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WB seeks to create development bank in Azerbaijan

28 February 2017 12:33 (UTC+04:00)
WB seeks to create development bank in Azerbaijan

By Nigar Abbasova

The World Bank is still interested in creation of a development bank in Azerbaijan. WB senior financial sector specialist Angela Prigozhina told Trend that the bank maintains its interest in the issue.

"However, we do not abandon this idea – there are a huge number of other state financial institutions, including funds and agencies that are engaged in lending to the economy and support of small and medium businesses. The development bank, or other similar consolidated and effective tool for the economic development, can be created on the basis of these institutions," Prigozhina said.

Development banks are dedicated to fund new and upcoming businesses and economic development projects by providing equity capital and loan capital. Such financial institutions are mainly providing all types of financial assistance, including medium and long term to business units, in the form of loans, investment, guarantee operations, and promotional activities.

Prigozhina clarified that development banks operate at the highest standards of corporate governance and always help the private sector to solve existing problems, for example, lack of long-term financing or lack of the manat loans.

Speaking about the main challenges, she said that such institutions are effective only in case of availability of a favorable business environment for competition and efficient financial market regulator. Besides, additional reforms are needed to minimize lending risks.

"Today, work is underway to create a private credit bureau and develop bills "On protection of creditor rights" and "On establishment of secured transactions registry". Also, together with the Financial Market Supervisory Body (FMSB), we are starting comprehensive work with distressed assets, making amendments to the law "On bankruptcy" and implementing other measures, " she said.

She emphasized that all these reforms are necessary for the development bank to become a catalyst for development of the economy, but it is also very important for the financial system to be stable.

Meanwhile, the government of Azerbaijan may soon allow international financial organizations to launch issuance of manat loans. Azerbaijan’s Financial Market Supervisory Body (FMSB) and foreign financial entities are reportedly in talks on the issue. Currently, European banks and international financial corporations have a right to issue credits in national currency only by means of hedging their foreign exchange risks in the currency exchange fund (TCX).

A mission of the World Bank on financial and private sector development in the South Caucasus, headed by Prigozhina, arrived in Baku on February 19 with a 10 day visit. Within the visit the mission discusses a variety of projects covering the insurance market, strengthening the financial infrastructure, solving the problem of overdue loans, as well as improving the deposit insurance system in Azerbaijan.

Azerbaijan became a WB member in 1992. As of September 2016, the Bank allocated loans to the country worth $3.99 billion, while the funds were used to finance more than 70 projects.

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

Follow us on Twitter @AzerNewsAz

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