18 September 2020, Baku: The Cooperation Council with Entrepreneurs under the Management Board of the Central Bank held its next meeting online on 16 September 2020. The meeting was participated by the National Confederation of Entrepreneurs Organizations (NCEO), the Azerbaijan Banks Association (ABA), entrepreneurs and banking sector representatives represented in the Council, as well as other non-Council member representatives. The meeting was also attended by Tahir Mirkishili, the Chair of the Committee of the Milli Majlis on Economic Policy, Industry and Entrepreneurship, Javanshir Abdullayev, Director of the Bank Education Center (BEC).

This meeting of the Council was dedicated to challenges entrepreneurs faced during the pandemic and discussion on cooperation with the banking sector on the ways out.

Opening the meeting Elman Rustamov, Governor of the Central Bank noted that the Council’s operation over the past period shows that an active dialogue between the banking sector and businesses has become a very effective cooperation platform to identify and find the ways out of the challenges entrepreneurs encounter, evaluate the efforts to improve access to financial services and determine new needs.

Some of the issues raised at previous meetings of the Council have been implemented, others are under implementation, and some issues are under discussion. Among the work done to support entrepreneurs, the importance of the amendments to the relevant Regulations to increase effectiveness of the current currency regime, especially for import operations of entrepreneurs was noted. Also, active work has started to bring to the country the experience of settlement with checks in trade operations. Introduction of this mechanism will create conditions for transparency of business settlements, reduce the need for daily liquidity of partners in trade operations, attract additional resources from the bank by providing checks, and reduce cash flow in the country. At the same time, the Central Bank in-depth analyzes the processes taking place in businesses and constantly monitors the problems of the sector. In general, active work is being done to address other issues raised by the Council.

Before moving on to the agenda, Elman Rustamov briefed the participants on the consistent work done under the direct leadership of the President to reduce impact of the coronavirus pandemic and translation of the global economic crisis triggered by the sharp fall in oil prices on international energy markets to the national economy, safeguard health of the population, consistent efforts to ensure population’s economic activity, urgent measures under way and the tasks faced by the financial sector. The macroeconomic situation in the country and the tasks faced by economic regulatory institutions and the financial sector in connection with socio-economic development are always in the spotlight. Despite negative effects of the pandemic, macroeconomic and financial stability is maintained. Inflation is at an acceptable level, the national currency is stable. The created platform for macroeconomic stability has allowed to pursue a counter cyclic monetary policy. In pursuing this policy, the Central Bank seeks to support economic activity and employment while maintaining macroeconomic and financial stability.

Noting the assistance provided by the Central Bank to banks and in their turn by banks to entrepreneurs to increase support for entrepreneurs amid the pandemic, he said that since the beginning of the year, the banking sector has received about AZN1 billion worth liquidity support in several areas. As a result of the work done to fulfill the instructions of the President, business and mortgage loans increased and consumer loans decreased. Since early year, regulatory requirements on loans to entrepreneurs engaged in export activities have been relaxed, and regulatory requirements have been tightened to reduce consumer lending. Problem banks were removed from the sector and the population's deposits on these banks were returned. To minimize negative effects of the pandemic, a number of prudential standards have been relaxed, recommendations made to increase capital buffers and restructure the loans to pandemic-affected economic entities. To date, AZN886 million worth (49,000 borrowers) loans were restructured. Restructuring of the loan portfolio was actively carried out at the initiative of banks, along with the Central Bank's regulatory easing measures. Within the framework of the self-employment program, with the encouragement of the Central Bank, banks provided various assets to vulnerable groups. To increase access to financial resources in rural areas, the Central Bank has launched a joint project with relevant agencies.

After the introductory speech, Elman Rustamov invited the participants to discuss the issues on the agenda. Discussions began on difficulties faced by entrepreneurs in the context of the pandemic and ways to cooperate with the banking sector to overcome this situation.

Mammad Musayev, President of the NCEO spoke about practical benefits of the dialogue between the banking sector and entrepreneurs, noting that the Council, established to further increase efficiency of economic management in the country, will play a major role in private sector development. Therefore, we must work actively to bring to the attention of the Council the issues that are relevant as a result of our discussions. He addressed a number of issues, including solution of the shortage of working capital of entrepreneurs, active use of checks, return of entrepreneurs' remaining funds in closed banks, regulation of problems in non-cash settlements, acceleration of numerous disputes in courts, and a number of legislative amendments. At the same time, he suggested that we prioritize the emerging problems and dedicate next meetings to the discussion of specific issues.

Tahir Mirkishili, the Chair of the Committee of the Milli Majlis on Economic Policy, Industry and Entrepreneurship highly appreciated the activities of the Council in regulation of the problems emerged during the banking and private sector dialogue and informed the participants that the Committee stands ready to support resolution of issues related to the legislation. He said that currently, at the instruction of the President, a comprehensive analysis of economic legislation is being carried out, active work is being done to change the provisions that do not meet modern requirements, hinder business development, and create an economic and legal framework that meets new challenges. I invite you to take an active part in this work and bring to your attention that Mr. President, the Government and the Milli Majlis have always been by the side of honest, healthy businesses.

Zakir Nuriyev, President of the ABA in his speech noted the difficulties arising from the present situation in the current activities of banks as a direction of the business sector and praised the changes made by the Central Bank in the regulatory framework of the banking sector, application of appropriate support measures. He noted that although financial support and introduction of appropriate incentive mechanisms are more important especially in areas most affected by the pandemic, at the same time, banks find it difficult to assume additional risks of these businesses. He also noted expediency of considering the possibility of extending relevant regulatory easing measures in banks.

In his speech Javanshir Abdullayev, Director of the BEC noted the importance of the Council as an critical platform for cooperation between the financial and banking sector and entrepreneurs in terms of providing necessary support to businesses, especially during the pandemic. Regarding the regular analysis of surveys conducted among entrepreneurs, he said that in the current economic environment, the number of solvent businesses is declining. In many cases, their business plans are not developed to the satisfaction of banks. He noted the importance of separate state support funds for businesses, as well as the need to consider the possibility of consolidating their activities in the current situation. He also noted that, as is the case in international practice, especially in Turkey and Malaysia, it is advisable for banks to prefer the use of government guarantee mechanisms to support businesses.

After that, a well-known businessman Abdolbari Gozel and other participants spoke about promoting development of local production areas in the domestic market, especially continuation of concessions on credit liabilities to the banking sector in areas most affected by the pandemic, allocation of new loans to address working capital shortages, take additional measures to improve the currency regime, speed up the implementation of check settlements, simplify requirements for micro-crediting mechanisms, more widely use guarantee mechanisms to activate business lending, and other issues.

Summarizing the results of the discussions, E. Rustamov noted that the meeting was very useful and said that a comprehensive study of the issues discussed at the meeting and the proposals put forward, joint work in these areas will continue.

In conclusion, he noted that the meetings of the Economic Council with the participation of business representatives, where the discussion of topical issues raised by entrepreneurs will help find solutions to their problems, be an important support for businesses in the real sector and the financial system as a whole.