ADB ready to help Azerbaijan develop green business, housing finance

The Asian Development Bank (ADB) intends to continue supporting financial sector development and financial inclusion in Azerbaijan through technical assistance, financing, and investment, reads the final report of the project “Azerbaijan: Development of Nonbank Finance and Alternative Financial Instruments for Economic Diversification” completed on November 29, 2023, Report informs.

The project lasted for five years.

The report states that ADB's further steps should include both top-down and bottom-up actions to improve financial inclusion. Top-down actions involve working on policy, developing regulatory frameworks and financial instruments for sustainable and climate financing. Bottom-up steps should focus on expanding access to green financing for small and medium-sized businesses, as well as developing innovative solutions for green housing finance.

ADB also intends to explore the possibility of scaling up or implementing these initiatives in Central and West Asian countries, as well as other developing member countries. As much as $500,000 was allocated for the project implementation, of which 90% was utilized. The unused funds, $51,720, remained due to the cancellation of the COVID-19 assessment at the request of the Central Bank of Azerbaijan (CBA), conducting workshops in a virtual format, and the non-use of reserve funds.

As part of the project recommended by ADB, the CBA implemented an agent banking model to expand access to financial services in remote areas. Since March 2022, the pilot use of the Azerpost LLC network as a banking agent has improved financial services in regions with limited access. To facilitate this, changes were made to regulatory documents: in May 2024 to the banks' credit risk management rules, and in July 2023 to the law on payment services and payment systems. Another implemented recommendation was to provide non-bank credit organizations (NBCOs) access to national payment systems and permission to open and manage payment accounts and issue credit cards.

This allowed NBCOs to issue loans without bank intermediation. The project also prepared and presented a draft law on leasing activities, which is under review by state authorities.

The CBA also presented a microfinance development strategy, developed based on an analysis of sector problems and consultations with stakeholders. The project included measures to protect the rights of financial services consumers. Reports on international practices were presented in five key areas - product information disclosure, consumer treatment, complaint handling mechanisms, personal data protection, and enforcement mechanisms - to assist the CBA in developing an appropriate regulatory framework.

The results of this technical assistance are expected to be considered in the development of ADB's partnership strategy with Azerbaijan.