Collateral requirement for entrepreneur loans has been eliminated in MCGF Credit Guarantee mechanism

Ensuring decent living standards and increasing social welfare in Azerbaijan, achieving balanced and sustainable economic growth is one of the priorities of the concept of socio-economic development of the country. As a result of purposeful reforms implemented in recent years, a number of achievements have been obtained in improvement of the business and investment climate in the country, increase of entrepreneurs’ access to financing, and development of state-to-business relations. As part of the reforms, l a mechanism of credit guarantee and granting of interest subsidies from the state budget has been created in the country as a financial support tool.

Mortgage and Credit Guarantee Fund started introduce a credit guarantee and interest subsidising mechanism since 2018. During that period, business loans worth AZN 41,759,000 has been provided to various sectors of the economy such as food industry, agriculture, trade services, machinery and equipment production and other industries covered by Funds guarantees.

In order to analyse the existing problems and improve the credit guarantee mechanism Fund regularly holds meetings with authorized banks and entrepreneurs and studİes international experience in this field. The analysis show that small and medium-sized business face high requirements for collateral while applying for loans to banks and as a result, they have limited access to financing (loans).

As a result, a completely new approach to risk management has been applied to the credit guarantee mechanism and collateral requirements were eliminated for business loans in existing mechanism. These changes are expected to open new opportunities in form of unsecured business loans with Fund’s guarantee for entrepreneurs with low-risk credit rating and not satisfactory collateral.

Elimination of the requirements for collateral on entrepreneur loans under the existing mechanism will facilitate financing for entrepreneurship by increasing access to financial resources for entrepreneurs with lack of collateral, ultimately diversify the economy, support economic activity and development of the non-oil sector in the country.