The Black Sea Trade and Development Bank (BSTDB) will include the climate mitigation and adaptation financing priorities in the Country Strategy for Azerbaijan, BSTDB President Serhat Köksal said in an exclusive interview with Trend.
"Azerbaijan ratified the Paris Agreement and its Nationally Determined Contributions (NDCs) specifically outlines the country’s emission reduction target, the national socio-economic climate priorities, the most vulnerable sectors, what mitigation and adaptation actions are necessary to meet said target, and what financing is required in this respect. BSTDB will consult the country’s most updated NDC and include the climate mitigation and adaptation financing priorities in the Country Strategy for Azerbaijan," he said.
Köksal believes that this way the Bank will better align its own financing priorities, as stated in the BSTDB Climate Change Strategy, with the priorities of Azerbaijan, thus supporting the country in meeting its climate mitigation and adaptation commitments.
"At the operations level it means that BSTDB will support emission reduction investments such as renewables, energy and resource efficiency, sustainable infrastructure, green buildings, and electric transport systems, just to name a few. At the same time BSTDB will support climate adaptation projects especially in the vulnerable sectors such as construction and real estate, coastal infrastructure, agribusiness, mining, water-intensive sectors and utilities," the BSTDB president explained.
Portfolio expansion in Azerbaijan
Köksal pointed out that over time, BSTDB is committed to a policy of steady, prudent, high quality growth that is broad based and extended to all its Member States.
"Obviously, this very much includes Azerbaijan, in which we have been present since our Bank was created in the late 1990s. Because of the structure of the Azerbaijani economy, it has been our intention to focus primarily on non-energy related sectors of the economy, since that is where needs are greatest, and it is consistent with the objectives of the Government to diversify the economy. Over the years, we have generally found it easier to work with Azerbaijani financial institutions, either financing them directly to assist the institution directly to grow, or to act as an intermediary with the end recipients being small and medium enterprises. In terms of products, we have variously participated as investor and taken a (non-controlling, non-management involvement) equity stake in an Azerbaijani bank, we have provided numerous credit lines. Furthermore, as you are aware, we were the first international financial institution to undertake a local currency loan in manat, thus helping to lead the introduction of this important product which contributes to greater confidence in the manat and the domestic financial market, and over time can help the domestic financial market grow more broadly and deeply," he said.
Going forward, Köksal said the Bank expects that the emphasis on non-energy related sectors will continue, because the diversification challenge remains.
"For our part, we would like to broaden our sectoral coverage so as to work directly with companies, in areas such as agri-business, manufacturing, and trade, rather than dealing with them indirectly through the financial sector. As our mandate states that we should focus on increased cooperation among our member states, any projects in the region that can improve cooperation with neighbors would be attractive to us. Moreover, we would be very keen to increase our presence in supporting the development and delivery of key infrastructure, particularly at municipal level in cities and towns which may have been underserved relative to the capital," the Bank's president explained.
Expanding network of partner banks
Köksal noted that financial sector remains one of the priorities for the BSTDB in Azerbaijan as one of the important channels to reach micro, small and medium sized businesses as well as to support exporters and importers through trade finance facilities.
"The USD 5 million provided to TuranBank this year will be used for the latter fostering the international trade in particular within the Black Sea Region. In 2022 the BSTDB has also signed an agreement with Rabitabank for USD 10 million. These funds will be on-lent to SMEs to finance their investment programs and working capital needs, help their development in domestic and international markets and strengthen their competitiveness and export capacity. We are in discussions with a number of other financial institutions in the country and hopefully will be able to expand the network of our partner banks in the future," he added.
Financing in local currency
Serhat Köksal said that financing in local currency is considered for any project that the BSTDB is exploring in Azerbaijan to reduce currency risks in particular where the borrowers are exposed to such risks due to nature of their business and cash flows.
"We have experience in securing the local currency funding through the local capital market as well as working with local banks, and hope that this successful experience will help us to be able to continue offering financing in local currency," he added.
New projects in Azerbaijan
The BSTDB president noted that after the slowdown provoked by the COVID-19 pandemic and the recent conflict in the Black sea region, the Bank is currently in the process of developing a pipeline of new projects.
"Non-oil and gas sectors continue to be our priority. We already have projects in the pipeline that we hope to be able to finalize in 2023," he concluded.