Azernews.Az

By Aynur Karimova

The state of the fiscal market has opened up new challenges for the banking sector, which is in crucial need of updated initiatives.

In this situation the Azerbaijani banks plan to develop a strategy adaptive to current economic status.

Zakir Nuriyev, the head of the Association of Banks of Azerbaijan, said that the decline in oil prices and quite difficult economic situation worldwide impact the national economy, making the banks revise their development strategies.

"At each stage of economic development banks review their development strategy," he said. "The strategy was formed in view of the large oil revenues of the country so far," he said at a conference on supporting the development of small and medium-sized businesses on November 24.

Earlier the CBA and the ABA discussed to draft a new strategy for 2016 for developing the banking sector with a view to support entrepreneurship in the country.

"The new strategic planning will focus on more responsible lending, financing of SMEs and corporate sector, as well as challenges coming from decrease in banks' incomes due to lower interest rates in 2015 and cost optimization on the background of reduced profits," Nuriyev noted.

Currently, there are 43 banks with their 758 branches in Azerbaijan.

Register of movable property

Nuriyev added that the register of movable properties, to be created under the draft law on secured transactions, will allow minimizing the impact of complex economic processes on the banking sector of Azerbaijan.

The next important step is to create an information system on customers, he believes.

"Financing the banking sector is almost impossible unless there is a comprehensive database providing detailed information about each client," he said noting a need for changes to the draft law "On privacy".

"We cannot talk about the accelerated lending, if centralized credit registry is yet to be improved, and a private credit bureau is yet to be established, while some legislative acts including the law "On mortgage" need to be changed," he stressed.

Nuriyev believes that the law on secured transactions is very important for the banking sector.

"This law is also important for other members of the financial sector, but the banks as an engine of economy are much more interested in its adoption," he said.

Mortgage loan

Later, Nuriyev told journalists that the ABA has sent a package of proposals to the CBA to expand mortgage lending in the country.

Expansion of mortgage lending is one of the most important issues for 2015-2016 and there is a progress with resolution of some issues, he believes.

In Azerbaijan, the maximum amount for mortgage loans provided via the Azerbaijan Mortgage Fund is 50,000 manats with a rate of eight percent and maturity term of 25 years. The “social mortgage loan,” however, is issued in the amount of 50,000 manats with an annual rate of four percent and for a term of 30 years.

For issuing this type of loan the banks require a 15-percent down payment, whilst the figure is 20 percent for a conventional loan.

The social mortgage loan is allocated in Azerbaijan’s national currency, the manat, and the beneficiaries should be Azerbaijani citizens.

Mortgages are only given for apartments or private housing and the amount should not exceed 80 percent of the market value of the property. The monthly payment for a loan must not exceed 70 percent of the monthly income of the borrower, who should also produce a copy of his/her life insurance agreement.

The family members of martyrs, families of National Heroes of Azerbaijan, internally displaced persons, civil servants with work experience of no less than three years, Ph.D. holders, persons who have achieved special merits in sports, as well as those who have a minimum of three years military service can enjoy these preferential rates.

--

Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

Follow us on Twitter @AzerNewsAz