Loan Guarantee Fund established

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    Under the Decree of the President of the Republic of Azerbaijan, Mr. Ilham Aliyev, dated 15 September 2017, a Loan Guarantee Fund was created in the Republic of Azerbaijan to expand access of Azerbaijani entrepreneurs to financial resources. Ayaz Chaparli expert of the Center for the Analysis of Economic Reforms and Communication (CAERC) stated that the “Loan Guarantee Fund of the Republic of Azerbaijan” OJSC will act as a legal entity, which will grant guarantee for loans issued to entrepreneurs with national currency by commercial banks while also subsidizing part of interests calculated for such loans: “This measure is one of the reforms indicated in the Strategic Road Map for production of consumption goods at small and medium enterprise level.”

    Ayaz Chaparli further noted that establishment of the Loan Guarantee Fund is an important step towards recovering economic balance between real sector and financial sector. It is also important for effective distribution of financial risks, strengthening financial stability of banks and capital flow into the real sector. Besides, the Loan Guarantee Fund will contribute significantly to the stimulation of dedollarisation in the country. “The Fund will ensure increase of financial inclusiveness, diversification of the delivery of financial services while also expanding access of business to financial sources and improving the use of financial services. Increased financial inclusiveness in the country is likely to contribute to better support of economic activities, development of entrepreneurship, increased job places, expanded consumption opportunities for households and elimination of income inequality.”

    It is worth to note that a Working Group consisted of public and private sector representatives are tasked under the Presidential Decree to prepare the draft Stature, amount of the statutory capital, including rules for issuing guarantees for loans issued to entrepreneurs with Manat. The private Sector will be represented in the Working Group with the representatives of leading commercial banks and audit companies. In addition, the Supervisory Board of the Company will be formed from the representatives of National Confederation of Entrepreneurs’ (Employers) Organizations and Azerbaijan Banks Associations along with the representatives of economic and financial agencies of the Government. According to the analyst of the CAERC, the Loan Guarantee Fund will operate based on openness, transparency and accountability principles with the involvement of stakeholders.

    Under the Decree, the appointment and dismissal of the chairperson and deputy chairperson of the Board, as well as earlier termination of their office shall be determined by the President of the Republic of Azerbaijan.

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