AZE.US
Some people in Azerbaijan who cannot get a bank loan, or do not want to go through lengthy banking procedures, turn to non-bank credit organizations.
The process is often simpler and faster. But experts warn that such loans can later create serious financial pressure, especially for people who already have unstable income.
A survey of residents showed that many borrowers see non-bank lenders as more accessible than banks, but complain about high interest rates. Some said people often agree to expensive loans because they have no other option, especially when they are unemployed or cannot prove official income.
The original purpose of non-bank credit organizations was different. They were created to support low-income families who could not borrow from banks or provide collateral. The idea was to help people start small businesses, generate income and reduce reliance on informal moneylenders.
But experts say the sector has moved away from that mission over time.
Former Finance Minister Fikret Yusifov said there are currently 54 non-bank credit organizations licensed by the Central Bank of Azerbaijan. According to him, these organizations issued 717 million manats, about $422 million, in loans to the population in 2024. In the first half of 2025, the figure reached 811 million manats, about $477 million.
Yusifov said the average interest rate on these loans was around 35-36%. In some cases, he said, borrowers received loans at 35-40%, and sometimes as high as 48% annually.
He warned that such rates increase the debt burden on citizens. When high interest is combined with strict collateral conditions, a borrower may fail to solve the original financial problem and end up losing property.
Yusifov said non-bank credit organizations were meant to help people stand on their feet, not function like pawnshops. If they begin to operate under the same logic as pawn lending, he said, the purpose of the sector is distorted.
The Central Bank is the main regulator overseeing this area. It monitors whether non-bank credit organizations operate in line with the law, properly disclose loan terms and maintain financial stability.
However, the regulator does not directly set interest rates. The annual interest rate is determined by the agreement between the borrower and the credit organization.
Economist Khalid Karimli said there are several reasons why loans from non-bank credit organizations are more expensive. One factor is that these organizations often attract funding at a higher cost than banks. Another is that they usually lend to riskier groups of clients.
According to Karimli, banks tend to finance borrowers with lower risk first. Those who remain outside the banking system often carry higher default risks. When non-bank lenders issue loans to such clients, they add a risk premium to the interest rate.
He also noted that banks are larger institutions, which allows them to manage operating costs more efficiently. Non-bank credit organizations are usually smaller, so their relative costs can be higher.
As a result, high interest rates are often presented as a way to compensate for funding costs and repayment risks. But for borrowers, the practical outcome is clear: a loan that seems easy to obtain can quickly become a serious financial trap.
AZE.US