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EBRD lends $1 million to Azeri bank
Bank of Baku to expand lending to smaller businesses and international traders
The European Bank for Reconstruction and Development is lending $1 million to
Azerbaijan’s Bank of Baku, one of the most innovative performers in the
country’s growing financial sector, as part of moves to help diversify the
Azeri economy away from the dominant oil and gas sector.
As well as the $1 million credit line over three and a half years to support
lending to small and medium sized businesses, the Bank is extending its limit
under the Trade Facilitation Programme by $500,000 to $1 million to help the
bank further develop foreign trade finance services.
Bank of Baku, set up 11 years ago, is currently Azerbaijan’s seventh biggest
bank by assets. The bank, which has made its niche outside the energy sector,
has since 2002 focussed on SME and retail lending. It has a wide and steadily
growing client base.
The EBRD is working with five Azeri banks, including Bank of Baku, to build
strong institutions capable of surviving future consolidation in the sector.
Bank of Baku had its first $1 million credit line in 2004 under the Multi-Bank
Framework for Azerbaijan, which has been efficiently used. Such opportunities
– still rare in a sector just beginning to get longer-term financing in
international markets – are helping to further strengthen the bank’s customer
base, diversify its funding and compete more successfully with dominant
state-owned players in the banking sector.
Technical cooperation funding for the Azerbaijan Multi-Bank Framework is
provided by Tacis, the European Union’s technical assistance programme for
eastern Europe and Central Asia.
This deal is in line with the “Early Transition Countries” (ETC) initiative
was launched by the EBRD in 2004 to stimulate market activity in the Bank’s
poorest countries of operations: Armenia, Azerbaijan, Georgia, the Kyrgyz
Republic, Moldova, Tajikistan and Uzbekistan. The initiative aims to stimulate
market activity in these countries by using a streamlined approach to
financing more and smaller projects, mobilising more investment, and
encouraging economic reform. The initiative is part of an international effort
to address poverty in these members of the Commonwealth of Independent States
(the former Soviet Union). The Bank will accept higher risk in the projects it
finances in the ETCs, while still respecting the principles of sound banking.
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