Credit rates to decrease in Azerbaijan, but not this year

Azerbaijan, Baku, Feb. 4 / Trend /

Leyla Abdullayeva, Trend analytical centre expert Azerbaijani banks have been actively using different types of simplified banking services to the population recently, especially in the area of credit trying to attract more customers in the current competitive area. Many credit proposals in the form of so-called BOLcard, Worldcard, Albalicard, etc. appeared on the market. People can get loans without any special efforts using them. The acceptable loans contribute to the fact that the money becomes available to the public and to business. In turn, they will they spend and invest it. This stimulates consumption and production which has a favourable impact on the economy and growth of the banking sector itself. However, while offering such availability to obtain a large variety of loan products, banks assume certain risks. The number of cases of late payment of interest on the loan and inability of customers to pay the amount increases. Moreover, fraud, swindlers' new ways of not paying the debt to the bank have become widespread. According to the CBA statistics, as of December 1, 2012, the amount of overdue loans in the countries' banks increased by 19.5 per cent to 761.1 million manat per annum. Meanwhile, credit operations remain the most profitable item of banking business through which the bulk of the net profit is formed. At present, as most Azerbaijani banks' main goal is to increase the amount of joint capital from the current 10 million manat to 50 million manat this year, one cannot manage without taking risks. The banks use the services of the Central Credit Registry Service of the Azerbaijani Central Bank (CBA) as one of the tools of guaranteeing themselves against risks. This means in November 2012, the number of appeals to the Registry Service almost tripled and reached 122,812 appeals (there were 41,582 requests in the same period in 2011). The proven practice of working with the registry and improving registry which already extends the structure of the information will cause a number of positive trends. For example, careful selection of borrowers, analysing their credit history, regular monitoring of the financial condition of the borrower, controlling their ability and willingness to repay the loan allows to some extent, the avoidance of credit risks. Accordingly while reducing the credit risks, banks will be able to lower interest rates on loans. It is known that the price of each loan product includes the cost of the credit risk defined by the bank for the type of loan. According to CBA statistics, as of December 1, the average rate on bank crediting of the Azerbaijani economy in manat amounted to 15.14 per cent and in foreign currency 15.62 per cent. At the same time the rates of loan products with different risks vary between 25-36 per cent which is considered a high bar. The task of minimising the credit risks for Azerbaijani banks today is very urgent, along with increasing capitalisation. The official exchange rate is 0, 7844 AZN/USD on Feb. 4. Do you have any feedback? Contact our journalist at agency@trend.az