Azerbaijan Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in azerbaijan, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Banking and Finance
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Overview

The financial sector in Azerbaijan is dominated by banks, which hold about 95% of financial sector total assets.  The non-banking financial sector, particularly the micro-finance sector, is underdeveloped and suffered significantly following the multiple currency devaluations in 2015. The Baku branch of the National Bank of Pakistan was closed in 2022 upon the bank’s request, bringing the number of banks in the country from 26 to 25.  The situation in the currency market of Azerbaijan remained stable, and the exchange rate of the manat did not change.  Despite publicly dropping the exchange rate corridor in 2017 and officially allowing the manat to float, the Central Bank has not introduced a genuinely floating exchange rate.  Since April 2017, the dollar-manat exchange rate has held steady at 1:1.70.  The Azerbaijani Central Bank increased its foreign exchange reserves by approximately $1 billion to $8 billion.

Azerbaijan increased lending by 31.5% in 2022, reflecting growth in private consumption, while deposits grew by 28.0%. Loans to households rose by 11.1%. Net bank profits rose by 70.1% in 2022, supported by high interest margins. The share of impaired loans in total lending declined considerably from 4.2% in 2021 to 0.3% in 2022.  Deposit dollarization fell slightly from 49.4% at the end of 2021 to 48.4% a year later, while loan dollarization declined from 25.8% to 19.7%.  Broad money expansion rose from 18.7% in 2021 to 23.6% in 2022.

Leading Sub-Sectors

Financial and wealth management, trade finance, working capital, and lending represent the best prospects for new business development.  Demand for microfinance is also increasing, with very few lenders in place.  Leasing in Azerbaijan is in its infancy but is a promising vehicle for business financing in this developing market.  The best prospects in leasing include manufacturing equipment, farm machinery, medical devices, and transportation.

Opportunities

Many Azerbaijani banks have expressed interest in pursuing correspondent relationships with U.S. banks.  In addition, an increasing number of private banks are interested in attracting foreign equity investors.  The EBRD, IFC, and some German financial institutions have taken equity stakes in several such institutions.  The increasing wealth of Azerbaijan has also raised interest in financial and wealth management services.  

Resources

Bank of Azerbaijan: https://www.cbar.az/home?language=en

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