AZE.US
The volume of non-performing loans (NPLs) in Azerbaijan has risen again, signaling growing financial strain among borrowers.
As of February 2026, problem consumer loans increased by approximately 6% compared to January and by more than 17% year-on-year. In the business lending segment, the increase reached roughly 18%, according to recent data cited by local analysts.
Why Are Problem Loans Rising?
Economist Kamran Hajiyev attributes the trend primarily to a widening gap between household income and expenses. As borrowing becomes more accessible, repayment capacity is not always assessed comprehensively.
Several factors are contributing to the rise:
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expansion of overall lending volumes;
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aggressive risk appetite among banks;
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incomplete visibility of borrowers’ total debt burden;
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growth in lending by non-bank financial institutions.
In particular, loans from microfinance institutions, leasing companies, and pawnshops may not always be fully reflected in traditional banking credit assessments. This can lead to underestimation of a borrower’s real financial exposure.
Digital Access, Higher Risk
Credit access in Azerbaijan has become significantly easier in recent years. Mobile applications now allow individuals to receive approved credit limits within minutes. While this increases financial inclusion, it also raises concerns about overleveraging.
International best practice suggests that debt servicing should not exceed 20–25% of monthly income to remain manageable. When repayment obligations approach 50% or more of income, default risks rise sharply.
Still Manageable – For Now
Analysts say the current level of non-performing loans remains under control. However, continued growth may require tighter risk management, improved credit scoring mechanisms, and enhanced financial literacy efforts.
The latest figures highlight a broader structural question: as consumer lending expands, can income growth keep pace with debt obligations?