Business consultancy project
Banking System in Azerbaijan
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Banking System in AzerbaijanThe emergence of the effective, stable, and developed banking system determines the development of the country and its attractiveness for the investors (Summary of the banking system of the Republic of Azerbaijan, 2007). A two-stepped banking system is presented in our country. The first stage is the National Bank of Azerbaijan and Financial Market Supervisory Authority (FIMSA), while the another is presented by the non-Bank credit institutions and commercial banks constituting the second stage of the system (Banking system in Azerbaijan, 2010). However, since the beginning of 2016 till the end of 2017 Central Bank terminated licenses of 15 banks, while two banks were closed in 2017. If we make a comparison with the current period, 30 banks currently Azərbaycan Beynəlxalq… PAŞA Bank ASC Kapital Bank ASC Xalq Bank ASC Bank Respublika ASC Azərbaycan Sənaye… AccessBank QSC Unibank KB ASC Rabitəbank ASC Premium Bank ASC AtaBank ASC Muğanbank ASC TuranBank ASC AGBank ASC Nikoil Bank İKB ASC Yapı Kredi Bank… AFB Bank ASC Azər Türk Bank ASC Expressbank ASC Bank BTB ASC NBCBank ASC Bank of Baku ASC Ziraat Bank Azərbaycan… Günay Bank ASC Amrahbank ASC Naxçıvanbank ASC Bank Avrasiya ASC Bank VTB (Azərbaycan)… Bank Melli İran Bakı filialı Pakistan Milli Bankı NBP… operate in Azerbaijan (List of Banks, 2017), including two state-owned banks, such as Azer-Turk Bank and International Bank of Azerbaijan and 28 private commercial Banks (Table No. 4) (Azerbaijan's banking sector: Facts & Figures, 2019). Azerbaijan banking sector faced considerable growth of non-performing loans in 2014 due to the sharp decrease in oil revenues. According to the statistics provided by the Central Bank authorities, cash transactions constituted 70% in 2014 and impeded the development of financial system accordingly. According to the estimations, considerable amounts of cash are kept outside the financial system. Moreover, the effectiveness of monetary policy was reduced considerably because of a significant portion of deposits in dollars, although the share of mentioned deposits diminished from 70% as of December 2017 to approximately 63% in 2019. Furthermore, despite the improving quality of the loan books of the banks, the role of the banking sector is still insignificant in the financing the real economy. Besides, interest rates of banks in Azerbaijan are very high and vary from 10% up to 35%, that’s the reason why private sources of finance became more popular in terms of business loans. Moreover, obstacles of development of private business are based on the high interest rates, strict collateral requirements, poor resources to evaluate credit risk (Azerbaijan - Banking systems, 2019) Figure. 13 Assets of Banks 2018-2019 (Finance and credit, 2019)
Azərbaycan… Kapital Bank… PAŞA Bank ASC Xalq Bank ASC Unibank KB ASC Rabitəbank ASC Azərbaycan… Nikoil Bank İKB… Premium Bank… Yapı Kredi… Bank VTB… Expressbank… Naxçıvanbank… Ziraat Bank… Bank… Günay Bank ASC Azər Türk Bank… AtaBank ASC AFB Bank ASC TuranBank ASC Bank Avrasiya… Pakistan Milli… AGBank ASC NBCBank ASC Amrahbank ASC Bank BTB ASC Bank of Baku… Bank Melli İran… Muğanbank ASC AccessBank QSC Figure.14 Net Profits of Banks 2018-2019 (Finance and credit, 2019) Top five banks in terms of Net Profits in Azerbaijan are International Bank of Azerbaijan (IBA) , Kapital Bank, Pasha Bank, Xalq Bank and Unibank (Figure.14). Top three Banks will be analyzed in more details below. Table.3 Position of Banks
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