Azerbaijan’s NBCO restructuring foreign borrowings
Azerbaijani non-banking credit organization (NBCO), Finance for Development, continues to restructure foreign borrowings, Jalal Aliyev, chairman of the NBCO board, member of board at the Azerbaijan Micro-finance Association (AMFA), told Trend March 28.
"We have signed restructuring agreements with foreign creditors," he said. "This allowed us to increase liquidity and restore lending since 2017. At the moment, we have repaid all the debts in euros. We still have to repay 200,000-300,000 manats and about $1.7 million. In general, we repaid 87 percent of the debt in US dollars."
As of Jan. 31, 2018, Azerbaijani NBCOs issued loans worth 414 million manats, according to the Central Bank of Azerbaijan.
Azerbaijani payment system to launch own platform for contactless payments
Azerbaijan's E-Pul payment system has prepared its own platform for contactless payments, the company told Trend March 28.
The platform's launch is expected after the legal regulation issues are resolved, the company said.
"The service will be launched as soon as we get the appropriate permission," the company noted.
The company added that it will start issuing its own plastic cards, which will be identical in functionality to a regular bank card.
The cards will be available for purchase after registration via the E-pul.az portal. The E-Pul card will be combined with an electronic purse that allows registered users to open a virtual account.
Clients will be able to top up their e-wallets via MilliON payment terminals. The funds loaded to the virtual account can be used to purchase goods, pay for services, as well as for transfers.
Azerbaijan’s collection agency increasing portfolio
Portfolio of Azerbaijan's Baku Collection Agency (BOA) has increased by 20 percent since early 2018, Samir Mustafayev, director of the agency, told Trend.
He said that the reason for the growth is the acquisition of problem loans portfolios from two banks.
"Since the beginning of last year, we have purchased problem loans portfolios from two banks, and we continue negotiations with three more banks," he noted. "Unfortunately, I cannot yet disclose the names of the banks and the total amount of funds received, as this is a bank secret. As a result, our portfolio increased by 20-22 percent."
At the same time, he noted that the growth of the portfolio doesn't mean the growth of the company's profit.
"It may seem that an increase in the portfolio leads to an increase in profits, but this is not so," he added. "These loans are very problematic, and we spend several months analyzing the transferred portfolio, calling customers and meeting them face-to-face. Only after that we can say what amount of funds we can return."
He noted that presently, the agency has a call processing center that allows working with a larger number of debtors.
"More than 70 people work in the center," Mustafayev said. "If earlier our employees themselves called the debtors, now this process is automated."
Azerbaijan Banks Association talks on situation with interest rates on loans
Reduction of the interest rate of the Central Bank of Azerbaijan (CBA) in the near future will not have a tangible impact on interest rates of bank loans, Zakir Nuriyev, head of the Azerbaijan Banks Association, told Trend on March 29.
"There is no direct connection between the Central Bank's interest rate and the rates on bank loans in Azerbaijan. This is linked with the fact that the financial resources of commercial banks are limited, but it is impossible to say exactly how the situation will change. Nevertheless, in the long term, the decision of the regulator will definitely affect the interest rates on loans, "Nuriyev said.
In February, the Central Bank of Azerbaijan decided to reduce the interest rate from 15 to 13 percent.
The CBA Board also decided to lower the lower limit of the interest corridor from 10 to 8 percent, and the upper limit from 18 to 16 percent.
The decision to reduce the parameters of the interest corridor, according to CBA Chairman Elman Rustamov, was made taking into account the entry of average annual inflation into an unambiguous trajectory, forecasts over further reduction of inflation and improvement of the foreign trade balance.
Major NBCO may leave Azerbaijani market
PARA non-bank credit organization (NBCO) may leave the Azerbaijani microfinance market, a source in the company told Trend March 29.
The NBCO's management is dissatisfied with the current financial indicators, according to the source.
"PARA has not yet made a final decision, so the shareholders of the NBCO will meet on April 30 and discuss whether it is worth continuing to operate or better leave the Azerbaijani market," the source noted.
The source added that in case if the PARA management decides to remain in the market, the authorized capital of the NBCO will be increased.
"If PARA stays in the market, additional capital injections will be needed to correct the current situation and expand activity," the source said, without specifying how much the capital could be increased.
PARA NBCO was established on the basis of ParaBank, which operated in Azerbaijan since 1991.
However, in 2016-2017, the bank faced difficulties that led to violation of the regulator's requirements regarding the bank's aggregate capital [50 million manats] and other violations.
As a result, the license of ParaBank was revoked, but the bank's management decided to continue operating as an NBCO and applied to Azerbaijan's Financial Market Supervisory Authority, and after that the bank received the corresponding license.
Azerbaijani NBCOs eye to get access to new funding source in 2019
Participants of the Azerbaijani microfinance market expect to gain access to the loans of the Central Bank of Azerbaijan (CBA) in 2019-2020, representatives of the Azerbaijani non-bank credit organizations (NBCO) told Trend.
The non-bank credit organizations launched negotiations to gain access to the CBA loans two years ago.
During this period, some meetings were held, but so far no concrete solution has been achieved, representatives of the Azerbaijani NBCOs said.
The lack of progress in the negotiations is related to the CBA monetary policy which envisages the targeting of the money supply. Before the February devaluation of 2015, the money supply was 10.551 billion manats. However, later the money supply began to narrow and at the end of 2015 it reached 6,901.8 million manats. Over the subsequent two years, its volumes changed, alternately increased and decreased. But, ultimately, by the end of February 2018, the money supply reached 9,180.6 million manats.
"The CBA gradually weakened the policy of narrowing the money supply," a source in the Azerbaijan Micro-Finance Association (AMFA), which initiated these negotiations two years ago, told Trend. "Earlier, the CBA did not want to give loans to non-bank credit organizations, because additional amounts of lending could prevent sterilization of the money supply."
"But today it is planned to move from money supply targeting to inflation targeting," AMFA said. "The CBA intends to move from money supply targeting to inflation targeting in the medium-term period. Afterwards, there will be no emphasis on narrowing of money supply. We will get hope for successful completion of the negotiations."
At the same time, even in case of success, NBCOs will be unable to receive the CBA funds directly.
One of sources in a big NBCO told Trend that non-bank credit organizations cannot open an account at the CBA to receive loans through it. Therefore, market participants offer the CBA to allocate loans to the banks, from which non-bank credit organizations will be able to acquire these loans at a symbolic margin.
"A new source of financing would help the NBCOs expand lending, especially in the regions," one of the market participants told Trend. "Most of our clients are rural residents. Nevertheless, the negotiations with the CBA are not the only alternative for us. The market participants and AMFA constantly hold negotiations with potential investors both inside the country and abroad."
After two devaluations, problems with search for lending funds arose in the Azerbaijani microfinance market. On the one hand, the share of bad loans increased and NBCOs could not repay the loans in the same amount to issue new loans.
On the other hand, attraction of funds from foreign investors proved to be unprofitable for NBCOs due to the changes in the exchange rate of the manat against the dollar. At the same time, the microfinance market participants could purchase limited loans from the banks because of the high interest rate on them.
As a result, market participants are actively searching for new sources of financing. Besides the negotiations with the CBA, AMFA held various negotiations with potential foreign investors. Some market participants discussed the possibility of creating new funds to expand lending. At the same time, negotiations were conducted with the European Bank for Reconstruction and Development and other international financial organizations.
