Brokerage service in Azerbaijani banks can stimulate greater investment growth, says economist

Like other states in the world, Azerbaijan constantly keeps banks under control, as this sector normally holds a very significant place in the economy of any country. Figuratively speaking, banks are the beating heart of the economy, and if they lag behind the innovations that have evolved in the world or fail to work properly, the economy will decline in time.

Azerbaijan also closely monitors what is happening in the banking sector all over the world and applies innovations. One of these innovations is the brokerage service within banks, which Azerbaijan intends to apply to this year. The governor of the Central Bank of Azerbaijan, Taleh Kazimov, spoke about it in his last press conference, noting that the CBA intends to involve local banks in brokerage services and saying that this step will create conditions for the further expansion of the capital market because Azerbaijani banks have a wide branch network.

But what is a brokerage service, and how will it affect the Azerbaijani economy?

In a comment to Azernews on the issue, economist Natig Jafarly noted that this is a widespread practice in the world. By acting as brokers, the branches of banks connect potential investors with those who want to invest. He emphasised that, actually, the banking system in Azerbaijan does not work according to the new and modern rules. It only takes deposits and gives loans.

“However, looking at the world in the last 20-25 years, we see that banks have already turned into financial institutions and big investment centres. They also act as self-investment funds. The strategy of the central bank and the steps taken by it serve to establish a new banking model in Azerbaijan. This is the right way and the right direction. Taking into account the large infrastructure of banks across the country, the brokerage services to be created there can help ordinary citizens enter the securities market as well, which is expected to be created in the future,” the expert said.

Natig Jafarly pointed out that certain work is already being done in connection with securities. It is said that there will even be new privatisation programs. It can act as an intermediary for citizens to gain access to stocks. And he added that, most importantly, banks can play a role in turning the investment centre into an investment fund.

“For example, there are people who have certain ideas and good business plans. Rather than lending to such individuals, investment banks and funds may become their partners. A bank can invest with them, as we see in Western countries. This practice has long existed in Western countries. It seems to me that the steps taken by the central bank are in this direction and in the right direction. This can also lead to the creation and strengthening of the securities market in the country. They can also act as a bridge between ideas and their implementation. This, in turn, is quite an interesting direction and can play an important role in the transition of Azerbaijan to a diversified economy,” economist Natig Jafarly concluded.