Azerbaijan 2009 Microfinance Analysis and Benchmarking Report

This report analyzes trends in performance and growth of Azeri MFIs against a backdrop of the financial crisis and economic recession in the region as well as the changing legislative environment in 2008.

Over the past few years the Azerbaijan microfinance sector has evolved with remarkable growth in outreach, scale and MFI competition. The report states that:

• Microfinance has enjoyed very high growth in the past three years, but is slowing down due to market concentration and slower economic growth;
• As a fast-growing market with a stable currency, the Azerbaijan microfinance sector has been an attractive choice for foreign investors;
• High growth, coupled with double-digit inflation, has pushed demand for more and larger loans;
• Increasing loan sizes are keeping relative costs down, but transaction costs are increasing.

The global financial crisis did put pressure on the growth and funding flows of Azeri MFIs, but did not affect Azerbaijan acutely. Although the financial crisis led to lower levels of capital market funding and lower liquidity levels across the banking sector, inflation levels came down in 2009, easing the pressure on MFI profitability.