SMB

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Public discussion held on the role of the credit guarantee mechanism in business development 01.03.23

A public discussion on "The role of the credit guarantee mechanism in business development" was organized with the support of the Public Council under the Small and Medium Business Development Agency (KOBİA), the Mortgage and Credit Guarantee Fund and The National Confederation of Entrepreneurs (Employers) Organizations of the Republic of Azerbaijan. Representatives of relevant state agencies, banking and insurance companies and business associations took part in the event organized as part of the state-entrepreneurial cooperation.

Farhad Garashov, the chairman of the Public Council under KOBİA, stated that the event was the first public discussion organized by the council in 2023, and it aims to discuss the opportunities of access to financial resources of SMBs, and to reinforce public-private cooperation in this field.

Orkhan Mammadov, Chairman of the Board of KOBİA, delivered his insights on funding SMBs and the significance of the credit guarantee mechanism for SMBs. It was noted that Azerbaijani entrepreneurs also opt for banks as a source of funding. Although the credit portfolio of banks is wide, the share of regions in lending is about 23%, while for Baku it is 77%. According to the analysis of the applications submitted to the Agency and the surveys, as well as the reports of international development organizations, the major challenges faced by SMBs in accessing funding sources are high interest rates, strict collateral requirements, risk distribution and lack of credit guarantee mechanisms. The credit guarantee mechanism allows small and medium entrepreneurs to overcome financial limitations, supports the provision of long-term loans to entrepreneurs for funding business projects. It also paves the way for banks' access to a new and wider customer network, and ensures that risks are minimized. Establishing a credit guarantee mechanism in our country is praiseworthy, however there is a need for further improvement of the guarantee system for the SMB sector.

Fakhri Kazimov, Chairman of the Board of the Mortgage and Credit Guarantee Fund, supplied detailed information on the Fund's activities, financial indicators, achievements, as well as the purpose of establishing a credit guarantee mechanism as a support tool for entrepreneurship in the non-oil sector.

It was underlined that this mechanism, which was established given the requirements of local entrepreneurs, is regularly improved by the virtue of exporing the best international practises. In order to ensure transparency and efficiency under this mechanism, applications from the entrepreneurs are submitted over the "Electronic Mortgage and Credit Guarantee" system on the "Electronic Government" portal.

Mammad Musayev, president of The National Confederation of Entrepreneurs (Employers) Organizations of the Republic of Azerbaijan, stated that the number of registered entrepreneurs in Azerbaijan is about 1.4 million. It is an indicator of the large number of people willing to start a business and work in the private sector in our country. Financial access is one of the key factors for launching a business. At present, the credit portfolio of banks and non-bank credit institutions in Azerbaijan is 20.3 billion. 80% of these loans fall to the share of Baku and Absheron-Khizi economic regions. This indicator exhibits the need for further improvement of access to financial resources for entrepreneurs in the regions.

State guarantee mechanisms for loans, interest subsidy provided by the Mortgage and Credit Guarantee Fund are among the best tools for financial accessibility of entrepreneurs. Entrepreneurs' awareness of these tools needs to be expanded and the mechanism needs to be improved in the future.

Subsequently, the Mortgage and Credit Guarantee Fund held a presentation on credit guarantee mechanism.

As part of the event, views were exchanged on the role of the credit guarantee mechanism in business development, improvement of the mechanism, and the questions from entrepreneurs were addressed.