As is the case in many developing economies, credit access in Azerbaijan is not as easy to come by as it should ideally be. That being said, significant efforts are being made to improve the ease of credit access and ensure that the country’s financial system has the capacity to cope with the increase in demand for credit that will likely come with greater ease of access.
Many of the obstacles to credit access in Azerbaijan are similar to the ones present in other countries. It is particularly difficult for businesses to secure a line of credit. Lenders require extensive collateral and often charge high interest rates. Encouragingly, there are government programs that enable particularly small businesses to secure funding even if they cannot secure a line of credit from a private institution.
Poor financial literacy, especially among business owners, is also impeding credit access in Azerbaijan. Many are often denied loans because of problems that they could rectify if given the needed support and education. For example, many Azerbaijani businesses fail to keep written records because they fail to understand that this impacts their perceived creditworthiness.
Improving financial literacy is an important part of expanding credit access in Azerbaijan. The MicroFinance Bank of Azerbaijan has reported that consumer loans, in particular, are being disbursed at a much higher rate than before, suggesting that creditors are becoming more willing to lend more liberally to reasonably worthy clients.
Also noteworthy are the extensive efforts that are underway to modernize the financial system and promote new lending and borrowing practices. The country’s first private credit bureau was recently established and intends to promote risk pooling and information sharing among the 20 largest domestic financial institutions. It is anticipated that this alone will greatly improve credit access in Azerbaijan by promoting responsible lending and eliminating some of the logistical hassles of applying for and granting credit.
– Michaela Downey