Financial Crime World

Azerbaijan’s Banking Sector Sees Stable Growth Amid Regulatory Changes

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The banking sector in Azerbaijan continues to play a dominant role in the country’s financial landscape, holding a significant 95% share of total assets in the financial sector. Despite recent regulatory changes and challenges, the sector has maintained stability, with key indicators showing steady growth.

Key Indicators Show Steady Growth

  • Lending increased by 31.5% in 2022, driven largely by growth in private consumption.
  • Deposits grew by 28%, while loans to households rose by 11.1%.
  • Net bank profits surged by 70.1% in the same period, supported by high interest margins.

Currency Market Stabilization Efforts

The Azerbaijani Central Bank has been working to stabilize the currency market, with the exchange rate of the manat holding steady at around 1:1.70 since April 2017. The country’s foreign exchange reserves have also increased by approximately $1 billion to reach $8 billion.

Deposit and Loan Dollarization

  • Deposit dollarization fell slightly from 49.4% in 2021 to 48.4% in 2022.
  • Loan dollarization declined from 25.8% to 19.7%.
  • Broad money expansion rose from 18.7% in 2021 to 23.6% in 2022.

Growth Opportunities in Key Sub-Sectors

Azerbaijan’s banking sector is expected to see growth opportunities in key sub-sectors such as:

  • Financial and wealth management
  • Trade finance
  • Working capital
  • Lending
  • Microfinance (with increasing demand)
  • Leasing (particularly for business financing in developing industries)

International Interest in Azerbaijani Banks

Many international players are showing interest in Azerbaijan’s banking sector, including:

  • Correspondent relationships with US banks
  • Foreign equity investors from institutions like the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), and German financial institutions.

For more information on Azerbaijan’s banking sector, visit the website of the Central Bank of Azerbaijan at https://www.cbar.az/home?language=en.