Azernews.Az

By Gulgiz Dadashova

Joint Leasing Company, the first and largest professional participant in Azerbaijan's leasing market, seeks to boost its activity as the company has changed the structure of the Supervisory Board.

In accordance with the decision of the company shareholders, the Supervisory Board of the British-Azerbaijani company will now be headed by Baroness Nicholson of Winterbourne. The Board also includes Rashad Hajiyev and Michael Bordman, with Elchin Akhmadov reassigned as the CEO.

The appointments will positively impact the company in future and help it enter international markets, Rashad Hajiyev, who is also Deputy Chairman of the International Bank of Azerbaijan (IBA), said at a press conference on November 14.

He said that professionals will work in the Supervisory Board, and international experiences will help Joint Leasing in its business development.

"IBA, which enjoys the front position in the local market and the region, has a large network of partners which makes it even stronger. Thus, we also want to see our subsidiaries as strong as we are," Hajiyev said.

The fact that the country's largest bank is the main shareholder creates opportunities for Joint Leasing, and allows the company to fund large leasing projects.

However, Hajiyev went on to say that the Joint Leasing Company was instructed to become a fully independent company in the future.

"In this regard we as the shareholder are ready to render all possible assistance. We have already supported the company's plans to issue bonds and borrow on foreign markets to diversify funding sources," Hajiyev said, noting that it doesn't mean that the IBA will leave the company.

Joint Leasing intends to place bonds worth 10 million manats by late 2013. The yield on the bonds is expected to hit 10 percent per annum and the term of placement is five years.

The speakers also pointed to the existence of a phenomenal potential of leasing market in Azerbaijan.

Michael Bordman said Azerbaijan's leasing market is still far from saturated.

"Leasing is fundamentally important for the development of small and medium enterprises and individual entrepreneurs. We believe that the development of funding in international markets and attracting long-term resources are necessary for the development of leasing," he said.

Bordman said that the new members of the Supervisory Board will work to attract funds from foreign financial institutions, and examine and identify new opportunities in the leasing sector.

"Investments in the capital market in Azerbaijan in the past two years amounted to about $ 22-24 billion, while the share of the leasing sector in these investments is 1%, or $ 250 million. The figure is about 5-10 percent in the countries of Asia, Eastern Europe, and Latin America. In short, this market has great potential, and we have to identify them," he said.

Elchin Akhmadov, in turn, noted that the main aim of the company will be financing the purchase of equipment, boosting positions in the market, and attracting international partners.

The Supervisory Board will actively develop business within the traditional framework and explore possible new markets in Azerbaijan. The studies will cover such areas as real estate, agribusiness, and leasing of complex equipment on a bilateral basis with its producers, Akhmedov said.

Currently, the market share of Joint Leasing reaches 30 percent, and its lease portfolio is estimated at 32 million manat. The figure is expected to rise to 35 million manat by late 2013.

The company has changed interest rates since early November. According to the rates, the leasing percentage is now at 17 percent.

Next year's goals are as follows: keeping the leading positions in the market, developing and maintaining the portfolio, expanding the directions of the existing business, and complying with the diversification of the portfolio at its current pace.

Investment in larger projects in the manufacturing sector is being considered.

The founders of the Joint Leasing Company are British DH Leasing LTD (52.4 per cent) and the IBA (47.6 per cent). The company was established on June 14, 2007 as the legal successor to the Azerilizing Company.

Islamic banking in leasing

Joint Leasing Company will begin a joint project with the Islamic Banking Department of IBA.

"To this end, it was decided to offer the Islamic leasing products under the Joint Leasing," Elchin Akhmadov said, noting that Joint Leasing and IBA decided to diversify their activities in this area.

According to him, all the technical issues have been resolved.

The project will cost 4 million manat.

Akhmadov expressed hope that the relevant cooperation agreement will be signed later this month.

IBA has launched the first and the only 'Islamic window' in Azerbaijan, offering the products of the Islamic banking system to the customers.

In 2012, IBA signed a $20 million agreement with the Islamic Corporation for the Development of the Private Sector (ICD) on 'Murabaha', as well as a big $100 million deal with several UAE banks on attracting syndicated Murabaha.

Murabaha is one of the most commonly used modes of financing by Islamic Banks and financial institutions. Murabaha is not an interest-bearing loan, which is considered riba (or excess). Murabaha is an acceptable form of credit sale under Sharia (Islamic religious law). Similar in structure to a "rent-to-own" arrangement, the intermediary retains ownership of the property until the loan is paid off.