AADA's online meeting with Azerbaijan Bankers Association

"Car loans in Azerbaijan: Reality and prospects"

This was the topic of a virtual conference organized by the Azerbaijan Automobile Dealers Association (AADA) together with the Azerbaijan Banks Association (ABA). It should be noted that before the forum, in April of this year, AADA sent a letter to the Association of Banks. What was the letter about and how did the ABA react? AADA’s Chairman Natig Zarbaliyev answers Autograph's questions:
- It is known that ABA is one of the most influential and experienced public associations uniting all the leading banks of the country. This organization has made a great contribution to the development of the country's economy, business and financial sectors in making many fateful decisions. As a public association, AADA has always considered the ABA as an example in its activities, and has tried to benefit from the experience of this organization. Even in our official program documents, we can find the idea that "we aim to become a strong organization like the ABA in the future." It is also known that the banking and automotive sectors usually operate in close cooperation with each other. This is the case all over the world. The practice of buying a car by paying the dealer directly in cash is almost an atavism. On the contrary, banks and car dealers are trying to attract customers by devising new financial schemes. As a result, all parties benefit: the dealer sells the car, the bank gives a loan, the insurance company insures, the customer uses a new car and gradually pays, in short, everyone wins. Unfortunately, the car loan terms we have are fantastically unaffordable for the majority of the population. Of course, the distribution of car loans by banks 10-15 years ago and the subsequent fate of these loans are well known. Given all this, we invited representatives of the banking sector to dialogue. The conference was initiated by AADA. Representatives of the automotive sector reiterated their proposals: to differentiate car loans from other consumer loans, as in the rest of the world, to reduce the minimum down payment requirement to 20-25% and annual interest rates to 16%, to eliminate all additional and bureaucratic barriers to lending making. Otherwise, the roads will be flooded with old, unusable, and sometimes even accidentally restored cars. Those who want a new car will apply to individuals, modern traders, not to the bank for a loan, and will borrow without a down payment and at a very high interest rate. In any case, cars are imported into the country, but which cars? During the first 4 months of 2021, 23,854 cars were imported to Azerbaijan. Their total cost was 244 million 577 thousand US dollars. Almost a quarter of a billion dollars is spent on used vehicles. It is clear that spare parts must be transported after them, ie currency must be spent once again. As part of the implementation of the "State Program on Road Safety in the Republic of Azerbaijan for 2019-2023" approved by the decree of President Ilham Aliyev, AADA members will undoubtedly take the issues of renewal, rehabilitation, road safety and improvement of the environmental situation extremely seriously. Let's not forget that creating a "clean environment" and becoming a country of "green growth" are our national priorities. There is no denying the importance of importing and operating modern, environmentally friendly vehicles in addressing these issues. From an economic point of view, the development of the civil car market is beneficial for our country. It is known that every new car sold on credit brings at least one bank and one insurance company a new customer. Before meeting online with ABA, I applied to some foreign banks as a customer via the Internet and inquired about car loan terms. In Kazakhstan, they offered a 7-year loan with an initial payment of 10 percent, at 20 percent per annum. Georgia and Ukraine have promised 6-7 year loans without down payment. Annual interest rate in Georgia - 19%, in Ukraine - 13%! Of course, each country has its own path of economic development, and all measures must be seriously analyzed and justified in every way, and AADA members are ready to work as a team. We are convinced that the ABA, as a fairly influential organization, can give a strong impetus to the renewal of the country's car fleet by optimizing car loans. This was our first meeting in the format of a bilateral online conference. On the ABA side, the heads of the organization and authorized representatives of eight banks were present, and from our side, almost all members of the association. Of course, it would be naive to expect reasonable decisions from the first attempt. The main thing is that a dialogue took place and the problem was addressed by both sides. There was a specific proposal from the ABA top, which can be considered as the main outcome of the conference. Thus, in his speech, ABA President Zakir Nuriyev said that he was ready to discuss the issue of preferential lending for locally produced cars and suggested AADA to develop a special program including that. This couldn’t make us any more content. But the world of cars is wide and colorful. Each car brand has its own buyer. Both desires and opportunities are different. Our goal is to bridge the gap between these desires and opportunities. Changes in the loan terms of foreign cars are inevitable. AADA addressed a number of proposals to the Cabinet of Ministers and the Ministry of Economy of the Republic of Azerbaijan. The answers we received gave us a reason to say that the state of the country's car fleet, mass imports of old cars, environmental and transport safety issues are also in the focus of government agencies. AADA as a public association will continue to work in this direction.