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Boosting banking in Azerbaijan
EBRD takes stake in leading Azeri private bank ADB
The European Bank for Reconstruction and Development is taking an equity stake
of 25 per cent plus one share in Azerdemiryolbank (ADB), one of Azerbaijan’s
leading private banks, as part of a capital increase.
At the same time, the EBRD is also lending ADB $1 million over 5 years for
on-lending to micro and small enterprises around the country, stimulating
grassroots business activity as well as increasing the limit under the Trade
Facilitation Programme to $3 million (from $1 million). ADB will be the first
bank to be included in the EBRD’s micro and small lending programme through
commercial banks in Azerbaijan. The EBRD’s program now works with 55 banks in
its countries of operation to provide financial access to smaller borrowers
and plans to further expand its outreach through other Azeri banks in the
coming months. EBRD will offer technical cooperation to help ADB extend this
service further into the regions and will be co-ordinating this effort with
the German-Azerbaijan Fund.
The equity investment will enable ADB, with its 288 staff and total assets of
$38 million, to further strengthen its position as competition heats up in the
banking sector. Gradual consolidation in the sector and increasing capital
requirements have intensified competition within the core of the private
banking sector. This competitive core consists of a number of strong, fast
growing private banks.
ADB’s strategy is to expand its customer base, especially in the retail and
small and medium enterprise sector, and emphasise regional expansion to become
one of the major private commercial banks in Azerbaijan. With the EBRD equity
stake, it will now be in a better position to compete with the state-owned
banks still dominating the sector.
As part of the deal, ADB has agreed to implement an institutional building
plan and business plan agreed with the EBRD. One element of this will involve
strengthening the corporate governance structure of ADB, which will help set
standards that can be applied by other banks. Another element targets
efficiency enhancements, allowing faster transfer of skills and improved
commercial performance. The institutional building plan will be implemented
through advisory services financed with technical co-operation funds from the
Early Transition Countries multi-donor Fund.
ADB has been a client of the EBRD since 1998. It is currently involved in the
Bank’s Trade Facilitation Programme and Multi-Bank Framework for Azerbaijan
with credit lines for small and medium sized enterprises. ADB is also
receiving technical cooperation to support the development of sustainable SME
finance.
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