Central Bank introduces new financial instrument to expand financial accessibility for real sector

22-07-2025

22 July 2025, Baku: The Central Bank of Azerbaijan (CBA) is continuing its strategic initiatives to expand access to financial resources for the real sector in the country on favorable terms. To this end, a 3-year program is planned to provide banks and non-bank credit institutions (NBCIs) with access to a new financial instrument for the first time in the financial sector beginning August 1, 2025.

Within the program framework, banks and NBCIs will hedge the funds they attract from non-resident financial institutions with a financial instrument provided by the CBA after converting them into manat. These hedged funds will finance micro, small, and medium-sized enterprises; family farms; and self-employed individuals through loans and leasing.

The favorable environment created by recent reforms to strengthen macroeconomic stability, improve monetary policy transmission, and regulate the financial sector has laid the foundation for a program that will promote financial accessibility. Notably, the strategic initiatives implemented have led to Azerbaijan's sovereign credit rating being upgraded to investment grade by international rating agencies, and positive dynamics are predicted for the next period. Against the backdrop of the country's increased sovereign rating, the financial stability of credit institutions is also strengthening, which positively impacts their rating indicators. This favorable environment thus expands opportunities for local financial institutions to attract funds from international markets. To ensure the efficient use of these resources within the country and to promote sustainable financing, the CBA decided to support these institutions with appropriate financial instruments and introduce a new financial mechanism.

The program will also cover funds raised during the three months prior to its implementation on August 1, 2025 that were already used to finance the aforementioned target groups. Banks and NBCIs can take advantage of the opportunity provided by the CBA by eliminating existing active hedging instruments. Half of the resulting savings (50%) will be allocated to improving the credit conditions offered to customers.

Overall, the program will support the inflow of foreign financial resources into the country's economy by increasing credit institutions' ability to borrow from foreign financial markets.

It should be noted that credit institutions' use of the proposed new hedging instrument will reduce the cost of resources used for lending. Overall, this instrument is an important step toward achieving the goals of diversifying and expanding the economy and increasing financial inclusion.