Study of Small and Medium Enterprises in Azerbaijan - IFC

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8. Access to Finance 8.1 Overview of the Azerbaijani financial system Based on the data of the National Bank of Azerbaijan (NBA) as of January 1, 2008 49 , there are 46 banks operating in the country, out of which 21 bank have some foreign capital participation. In six banks, the foreign capital share ranges from 50 percent to 100 percent (in 13 – less than 50 percent), and two banks act as subsidiaries of a non-resident bank. According to official data 50 , the cumulative capital of the commercial banks, their assets and credit investments significantly increased in 2007. On January 1, 2007, the assets were 3.8 billion Azerbaijani manats (equivalent to $4.7 billion) and at the beginning of 2008, this indicator reached 6.7 billion Azerbaijani manats (equivalent to $8.3 billion), a 78 percent increase. The cumulative capital of the banks on the January 1, 2007, was 603 million Azerbaijani manats ($744 million), and as of January 1, 2008, it reached 1 billion Azerbaijani manats ($1.4 billion). At the beginning of 1996, there were 200 banks with a total capital of $4.2 million in Azerbaijan. However, by January 2001, the numbers of banks had decreased to 59, with total capital of $532 million 51 . At the end of 2006, 44 banks were active: two state banks, 20 with foreign capital participation, and 22 commercial and/or joint stock banks. On January 1, 2007, the consolidated capital of these banks was $693 million. As of the beginning of 2008, 142 lending agencies operated in Azerbaijan, including 46 mainly undercapitalized commercial banks dominated by the state-owned International Bank of Azerbaijan (45 percent of total banking assets) and 96 nonbank credit institutions, whose share in total assets and total capital are less than 3 percent. According to NBA requirements, the minimum amount of a bank’s capital must exceed $12 million as of July 1, 2007 52 . At the end of 2007, the total assets of the banking system were $7.7 billion. The consolidated credit portfolio amounted to $5.1 billion, 43 percent of which was held by state-owned banks. 49 National Bank of Azerbaijan’s monthly report for January 2008 №1 (95). 50 National Bank’s monthly reports for January 2007 №1 (83) and January 2008 №1 (95). 51 Exchange rate for January 2001 was 4,550 Azerbaijani manats to $1. 52 National Bank’s monthly report for January 2008 №1 (95). 126 St u d y o f Sma l l a n d Me d i u m Ent e r p r i s es in Az e r b a i j a n
Chart 8.1 Development of Credit Institutions in Azerbaijan 500 400 374 485 300 200 2005 2007 100 44 46 85 96 0 Banks Bank's Branches Non-credit Institutions The growth of bank branch networks (from 374 branches in 2005 to 485 in 2007) appears insufficient given the scale of current growth in the economy; the penetration rate is well below some transition countries and the EU. The total number of bank branches in Azerbaijan per 10,000 inhabitants is about 0.54, which is much lower than in Ukraine (2 branches per 10,000 inhabitants), Uzbekistan (3) and Spain (10). Chart 8.2 Comparative Banking Indicators of the selected countries in 2007 120 100 80 60 40 20 13 19 22 38 35 57 90 104 % of deposits to GDP % of loans to GDP 0 Azerbaijan Kazakhstan Latvia EU, average The banking system remains quite small relative to the size of the economy. Even with high assets and the growth of loans and deposits in Azerbaijani banks over the past few years, total banking assets were only about 26.7 percent of GDP, with loans accounting for about 19 percent and deposits only 13 percent at the end of 2007 – a much lower ratio than the 35-60 percent of GDP characteristic of the advanced transitional economies of Central and Southeastern Europe. Aze r b a i j a n Bu s i n e s s En a b l i n g En v i r o n m e n t Pr o j e c t 127
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Study of Small and Medium Enterpris
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Study of Small and Medium Enterpris
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5. Business Permits................
