MICROCAPITAL STORY: Rural Microfinance Institution (MFI) Aqrarkredit of Azerbaijan to be Transformed into Full Agricultural Bank

Baku-based Aqrarkredit, a joint-stock non-banking credit organization, will be transformed into a full agricultural bank by the end of the year. The action is awaiting government approval and the chairman of the microfinance institution (MFI), Mammad Musayev, remarked that Aqrarkredit has discussed the selling of shares, upon completion of the change in status, with the European Bank for Reconstruction and Development (EBRD), a London-based international bank utilizing investment tools to encourage democracy and market economies from central Asia to central Europe since 1991, and the International Finance Corporation (IFC), a member of The World Bank Group founded in 1956. In preparation for the governmental review, Aqrarkredit recently underwent an audit conducted by KPMG, a global auditing firm operating in 145 countries.

As stated in the ABC.AZ source article, the minimum capital requirement for newly-established banks in Azerbaijan is AZN 10 million, or USD 12.1 million. With charter capital of over AZN 18.5 million (USD 22.4 million) according to the MFI’s web site, Aqrarkredit is significantly above the minimum requirement.

Aqrarkredit possesses an overall loan portfolio of AZN 15 million (USD 18.1 million) and total assets of nearly AZN 25.9 million, or USD 31.2 million. The MIX Market, the microfinance information clearinghouse, lists Aqrarkredit as a non-bank financial institution dedicating 61 to 70 percent of its operations to microfinance and reaching over 2,800 active borrowers, 15 percent of whom are women. Established in 1992, Aqrarkredit was formerly known as the Agro-Industrial Bank of the Azerbaijan Republic, until the name was changed by the Cabinet Ministers through decree in 2001. Aqrarkredit concentrates its efforts on rural areas and agricultural enterprises and offers tailored products such as a leasing program for farm equipment and the National Fund for Entrepreneurial Support (NFES)—a program specifically targeting small and medium enterprises (SMEs).

The main shareholder in Aqrarkredit is Azerbaijan’s Ministry of Finance which holds shares worth 99.93 percent. The remainder belongs to the Melioration and Water Industry Company (0.04 percent) and the State Insurance Commerce Company (0.03 percent).

The EBRD reported 2006 total assets of EUR 30.7 billion and a loan portfolio of nearly EUR 8 billion and is owned by two intergovernmental organizations and 61 countries, of which Azerbaijan is included. For a more detailed description of EBRD and its activities pertaining to Azerbaijan and microfinance in general, please refer to this recent MicroCapital article.

The IFC, which “provides loans, equity, structured finance and risk management products, and advisory services to build the private sector in developing countries,” reported total assets of USD 40.6 trillion and a loan portfolio of over USD 12.7 trillion as of June 30, 2007, according to financial statements audited by Deloitte and Touche (page 2). Since Azerbaijan joined the IFC in 1995, the Washington, DC-based institution has helped to establish the Micro Finance Bank of Azerbaijan (MFBA)—in which it is a shareholder—and has arranged for USD 104 million in syndicated loans as well as committed USD 246 million of its own funds for investments within the country (figures include non-microfinance investments).

MicroCapital recently reported on MFBA here.

By Anthony Busch, Research Assistant

Additional Resources:

ABC.AZ: Home, “Till the End of the Year Aqrarkredit to be Transformed into Agricultural Bank with Participation of EBRD and IFC”, April 21, 2008

Aqrarkredit: Home, Legal Status, Financial Status, Balance Sheet, MIX Market Profile, Leasing Program, National Fund for Entrepreneurial Support

Deloitte and Touche: Home

European Bank for Reconstruction and Development: Home, About, 2006 Financial Report, Members/Shareholders

International Finance Corporation: Home, About, History, Financial Statements, Azerbaijan

KPMG: Home, About

Micro Finance Bank of Azerbaijan: Home

MicroCapital article, April 15, 2008: “The European Bank for Reconstruction and Development (EBRD) will Extend a $30m Syndicated Loan to the Micro Finance Bank of Azerbaijan (MFBA) for On-lending to Micro Enterprises”

MicroCapital article, May 12, 2008: “Three Microfinance Institutions (MFIs) Account for Over Half of Azerbaijan Micro-finance Association’s (AMFA) Total Loan Portfolio for the First Quarter of 2008”

Ministry of Finance: Home

MIX Market: Home

OANDA: FXConverter

The World Bank: Home

Similar Posts: