A public discussion was organized on the role of the credit guarantee mechanism in business development
A public discussion on “The role of the credit guarantee mechanism in business development” organized by the Public Council under the Small and Medium Business Development Agency (KOBIA), with the support of the Mortgage and Credit Guarantee Fund and the National Confederation of Entrepreneurs (Employers) Organizations of the Republic of Azerbaijan (ASK).
Representatives of relevant state institutions, banking and insurance companies and business associations participated in the event organized within the framework of state-entrepreneurial cooperation.
Mr. Farhad Garashov, the Chairman of the Public Council under KOBIA, noted that the event is the first public discussion organized by the council in 2023, and the goal is to discuss the possibilities of access to financial resources of SMEs, and to strengthen public-private cooperation in this field.
Mr. Orkhan Mammadov, Chairman of the Management Board of KOBIA, shared his views on the financing situation of SMEs and the importance of the loan guarantee mechanism for SMEs. It was noted that entrepreneurs in Azerbaijan prefer banks as a source of financing. Although the credit portfolio of banks is wide, the share of regions in lending is about 23%, and 77% for Baku. According to the analysis of the applications received by the agency and the surveys conducted, as well as the reports of international development organizations, the main difficulties faced by SMEs in the field of access to financial sources are high interest rates, strict collateral conditions, risk distribution and lack of loan guarantee mechanisms. The loan guarantee mechanism allows small and medium-sized entrepreneurs to overcome financial limitations, supports the provision of long-term loans to entrepreneurs for financing business projects. It also facilitates banks’ access to a new and wider customer network, and ensures the minimization of risks. The formation of a credit guarantee mechanism in our country is commendable, but there is a need for further improvement of the guarantee system aimed at the SME sector.
Mr. Fakhri Kazimov, Chairman of the Board of the Mortgage and Credit Guarantee Fund, gave detailed information about the Fund’s activities, financial indicators, achievements, as well as the purpose of creating a credit guarantee mechanism as a support tool for entrepreneurship in the non-oil sector. It was emphasized that this mechanism, which was created taking into account the requirements of local entrepreneurs, is regularly improved by studying the most successful examples of international experience. In order to ensure transparency and efficiency within the framework of the mechanism, applications from the borrowers are accepted through the “Electronic Mortgage and Credit Guarantee” system located on the “Electronic Government” portal.
Mr. Mammad Musayev, President of the National Confederation of Entrepreneurs (Employers) Organizations of the Republic of Azerbaijan, noted that the number of registered entrepreneurs in Azerbaijan is about 1.4 million. This number is an indicator of the large number of people who want to start a business and work in the private sector in our country. Financial availability is one of the important factors in starting a business. Currently, the loan portfolio of banks and non-bank credit organizations in Azerbaijan is 20.3 billion. 80% of these loans belong to Baku and Absheron-Khizi economic regions. As it can be seen, this indicator shows the need to further improve access to finance for entrepreneurs in the regions. State guarantee mechanisms for loans, interest subsidization provided by the Mortgage and Credit Guarantee Fund are one of the best tools for financial accessibility of entrepreneurs. There is a need to increase the awareness of entrepreneurs about these tools, as well as to improve the mechanism in the future. Then, a presentation on loan guarantee mechanism was held by the Mortgage and Credit Guarantee Fund.
Within the framework of the event, ideas were exchanged on the role of the credit guarantee mechanism in business development, improvement of the mechanism, and the entrepreneurs’ questions were answered.