ADB plans to boost private sector financing in Azerbaijan
By Nigar Orujova
The Asian Development Bank plans to expand the private sector funding in Azerbaijan, Principal Investment Specialist at the ADB's Private Sector Department, Rainer Hartel, said at a press conference on issuing a $50 million loan to AccessBank in Baku on July 24.
The loan agreement which was signed will support the work of AccessBank in financing micro, small and medium-sized enterprises in the regions of Azerbaijan.
According to AccessBank's CEO Michael Hoffmann, it is the largest credit in the bank's history attracted from one entity. The loan was disbursed for five years.
Hartel did not rule out the ADB could provide such loans to other banks.
"We will cooperate with banks with efficient corporate management, a clear business plan, etc. AccessBank meets all these requirements. It is possible that in the future we will be providing loans to other banks," he said.
The ADB continues to cooperate with four Azerbaijani banks within the framework of a trade financing project, Hartel said.
According to him, the ADB has decided to start business financing without state guarantees. These funds primarily will focus on business projects in the country's regions.
According to the head of the ADB's representative office in Azerbaijan Olly Norojono, the bank supports the government in implementing the policy of economic diversification. The mentioned loan will be a successful step within this cooperation.
Norojono also said that the ADB's portfolio in the public sector of Azerbaijan has reached $1 billion.
Drafting of new partnership strategy postponed
Preparation of a new partnership strategy of the ADB with the Azerbaijani government has been postponed for next year, Norojono said.
Previously it was expected that the strategy would be adopted in 2013.
An ADB mission is due to arrive in Baku next week in order to develop a strategy that will cover the period 2014-2018. During the two-week visit, the representatives of the mission will be holding meetings with government officials.
"We hope that the details of the strategy will be worked out in accordance with the results of the visit and from the beginning of the next year we will begin official discussions on the document," Norojono said.
Under the new strategy, the ADB may begin funding new areas such as solid waste management, alternative and renewable sources of energy, modernization of railway transport and urban public transport.
At present, the ADB has seven ongoing projects in Azerbaijan. The current portfolio of the bank amounts to $990 million. Some 46 percent of the portfolio falls to the transport sector, while 16 percent is in the energy sector, 36 percent in city services, i.e., the improvement of water supply, sanitation system, etc.
In 2012, the bank approved projects worth $250 million, and all of them were in the public sector.
According to the updated business plan of the bank's operations in Azerbaijan for 2012-2014, the total amount of funding for approved ADB projects in Azerbaijan in this period will be $575 million. The projects approved under the business plan, as expected, required $250 million in 2012. Some $155 million is expected to be necessary for the projects in 2013 and some $170 million in 2014.
In 2012-2014 the bank intends to allocate $155 million annually out of the ordinary capital resources. If necessary, possibilities of providing additional resources for funding and co-financing will be considered.
The bank plans to allocate $3.25 million in technical assistance in 2012-2014.
Azerbaijan is a member of the ADB since 1999. The country's share in the bank's capital is 0.5 percent.
AccessBank was established to provide financial services for Azerbaijan's micro and small businesses as well as families with middle and low income. It is recognized as the most reliable bank in Azerbaijan by international rating agency Fitch ("BB+, outlook - stable).
Currently, more than 60 percent of AccessBank's 47 branches are located in the country's regions. The agriculture crediting portfolio has significantly grown in recent years, reaching $110 million.
AccessBank is owned by six international financial institutions, including AccessHolding, operating in micro financing as a strategic investor, the European Bank for Reconstruction and Development, the International Finance Corporation, the Black Sea Trade and Development Bank, German state development bank KfW, and German company LFS Financial Systems GmbH.
The bank, which was founded in 2002, has 37 branches with 1,565 employees.