BAKU, Azerbaijan, October 29. The Central Bank
of Azerbaijan (CBA) has gradually tightened requirements for payday
loans over the past three years to prevent excessive borrowing by
individuals, governor of the Central Bank of Azerbaijan (CBA) Taleh
Kazimov said, Trend's correspondent reports from the event.


He made the remarks at a press conference on Thursday following
a meeting on the parameters of the interest rate corridor.


According to him, the CBA introduces additional restrictions on
payday lending every year, particularly in the second half of the
year.


“Over the past three years, we have taken decisions to tighten
lending requirements, particularly for payday loans. Every year, we
introduce new restrictive measures in the second half of the year
because we believe this type of lending can lead to undesirable and
excessive indebtedness among the population,” the CBA governor
said.


Kazimov noted that further tightening of requirements for payday
loans is also planned this year. One of the objectives, he added,
is to help bring interest rates on these loans to more reasonable
levels.


He explained that the higher interest rates on payday loans
compared with conventional consumer loans reflect the specific
characteristics of this product.


“It is normal for interest rates on these loans to be higher
than on conventional loans. They are generally issued for periods
of around 45 days, require only an identity card, and involve
relatively small amounts. This is a credit product used worldwide.
We simply do not want it to expand,” he emphasized.







Kazimov said the CBA had previously tightened requirements
governing the total cost of loans, including interest, commissions
and other fees.


“Last year and the year before, we established limits on the
maximum total income that could be generated from a loan, as well
as requirements for commissions and other charges. We tighten these
rules every year and have made it clear that we do not want this
segment of lending to expand,” the CBA governor said.


He stressed that the CBA does not plan to ban payday loans
entirely. Its aim is not to remove the product from the market but
to ensure that it is managed in a more sustainable and balanced
manner.


“Although this type of lending can lead to a significant
increase in household indebtedness, it is also a channel through
which people can access financial resources, and we do not want to
close it off entirely. We want it to be managed properly. For now,
we have no plans to withdraw this product from the market
completely,” Kazimov added.


According to the CBA governor, any further restrictive measures
will depend on household indebtedness, the financial stability of
credit institutions and their partners, and the profitability of
the sector.


“If we see that household indebtedness is at an acceptable level
and profitability remains balanced, we may stop tightening the
rules. However, we do not intend to eliminate this product
entirely. One of the Central Bank’s main objectives is to increase
financial inclusion and ensure that people have access to financial
resources. Access to finance must be maintained so that people can
continue to use these services,” he said.