Improving SME Access to Credit in Azerbaijan
In recent years Azerbaijan has made great strides in modernizing its banking and financial regulatory system, which in turn has improved access to credit and fueled economic growth. Despite its gains, Azerbaijan lacks an effective system for banks and nonbank financial institutions, such as microfinance institutions, to safely accept movable property as collateral. Because there is no centralized register, secured transactions are ineffective, inefficient and costly.
The inability to use movable property such as equipment, livestock, etc., as collateral is particularly significant for small and medium-sized enterprises (SMEs) since many do not own immovable property such as land or buildings. As an innovation under its $6.4 million, USAID-funded SME Support through Financial Sector Development project, ACDI/VOCA has helped draft a new secured transaction law and establish a related filing office. Both will make it easier for banks to provide capital to SMEs.
As part of this effort ACDI/VOCA, in cooperation with USAID’s START Participant Training Program, organized an international study tour for 10 Azeri government officials and financial sector professionals in Bosnia-Herzegovina. The tour was conducted by CReDILS LLC, a private company that maintains the Bosnian movable property electronic filing and registration office. The Azeri officials learned how to create both the legal and technical framework for a movable property system and how to establish an electronic registry for recording notices of collateral agreements.
Since returning from the tour, the participants are now collaborating with the Azerbaijan State Register on Immovable Property to create the legal framework for a movable property system.
The impact of such a system will be far reaching, since it will provide Azeri SMEs with more and better loan options to invest in their companies and create new economic opportunities.
Click here for more information about ACDI/VOCA's SME Support through Financial Sector Development project.