Azerbaijan has eased the terms of business loans.This was reported by the Central Bank of Azerbaijan (CBA) in response to the inquiry of “Report”.”Taking into account the risks of business loans, in order to stimulate the role of banks in the financing of the real sector, more lenient prudential norms are applied to them compared to other types of loans (for example, consumer loans). Reserve norms and risk rates, which directly affect the calculation of regulatory capital of banks for these types of loans, are more was determined at a low level.For example:- The risk rate of business loans in national currency granted to small and medium-sized enterprises, as well as aimed at financing exports in the non-oil sector, was reduced from 100% to 50%;- The risk rate for business loans in foreign currency aimed at financing exports in the non-oil sector is set at 75%, etc.Also, in order to increase the role of banks in financing large-scale and long-term projects in the real sector, as well as to adapt the regulatory framework to advanced international practice, on October 24, 2022, the CBA approved the “Rule for Prudential Regulation of Project Financing Loans”.
In contrast to traditional business credit products, the mentioned Rule covers the requirements that payments for project financing loans are not made from the borrower’s income, but from the income generated by the project, the responsibilities of the parties involved in the project, the credit organization’s stable capital position and experienced human resources in the field of project management. According to the regulatory requirements established by the rule, loans in the project phase are excluded from the requirement to create additional reserves due to the long cycle of interest payments, other requirements have been determined taking into account the characteristics of this type of loans.At the same time, CBA continues to examine regulatory instruments based on advanced international practices in order to stimulate banks’ financing of the real sector of the economy, and keeps in mind the possibilities of applying those instruments,” the statement said.