This is a best prospect industry sector for this country. Includes a market overview and trade data.

Overview
 

The financial sector in Azerbaijan is dominated by banks, which hold about 95% of financial sector total assets.  The non-banking financial sector, particularly the micro-finance sector, is underdeveloped and suffered significantly after the devaluations in 2015.  Microfinance institutions are only now beginning to restart lending.  Following the 2015 devaluations, 19 banks were closed in 2016 as a result of non-performing loans, poor asset quality, lack of liquidity, and the overall economic downturn.  Azerbaijan’s largest bank, the International Bank of Azerbaijan (IBA), which is majority-owned by the Azerbaijani government, completed its restructuring in 2018, but has still not introduced an updated business model.

The Financial Markets Supervisory Authority (FIMSA), created in 2016, is the chief regulator of the banking and finance industry.  A lack of access to capital is a constraint to private business in Azerbaijan. 

The credit supply is far too small to provide a suitable environment for the development of small and medium enterprises (SMEs) in the country.

Banks' assets grew by 5.7% in 2018, driven by sharp growth in loans and an increase in cash and cash equivalents.  Banks' liabilities grew by 5%, driven mainly by a 9.6% increase in household deposits.  The banking sector is heavily dollarized, with roughly 65% of bank liabilities held in U.S. dollars.  Total banking sector capital totaled AZN 4.1 billion ($2.4 billion) at the end of 2018. 

Despite publicly dropping the exchange rate corridor in 2017 and officially allowing the manat to float, the Central Bank has not introduced a genuinely floating exchange rate.  Since April 2017, the dollar-manat exchange rate has held steady at 1.70.
 

Leading Sub-Sectors

Financial and wealth management, trade finance, working capital, and lending represent the best prospects for new business development.  As the economy stabilizes, the demand for microfinance is also increasing, with very few lenders in place.  Leasing in Azerbaijan is in its infancy, but is a promising vehicle for business financing in this developing market.  The best prospects in leasing include:

manufacturing equipment, health care equipment and transportation.


Opportunities

Many Azerbaijani banks have expressed interest in pursuing correspondent relationships with U.S. banks. 

In addition, an increasing number of private banks have become interested in attracting foreign equity investors, and the EBRD, IFC, and German financial institutions have taken an equity stake in several such institutions.  The increasing wealth of Azerbaijan has also raised interest in financial and wealth management services. 
 

Web Resources

Central Bank of Azerbaijan: www.en.cbar.az/

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.