The Asian Development Bank (ADB) is providing small and medium-sized enterprises in Azerbaijan access to credit facilities.

It is extending up to US$6mn in loans to the Azeri Bank of Baku in the form of two tranches – a US dollar tranche and an Azeri manat (Am) tranche. Repayment of the local currency tranche will be linked to the Am/US dollar exchange rate. The coupon will have a built in Am/US$ swap, allowing ADB to participate in Am upward movements.

William Willms, director for Capital Markets of ADB’s private sector operations department remarks: “The proposed loans will provide increased access to financing by SMEs, which would help promote their operations and profitability and enhance their competitiveness, contribute to private sector development and translate into sustainable economic growth.
”Lack of access to adequate finance is one of the biggest difficulties facing SMEs in Azerbaijan. Yet the SME sector accounts for 80% of registered private businesses and represents an estimated 10% of gross domestic product in the last five years. SMEs are also the biggest source of domestic employment outside the public sector.”
The credit line will also help Azerbaijan diversify its economy and lessen its dependence on oil exports.

ADB’s Willms adds: “In the long-term, Azerbaijan’s high dependence on oil exports may pose a threat to the economy given the potential volatility in the international oil market. The main challenge for Azerbaijan is to develop the non-oil sector to ensure that the economy continues to grow on a sustainable path after the oil boom.”