Page 45 - Small Stans and Causcasus Outlook 2022

Central Bank of Azerbaijan, this is 6.3% less than on October 1.
Problematic loans decreased by 8.65% compared to the beginning of
2021, and by 18.9% over 2020. At the end of October, the share of
overdue loans in the total loan portfolio was 5%. This ratio was 5.5% at
the end of September, 6.1% at the end of 2020 and 6.8% at the end of
October 2020. In general, there is a decrease in average interest rates
on consumer loans. The same can be said for business loans.

The problem is only expected to rise in the loan sector as Azerbaijan is
going to introduce student loans in 2022. Those studying at the
bachelor's, master's, secondary, vocational and residency levels will be
able to use this loan. Tuition fees in Azerbaijan vary from AZN400 to
AZN10000, depending on the level of education. Taking into account
the results of actuarial calculations, the Board of Trustees of Student
Loan Foundation, in coordination with the Cabinet of Ministers,
approved 2% per annum interest rates on social education student
loans and 6% on standard education student loans. However, many
experts expect loans to worsen the debt situation.

In October 2021, the total credit investments of the banking sector of
Azerbaijan increased by AZN458.6mn and reached AZN16bn on 1
November 2021. Compared to the end of 2020 (for 10 months of 2021),
total credit investments increased by AZN1.7bn.

Another growing trend in the credit sector is newly established NBFIs
(non-banking financial institutions). Of the 39 NBFIs that existed and
reported on the market in 2019-2020, seven increased their authorised
capital in 2020. These are “İnkişaf üçün Maliyyə” (Azerbaijani for
‘Finance for Development’), Birkart, International, Brand Credit, Falcon
Finance, Regional and City Finance. The highest dynamics was
recorded in "Finance for Development" (42.9 times), and the lowest
dynamics was recorded in "City Finance" (33.3%). The authorised
capital of 2 NBFIs – "Credit Service" and "Azerbaijan Micro-Credit" –
decreased by 5.8% and 22.6%, respectively. The authorised capital of
the remaining 30 NBFIs has not changed.

3.1.3 Industry

63.8% of industrial output is produced in the mining sector, 30.6% in the
processing sector, 4.8% in the production, distribution and supply of
electricity, gas and steam, and 0.8% in the water supply and waste
management sector.

Commercial oil production in the mining sector remained at the same
level, while commercial gas production increased by 23%.

Production of pharmaceuticals in the processing sector increased by
93.2%, construction materials by 83.7%, installation and repair of
machinery and equipment 64.3%, tobacco products 53.4%, leather and
leather products, footwear 31.4%, production of textile products 30.5%,
paper and cardboard 28.4%, chemical products 26.3%, finished metal
products 24%, rubber and plastic products 20.3%, metallurgical
products 18 , 9%, furniture production 18.6%, petroleum products
14.6%, computer, electronic and optical products 11.9%, food
production 11.3%, beverage production 3.7%, automobiles, trailers and

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