System to assess agricultural loans created

By Azernews

By Abdul Kerimkhanov

Thanks to a new innovative tool to evaluate loans in the agricultural sector, banks in Azerbaijan are expected to increase their capacity to lend to local farmers and agricultural firms.

All credit organizations in Azerbaijan are presented with a new system of agricultural loan assessment (AzALES), which will be tested within 15 days, Mirza Aliyev, Chairman of the Agency for Agricultural Credits and Development, said at the presentation of the new system.

Aliyev noted that the system will allow banks to better assess risks in the agricultural sector, as well as to quickly consider applications for loans.

He informed that in credit organizations, mainly in regional branches, there is not a sufficient number of qualified employees in the field of credit risk assessment. Therefore, he added, credit organizations do not want to take risks.

"As a result, farmers' applications are rejected or the process of issuing loans is delayed. At the same time, credit organizations require real estate as collateral, the cost of which far exceeds the loan amount," Aliyev said.

He added that the Agency also offers a new mechanism for working with loan applications.

"AzALES will be able to track the reasons for the rejection of farmers’ applications to credit organizations. About $200,000 were spent on creating the system," Aliyev mentioned.

Thus, AzALES will be managed by the Agency and will be available for the entire financial sector of the country.

The AzALES system was developed with the support of the European Bank for Reconstruction and Development (EBRD) and the EU, as well as with the participation of specialists from the Frankfurt School of Finance and Management.

In turn, Simona Gatti, Minister Counsellor, Head of the Department of Cooperation of the European Union Delegation to Azerbaijan, said that AzALES will help improve the knowledge of credit institution employees in the financial sector.

Gatti noted that the new system contributes to solving the problem of low qualification of personnel, which is observed not only in Azerbaijan.

She also mentioned the important role of the AzALES system in implementing the strategy of economic diversification, and in particular, modernization of agriculture and facilitating access to credit resources.

Gatti noted that EU funding has played an important role in facilitating the creation of AzALES.

“The system is presented at a critical moment when the Azerbaijani government uses important resources to modernize the agricultural sector as part of its economic diversification strategy,” she added.

She further noted that the success of many initiatives included in the government's agricultural roadmap and supported by the EU in this sector depends on improving access to agricultural loans, especially for small and medium-sized rural operators.

AzALES will allow to better assess the risks in the agricultural sector, as well as to faster consider loan applications.

Azerbaijani banks will be able to lend more to agriculture thanks to the new innovative tool for evaluating loans in this sector, the European Bank for Reconstruction and Development (EBRD) said in a message.

The AzALES system covers all commercially viable crops and livestock products in Azerbaijan and helps lenders more effectively assess risks, process loan applications faster and improve access to financing for small private farms.

Agriculture is one of the main sources of livelihood in the regions, 36 percent of the active labor force is employed in this sector. The agricultural sector accounts for about six percent of GDP, and taking into account the agro-processing industry, it exceeds 10 percent.

EBRD noted that Azerbaijan has powerful potential in the agricultural sector due to the diversity of crops.

Ivana Duarte, Head of the EBRD's office in Baku, considers that the new system will help improve the quality of services for it, which is often considered risky.

She emphasized that AzALES will use the positive effect of reforms already carried out by the government in the financial and agricultural sector of Azerbaijan.

AzALES will be centrally managed and supported by the Agency for Agricultural Credits and Development under the Ministry of Agriculture of Azerbaijan and will be available to the entire financial sector of the country.

This will allow financial institutions to use centralized and reliable agricultural data, increase efficiency and transparency and reduce costs, providing agricultural loans in a more systematic way.

The EBRD maintains a strong focus on Azerbaijan’s agricultural sector. Since 2013, the Bank has provided about €50 million of financing to various agribusiness firms in the country.

The EBRD is one of the leading institutional investors in Azerbaijan, where it focuses on supporting efforts to diversify the economy and develop the private sector.