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Foreword and Acknowledgements IFC,
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critically examines all areas of op
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of each formality. Special attentio
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Policy Recommendations Business Reg
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Problems Sources of Problem Recomme
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Business Taxation Problems Sources
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Capital: Baku Country’s populatio
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The state, ultimately responsible f
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1. Methodology 1.1 Background The s
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the share of economically active co
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Scope of activity Official statisti
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2. SMEs in Azerbaijan The aim of th
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Meanwhile, the number of small and
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Table 2.2 Statistical information o
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The “typical” small enterprise
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According to the IFC survey, more t
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2.5.3 Legal disputes Most entrepren
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3. Business Registration In January
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According to the law previously in
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3.4 Economic impact estimate Accord
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tion duplicate is addressed to the
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the local tax inspectorate for regi
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3.10.3 Introduce the electronic reg
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3.10.7 Simplify the liquidation pro
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Business registration before ‘one
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Process map of one-stop-shop busine
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Registration for individual entrepr
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4.1 Licensing: the legal framework
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Chart 4.1 Number of activities requ
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While the Rules specify limits for
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Chart 4.6 Economic impact of licens
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Annex 4.1 Checklist of issues for d
Page 77 and 78: Based on the IFC survey estimates,
Page 79 and 80: 5.2 Permits coverage The Azerbaijan
Page 81 and 82: Box 5.4 An example of overlapping p
Page 83 and 84: 5.4 Permit expenses Azerbaijani leg
Page 85 and 86: Chart 5.9 40% Average percentage of
Page 87 and 88: 2.4. Specifying in the law a unifor
Page 89 and 90: Annex 5.1 Procedure for obtaining c
Page 91 and 92: Annex 5.2 Checklist of issues for d
Page 93 and 94: The most significant legal act in i
Page 95 and 96: 6.1.2 There is no effective mechani
Page 97 and 98: 6.1.4 Entrepreneurs are not aware o
Page 99 and 100: IFC’s analysis showed that only h
Page 101 and 102: 6.2.2.1 The inspections process and
Page 103 and 104: View from an entrepreneur: “The s
Page 105 and 106: Chart 6.11 Average registration in
Page 107 and 108: going in the opposite direction. In
Page 109 and 110: clearly defined circumstances, or a
Page 111 and 112: Annex 6.2 Presidential Decree No. 7
Page 113 and 114: The bulk of individual entrepreneur
Page 115 and 116: Items 1-9 are collected at the firs
Page 117 and 118: The IFC survey reveals that one in
Page 119 and 120: Table 7.5 Main tax obligations of a
Page 121 and 122: Chart 7.3 IFC Survey: Complexity of
Page 123 and 124: 7.3.2 Tax inspections negatively af
Page 125 and 126: 7.3.5 The cumbersome VAT administra
Page 127: • Introducing clearer and more el
Page 131 and 132: More than 90 percent of entrepreneu
Page 133 and 134: Chart 8.9 The loan interest rates o
Page 135 and 136: Case study of a Baku-based glass an
Page 137 and 138: View from a bank employee: “One p
Page 139 and 140: Box 8.2 Examples of a successful cr
Page 141 and 142: Box 8.3 Examples of alternative mec
Page 143 and 144: 9. Foreign Trade The volume of fore
Page 145 and 146: Box 9.1 Customs regimes under the C
Page 147 and 148: As Chart 9.1 illustrates, 98 percen
Page 149 and 150: Table 9.1 A comparison of the proce
Page 151 and 152: The comprehensive system of mandato
Page 153 and 154: Table 9.2 Average costs for imports
Page 155 and 156: Box 9.5 Customs payments The Custom
Page 157 and 158: Box 9.8 An excessive number of docu
Page 159 and 160: Moreover, due to the underdeveloped
Page 161 and 162: Expected impact More comprehensible
Page 163 and 164: 9.5.6 Accelerate WTO accession of A
Page 165 and 166: Chart 9.5 Goods importable upon app
Page 167 and 168: Azerbaijan has been long pending a
Page 169 and 170: List of Laws 1. The Tax Code of the
Page 171 and 172: Statistical Annexes Aze r b a i j a
Page 173 and 174: Chart A1.3 Individual Entrepreneurs
Page 175 and 176: Chart A1.7 Individual Entrepreneurs
Page 177 and 178: Chart A1.14 Three Major Types of Ob
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Registration Chart A2.1 Entrepreneu
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Chart A2.8 Three Major Problems Occ
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Chart A3.3 Existence of Licenses by
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Chart A3.9 Three Major Obstacles to
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Chart A4.4 Obtaining of Any Permits
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Chart A4.10 Time Required to Obtain
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Chart A5.4 Application for Credit o
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Chart A5.12 Average Interest Rate (
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Chart A6.3 Entrepreneurs That Under
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Chart A6.8 Authorities That Made In
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Chart A6.13 Breakdown of Number of
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Chart A6.19 Average Duration of One
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Chart A6.25 Small and Medium Enterp
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Chart A7.3 Small and Medium Enterpr
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Chart A7.8 Reported Share of Busine
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Chart A8.3 Usage of Optional (not c
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Azerbaijan Business Enabling Enviro
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Study of Small and Medium Enterprises in Azerbaijan - IFC

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