SECO and IFC help Azeri banks expand access to finance for small and medium enterprises

Azerbaijan’s Turan Bank is a relatively small bank, but has ambitious growth plans, particularly for the underserved areas of the country. Launched in 2005, the bank’s vision is to become a universal bank that provides a comprehensive range of financial products and services to small and medium enterprises and individuals through a wide network of branches and regional centers. To strengthen its position in the market, the bank’s management knew that it needed to improve its internal systems and practices and to attract further investment.
In 2009, Turan Bank was chosen as a pilot in the IFC Azerbaijan Corporate Governance Advisory Services Project, which IFC is implementing in partnership with SECO. The IFC program provided in-depth advice to help banks align their corporate governance systems with best international practices.
“Our plans for growth were ambitious, and we knew that we would benefit from IFC’s expertise in this area,” said Fuad Musayev, Chairman of the Turan Bank’s Supervisory Board. “We felt IFC’s pilot program would help strengthen our systems in line with our strategic plan on institutional development.”

IFC experts helped Turan Bank to introduce numerous corporate governance improvements, including the development and adoption of new internal documents to govern and guide practices, the clarification of management and supervision responsibilities, the establishment of a Corporate Governance Officer position, and the adoption of a succession plan and a dividend policy.

“With IFC’s support, we achieved significant results. IFC’s methodology engaged not only top management, but all Turan Bank’s employees. IFC does a great job in increasing awareness and improving understanding through its tailored workshops and meetings. Personally, I see that employees are much more informed and willing to implement better practices,” said Nazim Sadigov, Chairman of Turan Bank’s Management Board.

 

 

Signing of the loan agreement Signing of the loan agreement
Signing of the loan agreement: (left to right) Nazim Sadigov and Ed Strawderman Presenting a corporate governance completion letter: (left to right) Caroline Bright and Fuad Musayev


Building on its successful collaboration with IFC, Turan Bank later joined IFC’s Risk Management Project, which IFC is also implementing with SECO’s support. The project is helping banks across Eastern Europe and Central Asia recover from the financial crisis by building their internal capacity and advising them on how to better manage risk. Currently, IFC is working with Turan Bank to better manage non-performing loans and credit risk.
In June 2011, IFC extended a $7 million loan to help Turan Bank increase lending to micro and small entrepreneurs across Azerbaijan. The loan will enable the bank to diversify services and expand operations, especially in underserved rural areas.
Ed Strawderman, IFC Senior Manager, said: “Turan Bank’s partnership with IFC to date and the bank’s commitment to strengthening its corporate governance and risk management practices are key factors that led IFC to provide this loan. This financing will help Turan Bank to increase outreach to micro and small businesses, which is part of IFC’s financial markets strategy in Azerbaijan.”
Nailya Safarova, National Coordinator at the Swiss Cooperation Office in Baku, said, “We are very proud to see that the impact of the cooperation with IFC was even higher that we expected. While Turan Bank received the IFC investment as a result of its improved corporate governance and risk management practices, this facility will help it to achieve other development goals which are priorities for SECO - to ease access to finance for the small and medium enterprises and for the agricultural sector through microfinance.”
SECO began its partnership with IFC in 2001, and has been instrumental in helping IFC to expand advisory services to Azerbaijan, Kyrgyz Republic, Tajikistan and Azerbaijan. In the past decade, the Swiss-IFC partnership has provided significant opportunities for private sector development in areas as diverse as leasing, regulatory reform, housing finance, corporate governance and risk management.