National Benchmarking Study of Azerbaijan MF sector September 2008 Nigar Pirmammadova, Azerbaijan Micro-finance Association Finance Manager.

National Benchmarking Study of Azerbaijan MF sector

September 2008

Nigar Pirmammadova, Azerbaijan Micro-finance Association Finance Manager

4th Azerbaijan Micro-finance Conference, 16-17 September, 08

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Benchmarking Azerbaijan Microfinance 2007

National Benchmarking Study of Azerbaijan MF sector( since October 2005)

Our Strategic Partners & Donors BP & its co-venturers in the Azeri-Chirag-

Guneshli, Shahdeniz, Baku-Tbilisi-Ceyhan and South Caucasus Pipeline projects (RDI)

UNDP Azerbaijan Eurasia Foundation


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What does Benchmarking serve?

Benefits of Benchmarking

Increases Transparency Attracts Government Attention and Support Enables Access to Capital Attracts New Investors to Market Increases Scaling and Outreach of MFI Operations Facilitates Economic Growth Aids in Poverty Reduction Provides Comparative Information for Improving

Financial and Social Performance Extends Reach to Global Networks


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Report Structure

Country Overview Introduction Macroeconomic

indicators Economic Overview Legal and Regulatory

Environment in Microfinance Sector

Comparative Measurements Outreach and Scale Financial Structure Ratio Analysis Results Information about MFIs, CU

took part in preparation Benchmarking Report


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Macroeconomic indicators

1514

2241

2981

26,4%

34,5%

25,0%

0

500

1000

1500

2000

2500

3000

3500

2005 2006 2007

0%

10%

20%

30%

40%

50%

60%

GDP per capita

Real growth rate

Inflation rate December to December (%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2001 2002 2003 2004 2005 2006 2007

GDP per capita(AZN)/ Real growth rate % Inflation rate (%) 2001-2007 years

Source: The State Statistical Committee of the Azerbaijan Republic


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Legal and Regulatory Environment in Microfinance Sector

The working Group consisted of Azerbaijan Microfinance Association`s leading members on developing the Draft Law on Non-bank Credit Organizations was established under USAID “SME Support through Financial Sector Development Project” implemented ACDI/VOCA and with the support National Bank officials.

The main goal of developing the Draft Law is to create fruitful environment for micro-loans and to provide guarantee in serving the poor population expanding the financial service types by Non-bank Credit Organizations

If the Parliament passes the law, non-bank credit organizations will face the following requirements:

Higher capital requirements: Article 7.2 of the draft law stipulates that the minimum capital requirement for non-bank credit organization holding collateral deposits should be no less than AZN 250,000 (302,500 USD) and no less than AZN 25,000 (30,250 USD) for those not collecting collateral deposits. Currently, the capital requirement stands at AZN 6,050 (5000 USD).

More involvement and control of the NBA over microfinance operations


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Azerbaijan Microfinance is young....

Azerbaijan Microfinance Sector is 10 years

MFIs middle age is 7,5 years

15 MFIs, 12 commercial banks and 40 Credit Unions provide microfinance service


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Outreach and Scale Number of Active Borrowers and Total Loan Portfolio have increased during last years and continue to grow

Source: AMFA Matrix 31 December, 07 and Mix Market PEER group information

Number of Active clients and Gross Loan Portfolio 2005-2007

254 854

120 960

70 413

0

50 000

100 000

150 000

200 000

250 000

300 000

2005 2006 2007

Nu

mb

er o

f A

ctiv

e B

orr

ow

ers

0

70

140

210

280

350

420

To

tal

Lo

an P

ort

foli

o i

n m

ln o

f U

SD

Total Borrowers

Total Loan Portfolio in mlnof USD

Number of Active clients and Gross Loan Portfolio 2007 year

6 3656 882

8 964

3 939

0

2 000

4 000

6 000

8 000

10 000

Azerbaijan Armenia Georgia Central Asia

Num

ber o

f Act

ive

Borro

wers

0

2 000 000

4 000 000

6 000 000

8 000 000

Tota

l Loa

n Po

rtfol

io in

mln

of U

SD

Total Borrowers

Total Loan Portfolio in mlnof USD


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Outreach and Scale

• Sector dominated by FINCA and MFBA.

•FINCA and MFBA captured about 75 percent of new market share.

• New development: Significant growth for CredAgro

Other, 10% Other, 6%AzerCredit, 3%

CredAgro, 8% CredAgro, 17%

FINCA - AZE, 35%FINCA - AZE, 20%

MFBA, 42%MFBA, 54%

AzerCredit, 5%

0%

20%

40%

60%

80%

100%

Borrowers Gross Loan Portfolio

Number of Active Clients and Gross Loan Portfolio %


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Azerbaijan Microfinance is growing… Average loan balances have increased during last years

and continue to grow

Average Loan Balance per Borrower 2004-2007


2004 335 523,5 584 518

2005 399 617,5 649,5 434

2006 561 755,5 1034 529

2007 778 957 1150 703

0

200

400

600

800

1000

1200

1400

2004 2005 2006 2007

USD

Azerbaijan

Armenia

Georgia

Central Asia

Average Loan Balance per Borrower PEER groups


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Financial Structure• 95 percent of short and long term funding comes from foreign sources. • The terms for foreign funds increased from 47 to 55 months, while interest rates stayed around 9 percent on average. •The proportion of all borrowings from foreign funds now stands at 69 percent, up from 54 percent in 2006. •Largest increases in amounts came from foreign funds (223 percent increase) and foreign NGOs (225 percent increase).

0%

10%

20%

30%

40%

50%

60%

70%

Foreign

Commercial Bank

Foreign Fund Local

Commercial Bank

Local

Government

2006

2007


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Ratio Analysis

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9


Portfolio at Risk > 30 day (%)

Portfolio at Risk > 30 days (%)


2007 0,2% 0,2% 0,7% 0,9%


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Long term outcomes achieved under Benchmarking Study project

13 Azerbaijani MFIs, 3 banks and 2 CU have published audited financial data at www.mixmarket.org

8 Azerbaijani MFIs have successfully passed credit ratings by Microfinanza Rating & M-Cril

Findev and Viator MFIs got 2006 International Financial Transparency Award Diploma & cash price of US$ 10,000 by CGAP at 10th MFC Annual Conference “Bridging the Market Gaps” organized by Microfinance Centre in Sophia, Bulgaria during May 29- June 2, 2007.

10 New Investors provided commercial capital to Azerbaijani MF sector in 2007.


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THANK YOU FOR YOUR ATTENTION!

Contact : phone: 437 16 45

[email protected]

National Benchmarking Study of Azerbaijan MF sector September 2008 Nigar Pirmammadova, Azerbaijan Micro-finance Association Finance Manager.

Documents

azerbaijan microfinance

azerbaijan republic

microfinance service

microfinance operations

scale sector

nonbank credit organizations

percent increase

azerbaijani mfis