BAKU, Azerbaijan, October 13. Risks in
Azerbaijan’s non-financial sector remain generally manageable.
Although there are certain risks associated with individual
borrowers in the banks’ business loan portfolios, no sector of the
economy as a whole has been classified as high-risk.
This was stated in the “Financial Stability Report” published by
the Central Bank of Azerbaijan (CBA).
According to the report, as of the end of 2025, the banking
sector’s business loan portfolio totaled 16.1 billion manat ($9.4
billion). Borrowers for whom individual financial data was
collected and analyzed accounted for 55% of this portfolio. The CBA
assessed companies’ debt levels and their ability to service
interest expenses based on Moody’s rating methodology.
The analysis showed that, despite risks at individual companies,
the overall risk level in the non-financial sector remains
manageable. Positive trends were observed in the stability of
trade, the manufacturing sector, transportation, and the extractive
industries.
At the same time, profitability indicators varied by sector.
Compared with the previous year, profitability in the
transportation, information technology, and telecommunications
sectors increased, while in some other sectors, the faster growth
of expenses relative to revenues led to a decline in
profitability.
As for debt trends, in 2025, compared to 2024, debt levels declined
in the retail sector and the manufacturing industry. At the same
time, debt increased in the service sector, agriculture,
transportation, as well as in the information and communications
sector.
The report emphasizes that business lending plays an important
role in financing economic activity. In Azerbaijan, the business
loan portfolio grew by 13.4% year-over-year, exceeding the nominal
growth rate of GDP and GDP in the non-resource sectors. Over the
same period, nominal GDP growth stood at 5%, while nominal GDP
growth in non-resource sectors was 6.1%.
The volume of business loans issued to all sectors of the
economy increased over the past year. The largest growth was
recorded in construction, transportation, the non-manufacturing
sector, and the services sector. The share of the business loan
portfolio in GDP increased by 0.7 percentage points, reaching
13.2%. In other sectors, with the exception of agriculture and
industry, the share of business loans in the GDP of the respective
industries increased. This growth was driven, in particular, by an
expansion of lending in the construction sector.
As of June 2026, approximately one-fifth of the loans issued to
the real sector were directed toward investment purposes. 21.6% of
the business loan portfolio was used to finance the purchase,
construction, and renovation of real estate, the acquisition of
equipment, and other investment expenditures. This figure increased
by 0.6 percentage points compared to the end of 2025. The report
also notes a positive trend in loans directed toward fixed assets
in the construction sector.
At the same time, the dollarization rate of the business loan
portfolio rose from 25% to 27.6% in 2026. The Central Bank of
Azerbaijan attributed this increase primarily to secured
foreign-currency loans issued to a limited number of clients to
finance major infrastructure projects in the construction
sector.
The share of nonperforming loans (NPLs) in business loans
increased by 0.5 percentage points compared to the end of last
year, reaching 3.2%. However, the coverage ratio for nonperforming
business loans stood at 102%. This indicator suggests that banks
have sufficient reserves to cover potential loan losses.
The Central Bank of Azerbaijan is implementing measures to
stimulate business lending in order to support financing for the
real sector. In this context, regulatory easing is being applied
with respect to risk-weighted assets for loans to export-oriented
enterprises, the agricultural sector, as well as micro- and small
enterprises.
The report noted that, despite a slight increase in risks for
individual borrowers, an analysis of the business loan portfolio
shows that risks in the nonfinancial sector remain generally
manageable and do not pose an overall threat to financial
stability.
