Azernews.Az

By Nigar Abbasova

Oil-rich Azerbaijan, the economy of which was negatively affected by a sharp drop in oil prices and other negative developments, intends to adapt to new economic conditions and improve business climate in the country.

The market of non-banking organizations (NBCOs) is also among the spheres most affected by recent economic shocks. CEO of Finca Azerbaijan Timothy Tarrant said that the country will complete adaptation to new economic environment in the second half of 2017. Moreover, it will increase the volumes of business activity, which in turn may lead to a growth in the investment portfolio of NBCOs operating in the country.

NBCOs, the overall number of which currently stands at 59 provide certain types of banking services, but do not hold a banking license and are not eligible to accept deposits from the public. Some nine banks halted their operations since early 2016, while the reduction in a number of banks operating in the country also negatively affected operations of NBCOs.

Tarrant mentioned that business is currently reducing the use of credits, while financial market conducts optimization.

“Given the fact that the volume of manat reserves is limited, we may assume that the tendency will dominate further. However, the situation may change, should the volume of manat lending increase,”he said.

Tarrant mentioned that the tendency is not likely to change in the nearest future, while the investment portfolio of NBCOs, including FINCA will reduce in the next two years. Meanwhile, credit portfolio of FINCA reduced from $100 million down to $71 million.

Some experts link the decline in the loan portfolio of financial organization to the fact that the demand for loans in Azerbaijan’s market is limited, while one of the most essential problems for the banking sector is shortage of manat means, as the interest to credits in a foreign currency has already come to nothing. The recent increase of interest rate on manat deposits is one of the main factors that increased the attractiveness of Azerbaijan’s national currency.

Credit portfolio of NBCOs as for July 2016 stood at 548.9 manats ($ 338.6), which is 7.06 percent lesser than the index fixed in the same period of 2015. The volume of non-performing loans made 8.4 percent of the overall loan portfolio, according to the CBA.

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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova

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