Debt agencies appeared in Azerbaijan

eduction of accounts receivable allows banks to offer its borrowers more favourable lending conditions, and thus helps to develop business and attract new customers. That is why the task of combating overdue loans becomes a higher priority for banks.

Despite the availability of reserves, Azerbaijani banks alone can not solve the problem of overdue loans. Although "bad debts," as they are called, are within the limits defined by international standards (10 per cent) as acceptable (6.5 percent) in Azerbaijan, concern is connected with the fact that their volume increases. In world practice, in particularly difficult cases, it is collection agencies that return overdue loans to banks to help.

The first collection agency, VOA Collection Agency Company Ltd., has been created in Azerbaijan. It was registered in the Azerbaijani ministry of taxes on Dec.19, 2011.

A collection agency is also known as a debt agency, which is an agency professionally specializing in recovering overdue accounts receivable and problem debts; it is a type of business designed to favour payments on debts of individuals and legal entities.

Collection agencies may play a significant role in reducing the number of overdue loans in Azerbaijan. Rise of lending volume inevitably leads to rise of overdue loans. The Central Bank of Azerbaijan reports that banks issued 9.852.8 million manat of loans, of which 636.7 million manat (6.5 per cent) was overdue, as of early December, 2011.

Improvement of methods of effective management of accounts receivable, increase of efficiency of all methods of recovering debts, development of services on recovering for different sectors of the economy, active participation in forming a culture of work with overdue debts among employees of credit organizations, participation in increasing financial and credit culture of population - all these directions of a professional collection agency finally should lead to reducing delay level.

However, as world practice shows, in some countries problems with the emergence and activity of collection agencies with regard to bank, borrower and the agencies themselves arise. Thus, in Russia in 2010 all the largest state banks started to work with collection agencies. Sberbank started to transfer problem borrowers to collection agencies in late October 2010 and VTB 24, subsidiary of VTB state bank, started to cooperate with collection agencies in July, 2010.

However, complaints to the Russian Service on customers' rights and protection in regard to collection agencies became frequent. The Service believes collection agencies are a completely non-legal framework, although bankers dispute this statement. Court practice in disputes between collectors and borrowers is contradictory: in some cases, courts support a borrower who refuses to pay to collectors. In order not to face this problem, when accepting new debt agencies, first of all it is necessary to prepare relevant legislative base regulating relations between banks, agency and borrowers.


Leyla Abdullayeva /Trend/