April 20, 2007
ACDI/VOCA Launches Rating Program for Nonbank Financial Institutions in Azerbaijan
ACDI/VOCA has launched an initiative to promote ratings of Azeri nonbank institutions. Ratings provide an objective and well-recognized assessment of the strengths and weaknesses of financial institutions and are a critical tool for promoting operational transparency and attracting foreign investments.
As of April 2007 only four banks and six nonbank credit institutions in Azerbaijan have been rated by specialized international rating agencies. ACDI/VOCA’s rating program, an initiative of the USAID-funded $6.4 million Azerbaijan SME Support through Financial Sector Development project, will enable microfinance institutions (MFIs), rural banks and credit unions to obtain ratings on a cost-share basis.
After circulating a concept paper to both rating agencies and the Azerbaijan Micro-finance Association for input, ACDI/VOCA’s staff finalized the requirements, operating parameters and documentation of the fund and has begun accepting applications. To qualify, the institution agrees to publish its rating on the MixMarket website, which is dedicated to improving transparency and standardization of financial and operating information for MFIs. MixMarket has registered over 850 MFIs worldwide including 12 in Azerbaijan. ACDI/VOCA expects that over the next two years the rating program will double the number of Azeri nonbank credit institutions being rated by internationally recognized agencies.
ACDI/VOCA’s three-year SME Support through Financial Sector Development strengthens Azeri partner organizations including the Azerbaijan Bank Training Center and local microfinance, leasing and credit union associations so they can provide a sustainable local source of training and technical assistance to support the financial sector. In addition to developing local capacity, the project has a large component that addresses constraints to borrowing and lending, and more broadly, propounds a more competitive and stronger financial sector.