TODAY.AZ / Business

Azerbaijan needs new model to finance business activity, WB says

29 July 2015 [15:48] - TODAY.AZ

/By AzerNews/

By Aynur Karimova

Azerbaijan needs to switch to a new model of state financing of business activity and population. This remark was made by Angela Prigozhina, the World Bank coordinator for private and financial sector in the Southern Caucasus.

“As of today, Azerbaijan has quite large program for encouragement and development of small and medium-sized enterprises through state funds,” she told Trend. "However, Azerbaijan’s National Fund for Entrepreneurship Support and similar structures largely depend on state resources. Therefore, it is needed to switch to a new modern funding model, that is, to diversify the resource base with help of other sources."

Prigozhina said that, in the future, it is necessary to improve the mechanism of the allocation of resources for SMEs as part of state programs. At the same time, the funds allocated from the state budget could be used more effectively to improve cash flow efficiency.

“Given the current situation in the global economy, Azerbaijan, in order to replace the fiscal costs with private capital, needs to take additional measures to attract both domestic and foreign investments,” she noted. “It is very important to develop the stock market to allow companies to attract funds through the issuance of securities.”

The WB coordinator believes that one of the tasks of the Azerbaijani government is to support further economic development by providing a large number of enterprises with access to long-term and inexpensive resources and by stimulating mortgage lending that will allow it to resolve housing problems for many people.

"It is also important to stimulate attracting the population’s deposits to banks and allow returning these resources back to economy," she stressed.

Another issue is related to reducing the interest rates on loans. The WB representative believes that the establishment of a private loan office and a mobile property registry is one of the priorities for Azerbaijan.

"This will create preconditions for increasing lending to the population and SMEs," she said. "These two reforms haven’t been carried out in Azerbaijan and accordingly, they are very relevant and should be carried out as soon as possible."

A package of amendments to the laws on personal data, banks, non-bank credit organizations and the Code of Administrative Offences is currently discussed as part of the establishment of a credit bureau.

After making changes regulating the activity of private credit bureaus, a technical partner of the first bureau will be chosen.

Some 11 banks and two non-bank credit organizations are the potential founders of the country's first private credit bureau.

Among them are Access Bank, AGBank, Azerbaijan Senaye Banki, Bank Respublika, Demir Bank, Muganbank, PASHA Bank, Turan Bank, Yap? Kredit Bank Azerbaijan, UniBank, Kapital Bank, Finka Azerbaijan and AzerKredit.

As for the personal property registry, it will be governed by a future law on secured transactions. IFC is helping Azerbaijan establish the registry and the credit bureau and the bill is still being finalized by the CBA.

Azerbaijan has been taking various measures toward the development of SMEs, and as a result, positive trends in local entrepreneurship are being reported in the country.

State support for business activities is the main focus of the State Programs on socio-economic development of regions of Azerbaijan in 2004-2008, 2009-2013, and 2014-2018.

One of the main steps in the promotion of SMEs was the establishment of the National Fund for Entrepreneurship Support in October 1992. This was the first financial institution under the Economy and Industry Ministry engaged in the allocation of loans to small and medium businesses, including soft loans from the state budget.

Preferential loans worth 160.2 million manats were issued to 4,720 entrepreneurs throughout the country from the beginning of the year. Also, the number of non-bank credit organizations has increased to 20, with the aim of simplifying small enterprises' access to preferential loans.

Azerbaijan also launched the electronic information portal on permissions in October 2011. This portal allows the entrepreneurs to increase awareness about the list of documents and procedures required for acquiring valid permits. .

As a result of targeted measures implemented over the past 10 years, over 1.2 million new jobs and 55,600 new enterprises have been established. All of these measures paved the way for the increase of business activities and gave a strong impetus to the development of small businesses in the regions. From January-March 2015, the number of enterprises increased by 1.9 percent and as of April 1, this figure reached 96,398. Some 1,714 new legal entities were registered in this period.

URL: http://www.today.az/news/business/142498.html

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