Baku, Azerbaijan, May 2. The Central Bank of
Azerbaijan (CBA) has revealed the factors limiting the development
of the microfinance sector, Trend reports via the CBA’s Microfinance Model
Strategic Framework document.
The main factors limiting the development of the microfinance
sector include the lack of formation of microfinance as a specific
subsector of the financial sector, the limited resource base and
variety of key microfinance institutions, insufficient risk-sharing
mechanisms that are not adapted to the characteristics of the
microfinance sector, as well as weaknesses in the identification
system for self-employed individuals and family farms, which are
one of the main customer segments of microfinance.
It has been noted that the absence of a defined microfinance
segment in the legislation also limits the possibilities for the
implementation of encouraging prudential and state policies in this
field.
“The current situation makes it difficult to form specialized
microfinance institutions focused on small business lending. This,
in turn, limits the effective implementation of government policies
regarding self-employment and micro-enterprise development.
The fact that the majority of the portfolios of key microfinance
institutions, such as non-bank credit institutions (NBCIs), consist
of consumer loans indicates the necessity of incorporating the
concept of ‘microcredit’ into the legal framework and conducting a
policy that encourages this direction,” the document added.
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