Azerbaijan’s Financial Regulatory Bodies Face Challenges Amid Economic Downturn

Overview

The financial sector in Azerbaijan is struggling to recover from a series of devaluations and economic downturns that have led to the closure of 19 banks since 2016. Despite efforts by the government to stabilize the economy, the non-banking financial sector remains underdeveloped.

Challenges in the Financial Sector

Lack of access to capital: Private businesses in Azerbaijan face significant constraints due to limited access to capital, hindering the growth of small and medium enterprises (SMEs).
Heavy dollarization: The banking sector is heavily dollarized, with around 65% of bank liabilities held in U.S. dollars.

Efforts to Stimulate Growth

Correspondent relationships: Azerbaijani banks are exploring correspondent relationships with U.S. banks.
Foreign equity investors: Private banks are seeking foreign equity investors.
Financial and wealth management services: The increasing wealth of Azerbaijan is driving demand for financial and wealth management services.

Opportunities for New Business Development

Financial and wealth management: Experts say that this area holds the best prospects for new business development in Azerbaijan.
Trade finance: Trade finance, working capital, and lending are also promising areas.
Leasing: Leasing is another emerging opportunity, particularly in manufacturing equipment, healthcare equipment, and transportation.

Support from International Partners

U.S. Commercial Service: The U.S. Commercial Service has expressed interest in helping U.S. companies tap into these opportunities by providing guidance on market entry strategies, regulatory requirements, and business contacts.
Global network: With its extensive network of offices worldwide, the U.S. Commercial Service is well-positioned to support U.S. businesses looking to expand their operations in Azerbaijan.

Conclusion

Azerbaijan’s economic challenges offer a unique opportunity for international investors and lenders to provide much-needed financing and expertise to support growth and development in the region. As the economy stabilizes, opportunities are emerging for businesses that can adapt to the changing market conditions and capitalize on the country’s growing wealth and resources.