CBA predicts considerable raise in credit register requests this year - UPDATE

By AzerNews

Credit bureaus will be more needed in Azerbaijan in the future given the growth of the market and strengthening of the financial sector, experts say.

A 50-percent growth is expected in the number of requests to Azerbaijan's Central Credit Register (CCR) in 2013.

Central Bank of Azerbaijan (CBA) Director General Rashad Orujov said that in order to support infrastructural development of the banking sector, the CBA used to perform tasks that are not characteristic for a regulatory agency.

"In particular, it was engaged in the creation of a processing center, credit registry and the introduction of mortgage lending mechanisms. The creation of the Credit Register has become a very important risk management tool for banks. Whereas the number of requests to the register exceeded one million in 2012, we expect that in 2013 their number will reach 1.5 million," Orujov said.

Orujov said the CBA will soon complete the work on a bill aimed at regulating the activity of a private credit bureau in the country.

"In a very short time we'll be ready to introduce a bill on credit bureaus to the Cabinet (of Ministers) for consideration. After its adoption the private credit bureaus (before the formation of their own database) will be able at the first stage to take advantage of the CCR," Orujov said.

He said banks are already working on the creation of a private credit bureau and the CBA supports these initiatives. Such bureaus will allow banks to receive additional services from them.

"Private bureaus will allow the CBA to stop performing non-standard functions in this field," Orujov said.

"We think that the CCR will remain under the CBA, but it will not provide services to banks or individuals (borrowers). It will be used only for the purposes of research, banking supervision, for the CBA's own needs. There will be only private credit bureaus on the market -- we will not compete with them," Orujov said.

In turn, Head of the Central Credit Register Elchin Gabibov said the CBA supports the initiative to establish private credit bureaus.

"The establishment of private credit bureaus in Azerbaijan will strengthen the sustainability and stability of the financial sector of the country," Gabibov said.

The CBA's measures taken to improve the infrastructure of the domestic financial sector such as the establishment of the Azerbaijan Deposit Insurance Fund, Mortgage Fund as well as the credit registry have contributed to stability in this sector, he said.

Gabibov went on to say that currently information on 4.7 million loans of 1.6 million borrowers is kept at the Central Credit Register.

"In 2012, there were a record number of requests to the CCR - more than a million, and in the first quarter of this year we received 430,000 requests, " Gabibov said.

The representative of the International Finance Corporation (IFC) in Azerbaijan, Aliya Azimova, said that the expected market growth of micro-and retail lending in Azerbaijan will increase the demand for the services of credit bureaus.

Azimova said the international experience shows that commercial credit bureaus have the capacity to meet the growing needs of the market.

She believes the improved and effective credit data exchange system offering new services will help financial institutions in Azerbaijan to increase opportunities of access to finance of small and micro enterprises, and thus will support the development of the private sector.

"In recent years, the Central Bank of Azerbaijan and the IFC have been working on modules to upgrade the credit bureau. Ultimately, this work resulted in a single project. More than 10 banks have joined efforts in this project," Azimova said.

In turn, chairman of the executive committee for the establishment of credit bureaus operating in the framework of the project, Rauf Akhundov, said the excessive lending observed today increases the number of borrowers with negative credit history.

"Our goal is to help banks better manage their risks, as well as assist in building a culture of payment of loans in the country," Akhundov said.

Seven international companies seeking to be involved in the bureau as technical partners have applied to the executive committee of the first Azerbaijani private credit bureau. An international partner will supply software for the bureaus.

Based on its experience, the International Finance Corporation offers to grant a majority stake in the credit bureau to those capable of managing it. This will reduce the risks in the credit bureau's operation, in particular, prevent disputes between banks on certain issues.

Meanwhile, a list of potential shareholders of the future credit bureau including local banks - Access Bank, AGBank, Azerbaycan Senaye Bank?, Bank Respublika, Demir Bank, Muganbank, PASHA Bank, Turan Bank, Yap? Kredit Bank Azerbaijan and UniBank, which are part of the executive committee, has been compiled.

The process of creating the credit history of borrowers started in Azerbaijan from 2005 after the Central Credit Register Service was established under the CBA. The register covers the entire range of personal information about banks, non-bank credit institutions, borrowers, loans, etc.

The credit bureau will be able to collect credit information from other financial institutions such as leasing companies, organizations involved in micro-credit lending, non-financial entities, including telecommunication companies, trade outlets selling goods on credit, etc.

Deputy Regional Director of the Swiss State Secretariat for Economic Affairs (SECO) for the South Caucasus, Mathias Feldman, said that Switzerland attaches great importance to its cooperation with Azerbaijan, in particular, the support of efforts to diversify the economy and financial sector development.

He said Switzerland has allocated grants totaling more than $83 million to Azerbaijan.
Feldman said the availability of quality mechanisms to collect and store data about loans, lenders and credit history is important to maintain the stability of the financial sector.

"Private credit bureaus are important not only for this sector and banks, but also for the customers. Countries with a good system of credit bureaus have more opportunities to provide cheaper and more available credit," Feldman said.

He said the work on the creation of the first private credit bureau in Azerbaijan is in full swing, but much still should be done in this area.

"The first priority for today is completing work on the draft law on private credit bureaus, as well as its adoption," Feldman said.