Supporting SMEs’ role in Azerbaijan’s economy

By Lucia Sconosciuto

Supporting SMEs’ role in Azerbaijan’s economy

EBRD and donors help diversify the economy

With over €294 million of finance via direct financing and lending through local banks, alongside business advice operations, the EBRD in Azerbaijan has been backing small and medium-sized enterprises (SMEs)’s growth for decades.

Helping diversify the Azeri economy beyond the energy sector is a priority.

Thousands of small businesses have learned new skills, improved governance and invested to modernise and expand, thanks to the support of the EBRD and donors such as the European Union, Sweden, Taipei China and the EBRD Early Transition Country’s Fund*.

“I started the company from scratch in 2003 and we constantly learn new things,” said Ibrahim Alisoy, co-founder and general manager of IDEA LLC. His company specialises in the production of outdoor metal and wood furniture and architectural structures.

It all began with small scale production of benches, pergolas and lighting with striking, innovative design. Now their products include shelters for public transport, advertising supports and public illumination.

“Our company is different because we don’t do standardised products. Every order is customised, unique,” he added. “The most important things for us are design and quality.”

Until recently IDEA did not have an automated system to ensure accurate and timely information about warehouse and manufacturing operations. This used to delay deliveries to clients and complicate processes.

With orders increasingly coming in for customers in Russia, Kazakhstan and Qatar, there was an urgent need for more efficiency.

By February 2017, under the EBRD Small Business Initiative, the company worked with a local consultant to introduce an Enterprise Resource Planning System, in a project supported by the EU through the EU4Business Initiative**.

The new system has established better controls and cut product delivery times. It also provided a boost for the company’s confidence, which helped secure a large contract for outdoor furniture exports with a Russian company.

Since 2003, more than 850 SMEs in Azerbaijan have received advisory services, boosting their competitiveness.

The EBRD tools to assist SMEs to reach their potential include specific priority areas such as accounting improvement, through helping SMEs secure investments, export promotion training to help them conquer new markets, and the Women in Business programme aimed at providing financing and advice to companies that are managed by female entrepreneurs.

One such company is ESSE, led by Director Gulnara Hasanova. The company is a direct sales distributor of a wide range of fashion accessories and home-care products through a network of agents, most of whom are women. 

The advisory project, which was supported by Sweden through the Swedish International Development Cooperation Agency, helped the company open offices in Sheki and Ganja, in western Azerbaijan, as well as providing advanced training for sales staff and a new marketing plan.

“Working outside the capital Baku was a major challenge, but the project helped us to build a strong distribution network with partners and clients in the region,” said Ms Hasanova. “Our sales increased by 35 per cent.”

In Azerbaijan, the EBRD has also provided €233 million in indirect finance, supporting an SME lending portfolio of our partner banks reaching over 94,000 micro, small and medium-sized enterprises annually.

In addition, the Bank has a current outstanding portfolio of €61 million in direct financing to high growth potential SMEs in the country.

* The donors of the EBRD Early Transition Country’s Fund are: Canada, Finland, Germany, Ireland, Japan, Korea, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, Taipei China and the United Kingdom.

** The EU4Business initiative fosters the development of the private sector by helping SMEs acquire new skills, becoming more competitive, accessing more finance and increasing their export to new markets, including the EU. It covers all the EU Eastern Partnership countries: Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. It also supports the government with policy reform in order to improve the business climate.