BAKU, Azerbaijan, September 4. Azerbaijan has an important role to play in fostering sustainable economic development and private sector growth in the South Caucasus, a representative of the European Investment Bank told in an exclusive interview with Trend.
''Recent geopolitical developments are likely to provide a significant boost to economic and political relations within the region. Rising trade volumes and cross-border investment will generate increased demand for funding and financial services, supporting the growth and further development of the regional banking sector. Moreover, deeper economic integration will create opportunities for banks across the region to exchange experience and adopt best practices from one another.
Azerbaijan has an important role to play in fostering sustainable economic development and private sector growth in the South Caucasus. The EIB’s priority is to support this development by working with local financial institutions to expand access to long-term finance, particularly for micro, small and medium-sized enterprises (MSMEs), which are the backbone of the economy,'' a representative of the EIB noted.
He stated that a good example is the EIB’s cooperation with Bank Respublika, through which the Bank is providing €12 million in financing to expand access to affordable long-term credit for Azerbaijani MSMEs: This support helps businesses invest, grow and create jobs while contributing to the country’s economic diversification. Notably, €2 million of this €12 million EIB financing was provided earlier this year to enable Bank Respublika to make greater use of a new local currency risk-sharing mechanism introduced by the Central Bank of Azerbaijan. This will help the bank expand lending in local currency, reduce foreign exchange risks for both the bank and its clients, and make financing more stable and affordable for MSMEs.
According to him, Azerbaijan's banking sector has improved substantially over the past decade: Supported by a strong capital base, improving asset quality, enhanced liquidity buffers, and a more diversified funding structure, the sector is considerably more resilient than in previous years. The recent introduction of liquidity adequacy requirements, notably the Liquidity Coverage Ratio (LCR) and funding quality standards through the Net Stable Funding Ratio (NSFR), will be instrumental in further strengthening sectoral resilience, particularly given the high deposit concentration in the system.
He noted that the continued downward trend in financial dollarisation, together with the strong and steady growth in household deposits, will further enhance the banking sector's intermediation capacity and its ability to withstand systemic risks.
"The EIB remains committed to working with Azerbaijan and its financial partners to promote a modern, inclusive and resilient financial system that supports sustainable long-term growth," a representative of the bank said.
