The FINANCIAL — IFC, a member of the World Bank Group, has helped launch Azerbaijan’s first private credit bureau to enable local financial institutions to better share credit information and manage lending risks, and boost access to finance for borrowers, including small and medium enterprises.
The shareholders – around 20 local financial institutions and Creditinfo, a leading service provider for credit information and risk management solutions worldwide – signed an agreement establishing the private credit bureau in Baku today. For the last couple of years, IFC has supported the creation of the bureau through providing advice and sharing global experience in the area, according to IFC.
Azerbaijan is ranked 118th in the Getting Credit indicator in the World Bank Group’s Doing Business 2017 report. The bureau is expected to make it easier for financial institutions to grant credit and promote more responsible lending practices. Borrowers will have a right to give consent to share their loan information with the credit bureau.
“The private credit bureau will increase the range of users and data providers compared with the public credit registry. For example, it will have credit history profiles from leasing as well as non-traditional creditors like telecommunication companies, trade credit and utility payments,” said Reynir Grétarsson, the founder and CEO of Creditinfo Group. “Keeping all credit exposures in a single file will help financial institutions and lenders to efficiently evaluate risks, lowering borrowing costs and increasing the availability of credit.”
“Recent developments in countries in the region, including Azerbaijan, highlight the need to reduce risk and strengthen the financial sector,” said Aliya Azimova, IFC Country Representative in Azerbaijan. “Efficient information sharing will help reduce default rates and increase lending volumes. The credit bureau will also benefit borrowers, because a positive credit history allows wider access to finance.”
IFC has also worked with Azerbaijan’s government on legislation to reform the credit information sharing system. The law on credit bureaus, drafted with IFC advisory support and enacted in December 2016, provided the legal basis for the creation of a private credit bureau.
Since 2009, the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Project, part of the World Bank Group’s Finance and Markets Global Practice, has been helping to strengthen Azerbaijan’s financial infrastructure by supporting the development of credit bureaus, as well as introducing a formal risk management function and secured transaction system in Azerbaijan. The project is funded by Switzerland’s State Secretariat for Economic Affairs (SECO).
Azerbaijan became a member of IFC in 1995. Since then, IFC has invested $473 million, of which nearly $73 million was mobilized from other lenders, financing 56 long-term projects across a range of sectors, including financial services, infrastructure, and manufacturing sectors. In addition, IFC has supported around $80 million in trade through its trade finance program and provided $250 million for the Baku-Tbilisi-Ceyhan pipeline. IFC has also implemented a range of advisory projects aimed at encouraging private sector growth.
In fiscal year 2016, IFC invested almost $19 billion in developing countries worldwide.