KfW not in a hurry on bank choice for second phase of agricultural financing project
By Aynur Jafarova
German state development bank KfW is not in a hurry with the choice of a bank for implementation of the second phase of the project on financing agricultural areas in Azerbaijan due to expected changes in the banking system of the country, a source in the KfW Baku office told Trend news agency.
"The bank selection process is delayed due to continuing capitalization in the banking sector in Azerbaijan which may be accompanied by unification of banks," the source said.
According to the decision of the Central Bank of Azerbaijan, the loans of banks operating in Azerbaijan should not be less than the minimum level of 50 million manats by January 1, 2014. The central bank suggests that the banks facing obstacles in meeting this requirement merge. Otherwise, their activity in the domestic banking market may be restricted.
Therefore, the German development bank decided to postpone financing of Azerbaijan's financial institutions.
Azerbaijan's Bank Respublika and non-bank loan organization CredAgro were selected during the first phase of KfW's project. Bank Respublika got 1.5 million euros while CredAgro received 2 million euros.
The cost of the first phase of the project amounted to 5 million euros, 3.5 million of which was distributed. The remaining funds were designated for one more bank. In particular, negotiations were held with Demirbank, but they were suspended.
Parabank was also considered. However, a decision was made in favor of Turanbank, which was supposed to receive a loan within the second phase of the project.
It was planned to allocate 3.5 million euros to Turanbank as a subordinated loan for financing projects in agricultural areas, including the development of small entrepreneurship in the regions excluding Baku, Sumgayit and Ganja, Azerbaijan's largest cities.
However, KfW is not in a hurry with financing this bank either. It has decided to wait for the results of capitalization and the process of reformation.
KfW is a German government-owned development bank based in Frankfurt.