National Benchmarking Study of Azerbaijan MF sector

1. National Benchmarking Study of Azerbaijan MF sector September 2008 Nigar Pirmammadova, Azerbaijan Micro-finance Association Finance Manager

2. Benchmarking Azerbaijan Microfinance 2007 • National Benchmarking Study of Azerbaijan MF sector( since October 2005) Our Strategic Partners & Donors • BP & its co-venturers in the Azeri-Chirag-Guneshli, Shahdeniz, Baku-Tbilisi-Ceyhan and South Caucasus Pipeline projects (RDI) • UNDP Azerbaijan • Eurasia Foundation 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

3. What does Benchmarking serve? Benefits of Benchmarking • Increases Transparency • Attracts Government Attention and Support • Enables Access to Capital • Attracts New Investors to Market • Increases Scaling and Outreach of MFI Operations • Facilitates Economic Growth • Aids in Poverty Reduction • Provides Comparative Information for Improving Financial and Social Performance • Extends Reach to Global Networks 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

4. Report Structure Country Overview • Introduction • Macroeconomic indicators • Economic Overview • Legal and Regulatory Environment in Microfinance Sector Comparative Measurements • Outreach and Scale • Financial Structure • Ratio Analysis • Results • Information about MFIs, CU took part in preparation Benchmarking Report 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

5. Macroeconomic indicators GDP per capita(AZN)/ Real growth rate % Inflation rate (%) 2001-2007 years Source: The State Statistical Committee of the Azerbaijan Republic 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

6. Legal and Regulatory Environment in Microfinance Sector • The working Group consisted of Azerbaijan Microfinance Association`s leading members on developing the Draft Law on Non-bank Credit Organizations was established under USAID “SME Support through Financial Sector Development Project” implemented ACDI/VOCA and with the support National Bank officials. • The main goal of developing the Draft Law is to create fruitful environment for micro-loans and to provide guarantee in serving the poor population expanding the financial service types by Non-bank Credit Organizations If the Parliament passes the law, non-bank credit organizations will face the following requirements: • Higher capital requirements: Article 7.2 of the draft law stipulates that the minimum capital requirement for non-bank credit organization holding collateral deposits should be no less than AZN 250,000 (302,500 USD) and no less than AZN 25,000 (30,250 USD) for those not collecting collateral deposits. Currently, the capital requirement stands at AZN 6,050 (5000 USD). • More involvement and control of the NBA over microfinance operations 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

7. Azerbaijan Microfinance is young.... • Azerbaijan Microfinance Sector is 10 years • MFIs middle age is 7,5 years • 15 MFIs, 12 commercial banks and 40 Credit Unions provide microfinance service 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

8. Outreach and Scale • Number of Active Borrowers and Total Loan Portfolio have increased during last years and continue to grow Source: AMFA Matrix 31 December, 07 and Mix Market PEER group information 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

9. Outreach and Scale Number of Active Clients and Gross Loan Portfolio % • Sector dominated by FINCA and MFBA. • FINCA and MFBA captured about 75 percent of new market share. • New development: Significant growth for CredAgro 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

10. Azerbaijan Microfinance is growing… • Average loan balances have increased during last years and continue to grow Average Loan Balance per Borrower PEER groups 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

11. Financial Structure • 95 percent of short and long term funding comes from foreign sources. • The terms for foreign funds increased from 47 to 55 months, while interest rates stayed around 9 percent on average. • The proportion of all borrowings from foreign funds now stands at 69 percent, up from 54 percent in 2006. • Largest increases in amounts came from foreign funds (223 percent increase) and foreign NGOs (225 percent increase). 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

12. Ratio Analysis Portfolio at Risk > 30 days (%) 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

13. Long term outcomes achieved under Benchmarking Study project • 13 Azerbaijani MFIs, 3 banks and 2 CU have published audited financial data at www.mixmarket.org • 8 Azerbaijani MFIs have successfully passed credit ratings by Microfinanza Rating & M-Cril • Findev and Viator MFIs got 2006 International Financial Transparency Award Diploma & cash price of US$ 10,000 by CGAP at 10th MFC Annual Conference “Bridging the Market Gaps” organized by Microfinance Centre in Sophia, Bulgaria during May 29- June 2, 2007. • 10 New Investors provided commercial capital to Azerbaijani MF sector in 2007. 4th Azerbaijan Micro-finance Conference, 16-17 September, 08

14. THANK YOU FOR YOUR ATTENTION! Contact : phone: 437 16 45 nigarp@amfa.az www.amfa.az 4th Azerbaijan Micro-finance Conference, 16-17 September, 08