Please tell us about FINCA history in Azerbaijan

FINCA established its business in Azerbaijan in 1998 and has been offering financial services to micro and small business clients for almost 25 years throughout most districts of the country. Throughout its history in Azerbaijan, FINCA has always had a special focus on reaching rural entrepreneurs and households and continues to this day to focus on providing financial services mainly to clients in rural and regional areas of Azerbaijan. We also work in the urban areas, including Baku, of course, but the majority of the loan portfolio remains outside of the Absheron peninsula and we expect this regional focus to continue in the future. We view increasing access to financial services as part of our company’s social mission and we appreciate the chance our clients give us to serve them.

So, what were FINCA Azerbaijan’s main business results in 2022?

It was a challenging, but also a strong year for all of us after facing various post pandemic tasks and additional global market turbulence. I am happy that we were able to achieve this result and the team demonstrated a dedicated approach to our commitment to impact the lives of many thousands of small entrepreneurs in Azerbaijan for their sustainable futures. We also expanded our geographic

coverage in 2022 and added 3 new branches, increasing our national branch network from 22 to 25. We plan to grow further maintaining our rural and regional focus and with all branches outside of the Absheron peninsula.

By embracing technology to improve customer service and increasing the channels of interaction and communication with clients, FINCA Azerbaijan managed to increase the number of clients from 19,220 to 25,517, achieved 33% growth. FINCA disbursed 63 million AZN microloans to support small entrepreneurs and household business owners.

FINCA Azerbaijan was able to increase not only customer portfolio but also customer satisfaction with financial services provided; a large-scale customer survey conducted in the second half of the year revealed that almost 90% of clients expressed a willingness to recommend FINCA services to others.

Where does FINCA Azerbaijan find itself in digital transformation of the business?

We continue to embrace technology to improve customer service, to increase business efficiency, and to increase the channels of interaction and communication with our clients. I already mentioned the touch-tech paradigm above and all of the challenges that entails, but at the same time, it is also a great opportunity to be able to remove some of the client pain points from our operations through digitalization. Efficiency is another area of great opportunity in the provision of financial services to microfinance clients, as digitalization allows more results to be produced with less resources so these resources can be applied to other important areas. Lastly, using data to drive decision-making removes much of the subjectivity in dealing with clients, especially with credit decisions, which ultimately produces a better long-term and more positive result for both the business and the client. Ultimately, this business is all about the company and client interactions, and this is where digitalization is an opportunity to improve and enhance the client interaction, while removing unnecessary or bureaucratic steps so as to give the client a better experience.

FINCA bonds – a new tool for financing. Why did you decided to go for this and what are the expectations?

Actually, our first bond issuance in Azerbaijan occurred back in 2013 as a private placement. This time in 2021, we decided to take advantage of new partnerships and the growing financial market to issue public placement bonds, already with one issuance in 2021 and a second one in 2022. We will use these funds to continue to finance our growth and outreach to underserved rural communities. Both placements were very successful and fully subscribed. We expect to continue to increase bonds in our funding mix over the next few years.

Azerbaijan is a great market for us, and we have been here for the last 25 years and are looking forward to growing our business in the coming years. We expect to access the local bond market to fund our growth over the next years, as we have ambitious plans to increase our network to serve more people in the rural areas with our microfinance products.

The importance of the agricultural sector in the local economy and in the growth of the non-oil sector is being emphasized, and there is a big focus on supporting rural entrepreneurs. These bonds help to do that, help us to grow, eventually help our clients’ growth, and together, this creates good results not only for us but also for our clients

and for the general market. It also contributes to increasing access to finance for low-income groups of the population, especially in rural areas, to improve their businesses.

Over the last 15 months FINCA successfully raised 12 million AZN from local investors in four issuances. The total placement of our last placement of interest-bearing, unsecured, non-documentary registered bonds at the Baku Stock Exchange (BSE) was in the amount of 3 million AZN and consisted of 30,000 bonds with 12.5% coupon rate and value of 100 AZN each for 2 years with quarterly payment frequency of the coupon rate. The underwriters for the placement are AzFinance Investment Company CJSC and UniCapital Investment Company.

We are glad to see the local investors’ growing interest in our bonds, so FINCA Azerbaijan plans to issue the next tranche of 4m AZN local currency bonds in June 2023.

How do you access micro lending market in the country?

    The micro-lending market for the last few years has been undergoing a time of intense change, as old entrants exit and new ones enter the market. I see the biggest benefit of microfinance services as that of providing a tool to our clients that allows them to increase their livelihoods, better plan for the future of their families, and take more control over their own financial futures. We continue to see a great need to increase access to finance in the rural regions so that farmers and agricultural businesses can receive the financing they need to grow their business and increase their families’ incomes and savings. It is truly transformational to meet with clients that have sometimes worked with us for 5, 10, or even 20 years and see how their businesses and livelihoods have improved as our partners. In that regard, although the market changes, there is a great positive development in the steadily increasing access to finance for rural households. We are quite dedicated to remain a part of their positive story and help our clients improve their lives.