The development of non-bank credit organizations (NBCOs) is an important element of financial inclusion, enabling broader access to financial resources for individuals, as well as small and medium-sized enterprises. Within its mandate, the Central Bank of the Republic of Azerbaijan continues to take the necessary steps to strengthen the role of NBCOs and ensure the accessibility and transparency of the credit products they offer.
Pursuant to the amendments made in 2023 to the Law of the Republic of Azerbaijan on Non-Bank Credit Organizations, the Management Board of the Central Bank of the Republic of Azerbaijan approved the Prudential Regulation Rules for the Activities of Non-Bank Credit Organizations and the Rules on Credit Risk Management in Non-Bank Credit Organizations by its resolutions dated 15 November 2024. These changes were adopted within the framework of the strategic objectives set out in the Central Bank’s Financial Sector Development Strategy for 2024–2026.
The rules introduce new qualitative requirements, including regulatory provisions concerning the organization of credit risk management systems within NBCOs, credit risk policy, procedures for credit risk assessment and administration, risk monitoring, and the methodology for calculating the annual percentage rate (APR) under credit agreements.
In addition, the rules, for the first time, establish definitions and maximum thresholds for short-term “daily loans,” including limits on loan amounts, maturities, and daily interest rates, as well as stricter prudential requirements applicable to such loans.
At the same time, the rules introduce quantitative requirements affecting financial resilience. In accordance with the new provisions, the minimum charter capital requirement for newly established NBCOs has been increased to AZN 1 million. Both existing and newly established NBCOs are now subject to the AZN 1 million capital requirement, as well as capital-to-liabilities ratio requirements, while reserve formation requirements have also been revised.
These measures are aimed at strengthening the financial resilience of NBCOs and protecting consumer rights. The Central Bank will continue its efforts to improve the regulatory framework in this area, while closely monitoring ongoing developments in the NBCO sector and taking into account international best practices.
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