Azernews.Az

By Aynur Jafarova

The development dynamics of Azerbaijan's banking sector remain stable.

General Director of the Central Bank of Azerbaijan (CBA), Rashad Orujov made the statement at a round table titled "Development of inter-bank cooperation between Russia and Azerbaijan" on June 24.

The round table was held within the 5th Azerbaijani-Russian interregional cooperation forum in Gabala.

"Over the past 15 years, the assets of the banking system increased by more than 20 times. The average growth in the sector has been consistently above 40 percent in the last ten years," he said

Orujov also noted the total depth of the banking system (the ratio of assets to GDP volume) is about 37 percent.

"But taking into account that the banking sector operates mainly with the non-oil sector of the economy, then, the not less important indicator which is the ratio of assets to non-oil GDP, stands at 71 percent. Since 2008, despite the global financial crisis, the depth of the banking system showed stable growth. The lending activity remains high - the ratio of banks' loan portfolio to non-oil GDP of the country has already exceeded 50 percent. The capital base is stable and the total capital of banks increased in comparison with non-oil GDP by two percentage points, reaching 15 percent. If we pay attention to the country's economic growth, the growth of the banking sector exceeds the rate of economic development of the country more than twice," the CBA official said.

As of May 1, 2014, the total volume of assets of 43 banks operating in Azerbaijan amounted to 22 billion manats, the loan portfolio - 16.25 billion manats, and the total amount of capital - 3.61 billion manats.

Orujov went on to say that the deposits of the population provide more than 40 percent of funding of the Azerbaijani banks.

"Over the past five years, their volume increased 3.4 times, and we saw a positive trend of specific weight growth of the deposits in the national currency, which reached more than 60 percent of the total deposit base of the Azerbaijani banks. Deposits of the population - one of the most important indicators of trust to the banking system - also play a crucial role as resources for implementation of normal activities of the banks," he said.

Orujov also noted since 2008, the banking market grew more than two times.

"The average annual growth in the banking system amounted to about 15 percent over five years. The growth rate in the pre-crisis period was even higher, albeit against a background of low deposit base, which is now quite impressive. We believe that the annual growth of assets by 15 - 20 percent is a very good and stable rate. The institutional capacity of the banks grows steadily on this basis. The loan portfolio of the banking sector has also grown more than two times over the years, exceeding 15 billion manats, with an average annual growth rate of 17 percent," he added.

Orujov went on to add that the range of banking services available to Azerbaijan's postal operator Azerpost LLC will be expanded.

He said a lot of issues and problems were revealed following the global financial crisis, and they need to be discussed and explored. It is highly important to assess the banking sector's role in the development of the economy and people's lives, and this question is becoming more and more relevant.

The CBA official said currently, there are 43 banks in Azerbaijan, and there is a widespread access to their 710 branches and offices in all regions of the country.

"The dynamics of expansion of the banks' branch networks is annually growing and we believe that this is very important in terms of increasing the population's access to financial services. Azerbaijan has 152 non-banking credit organizations (NBCO), credit unions and other non-banking financial institutions, which, despite their small size, play an important role taking a specific niche in the market," Orujov added.

He also highlighted the activities of Azerbaijan's national postal operator, which also began providing financial services.

"The government's joint project with the World Bank (WB) has made it possible to successfully integrate Azerpost into the country's financial system. The huge branch network of up to 1,000 branches and offices ensures the presence of a financial institution virtually in every village. The operators are authorized to conduct payment operations, attract deposits, and the list of their services will expand in the future," Orujov added.

The official exchange rate on June 24 is 0.7843 AZN / USD.