Benchmarking Azerbaijan Microfinance 2006

This report illustrates performance trends in Azerbaijan’s microfinance sector during 2004-2006 for nine leading MFIs comprising 90 percent of the country’s non-bank sector. It focuses on increased operational efficiency, overall productivity and expansion of outreach and scale. Report findings include:

• MFIs in Azerbaijan have had to adjust to a rapidly changing macroeconomic environment, with high inflation and rising income levels;
• MFI loan balances have increased faster than outreach;
• External financing has partially met credit demand, but is concentrated towards a few larger MFIs;
• Local financing has been limited largely to government programs, although several banks have downscaling programs which compete with MFIs;
• Access to finance in rural areas is still limited;
• Efficiency gains in the sector have not led to decrease in cost of finance for microfinance clients.

Although Azerbaijani MFIs have contributed to poverty alleviation, it is hard to demonstrate their overall economic impact because they have not invested sufficiently in data collection and impact assessments. Recent structural changes such as financial sector development and economic revival have helped MFIs expand, compete and reduce expenses and costs to customers.