.
He made the remarks at a press conference on Thursday following a meeting on the parameters of the interest rate corridor.
According to him, the CBA introduces additional restrictions on payday lending every year, particularly in the second half of the year.
“Over the past three years, we have taken decisions to tighten lending requirements, particularly for payday loans. Every year, we introduce new restrictive measures in the second half of the year because we believe this type of lending can lead to undesirable and excessive indebtedness among the population,” the CBA governor said.
Kazimov noted that further tightening of requirements for payday loans is also planned this year. One of the objectives, he added, is to help bring interest rates on these loans to more reasonable levels.
He explained that the higher interest rates on payday loans compared with conventional consumer loans reflect the specific characteristics of this product.
“It is normal for interest rates on these loans to be higher than on conventional loans. They are generally issued for periods of around 45 days, require only an identity card, and involve relatively small amounts. This is a credit product used worldwide. We simply do not want it to expand,” he emphasized.
Kazimov said the CBA had previously tightened requirements governing the total cost of loans, including interest, commissions and other fees.
“Last year and the year before, we established limits on the maximum total income that could be generated from a loan, as well as requirements for commissions and other charges. We tighten these rules every year and have made it clear that we do not want this segment of lending to expand,” the CBA governor said.
He stressed that the CBA does not plan to ban payday loans entirely. Its aim is not to remove the product from the market but to ensure that it is managed in a more sustainable and balanced manner.
“Although this type of lending can lead to a significant increase in household indebtedness, it is also a channel through which people can access financial resources, and we do not want to close it off entirely. We want it to be managed properly. For now, we have no plans to withdraw this product from the market completely,” Kazimov added.
According to the CBA governor, any further restrictive measures will depend on household indebtedness, the financial stability of credit institutions and their partners, and the profitability of the sector.
“If we see that household indebtedness is at an acceptable level and profitability remains balanced, we may stop tightening the rules. However, we do not intend to eliminate this product entirely. One of the Central Bank’s main objectives is to increase financial inclusion and ensure that people have access to financial resources. Access to finance must be maintained so that people can continue to use these services,” he said.
