AZE.US
Problem loans in Azerbaijan increased by 16.8% over the past year, even as their share in the overall loan portfolio remained relatively low, according to newly released figures as of January 1, 2026.
The country’s banks and other lending institutions expanded their total credit portfolio by 9.1% compared with the same period a year earlier. At the same time, the volume of overdue loans grew faster than the overall market, reaching 1.6% of total lending.
Economists say the trend reflects both broader economic pressures and weaknesses in household borrowing behavior. Over the past decade, the level of non-performing and overdue loans has moved in parallel with wider economic shifts, making the issue relevant not only for banking stability but also for the social condition of borrowers.
Analysts say one of the recurring problems is low financial literacy. In many cases, borrowers take out loans without fully accounting for long-term risks, possible exchange-rate changes, or the stability of their future income. When economic shocks hit, repayment discipline often weakens.
Specialists say the biggest risks are now concentrated in consumer lending. When such loans are not repaid on time, additional interest and penalties can quickly deepen financial stress for households, while also creating strain inside the banking system.
Some experts argue that the Central Bank should tighten oversight further, especially in the consumer credit segment. They say that despite stronger regulatory scrutiny, some private banks continue to compete aggressively for market share by expanding their lending portfolios, partly to improve growth indicators and attract investor interest.
According to this view, part of the problem lies in risk assessment. Banks focused on issuing more loans may not always evaluate borrower risk carefully enough, which can contribute to a larger stock of troubled debt.
Experts also note that overdue loans arise for both objective and subjective reasons. Among the most common objective factors are job losses, loss of working capacity, delayed salary payments, and interruptions in business activity that leave borrowers unable to meet repayment schedules.
At the same time, the Azerbaijan Banks Association says that although problem loans increased in absolute terms over the last year, their overall share in the portfolio has remained broadly stable, fluctuating in the 2.5% to 2.8% range. In neighboring countries, the comparable level is estimated at around 3.1% to 3.9%.