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ADB providing credit to SME sector in Azerbaijan
Real estate news By Journal of Turkish Weekly
Tuesday , 09 October 2007
The Asian Development Bank (ADB) is providing small and medium enterprises (SMEs) of Azerbaijan access to affordable credit to help the Central Asian nation develop industries beyond the oil sector. ADB is extending up to US$6 million in loans to Azerbaijan's Bank of Baku, in two tranches - a US dollar tranche and an Azeri manat (AZN) tranche. The repayment of the local currency tranche will be linked to the AZN/US dollar exchange rate. The coupon will have a built in AZN/US dollar swap, which would allow ADB to participate in AZN upward movements. Both tranches which will be used for lending to SMEs. Bank of Baku is a commercial bank that primarily caters to retail customers, accounting for 60% of the retail sector of Azerbaijan.
"The proposed loans will provide increased access to financing by SMEs, which would help promote their operations and profitability and enhance their competitiveness, contribute to private sector development and translate into sustainable economic growth," said William Willms, Director for Capital Markets of ADB's Private Sector Operations Department.
One of the biggest hurdles facing SMEs in Azerbaijan is the lack of access to finance, though they account for 80% of registered private businesses in the country and represent an estimated 10% of gross domestic product in the past five years. SMEs are the biggest source of domestic employment outside of the public sector, providing livelihood for over three quarters of the country's workforce. "In the long term, Azerbaijan's high dependence on oil exports may pose a threat to the economy given the potential volatility in the international oil market. The main challenge for Azerbaijan is to develop the non-oil sector to ensure that the economy continues to grow on a sustainable path after the oil boom," said Mr. Willms.
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