Azerbaijan approves regulations of National Fund for Entrepreneurial Support

Azerbaijani President Ilham Aliyev has signed a decree to approve the new rules of lending and regulations of the National Fund for Entrepreneurial Support (NFES) which assists businesses in particular the development of small and medium enterprises and improvement of employment opportunities.

According to the decree, the supervisory board was set as the supreme governing body of the Fund. The Supervisory Board consists of 7 members, including the chairman.

Three board members are appointed by the ministries of finance, taxation, labor and social protection, the other 4 members by the Ministry of Economic Development.

Under the Regulations, the funds of NFES come from the state budget allocations, proceeds from its operations, including payments on principal, interest, penalties and commissions for soft loans, donations provided by local and foreign legal entities and individuals, assistance and grants issued by foreign states and international organizations, loans received by the government, and other sources not prohibited by the legislation.

The funds are used in compliance with rules approved by the President of Azerbaijan.

The Fund is headed by Managing Director who is appointed and dismissed by the Ministry of Economic Development.

According to the rules of using funds, the delivery of loans to businesses is carried out through authorized banks and non-bank lending institutions under agreement on their behalves or their responsibility for repayment.

Only 10% of proceeds from interests, penalties and fees paid to the NFES can be used for the strengthening of the logistics and social protection of employees.

The balance of the total amounts borrowed by agent banks from NFES can be up to 100% of their total capital.
The limit can be raised to 150% when large-scale projects are undertaken.

The balance of the total funds borrowed by non-bank lending institutions may be up to 100% of their share capital.

Soft loans from NFES may be provided to businesses under the following limits:

- From AZN 10 000 to AZN 50 000 - small loans;
- From AZN 50 001 to AZN 250 000 – medium-sized loans;
- From AZN 250 001 to AZN 1 000 000 – large-sized loans;
- From AZN 1 000 001 to AZN 5 000 000 – huge loans.

The maximum amount of a soft loan for 1 business entity should not exceed AZN 5 million. Maturity period are as follows:

- Small loans - up to 2 years;
- Medium-sized loans - up to 3 years;
- Large-sized loans - up to 5 years;
- Huge loans - up to 7 years.

Annual interest rates for loans are as following:

- To finance media development projects – 0.5%;
- To finance other projects - 1%.

Annual interest rates on loans charged by authorized credit institutions should not exceed 6% of the total loan amount (4% for media development projects).

/APA/