Dear financial sector participants,

The Management Board of Central Bank of Azerbaijan approved the “Financial Sector Development Strategy 2024-2026”.

The Strategy envisions developing important sectors of Azerbaijan’s financial system, such as insurance, capital markets and payment systems and reinforces further resilience of the banking sector. It highlights enhancing financial inclusion and encouraging depth and diversification of financial instruments, facilitating efficiency, safeguarding transparency and strengthening resilience of the financial sector as strategic objectives.

The Strategy document also reflects on a quantitative estimation of the market potential for each sector, determines relevant qualitative and risk-based regulatory requirements of Central Bank of Azerbaijan and encompasses the cross-border initiatives, such as Digital Finance, Sustainable Finance, Professional Growth and Financial Literacy.

In the rapidly growing Insurance sector, the Strategy fosters an expansion of the sales and intermediary channels (including insurance agents and brokers), promotion of voluntary and compulsory insurance products, establishment of an insurance-related data and monitoring center, as well as strengthening corporate governance and maintaining risk-based prudential regulation. Main strategic targets of the Insurance sector indicate on enhancing the Insurance Trust Index from current 66 percent to 80 percent, strengthening solvency of insurers, protecting consumer rights and uplifting the gross written premium per capita from current AZN 121 to an estimated market potential of AZN 195. Such a comprehensive approach aims at supporting the economic growth and managing risks effectively.

In conjunction with the high-growth potential of Capital Markets, the main objective of the Strategy is to expand the Sector’s countrywide role in the financial system and its further contribution to development of the economy. Strategic targets include a comprehensive infrastructural development of capital markets, strengthening and maintaining the market’s confidence to the Sector, expanding the market access routes and broadening the range of investment product offerings. Moreover, the Strategy envisages potential growth in share of the Capital Markets sector in non-oil GDP of Azerbaijan from current 10% to 14%, increase in retail investments from current AZN 150 million to potential AZN 1 billion as well as development of an effective regulatory framework.

Major focus in the Payments sector is made on increasing accessibility of payment services and enhancing transparency and competitiveness in the payments market along with application of innovative payment solutions. The Strategy envisages modernization of the national payment system, creation of a favorable environment for market participants and establishment of an effective oversight framework to support secure and effective payment services. The main strategic target is to increase number of average cashless individual transactions from current 93 to potential 200 transactions per annum. Consequently, formation of a competitive and innovative payments ecosystem is expected to have a considerable contribution to development of cashless economy and further economic growth of the country.

According to the Strategy document, a further sustainable development in the Banking sector is envisioned to be supported through expansion of affordable and responsible banking services. It is planned to broaden the banking market, to foster development of non-banking credit institutions and to modernize the supervisory framework. As part of those efforts, it is targeted to increase the volume of business loans to an estimated market potential of AZN 16.5 billion, to enhance corporate governance, transparency and competitiveness and to strengthen risk-based regulation and supervision, accordingly.

The Strategy also covers the cross-border initiatives, such as, effective integration of the ESG and sustainable finance principles into traditional financial services, development of digital solutions, large-scale promotion of innovation and reinforcement of cybersecurity.

Moreover, the Strategy addresses the fundamental questions on professional growth of subject matter experts, promotion of financial literacy and accessibility, and improvement of the regulatory and appropriate supervisory mechanisms of Central Bank of Azerbaijan.

Successful achievement of the targets specified in the “Financial Sector Development Strategy 2024-2026” will contribute to the macroeconomic and financial stability of our country and will create new opportunities for citizens to benefit from a robust and resilient financial system.

The public will be informed about the progress on implementation of the Strategy on an annual basis.

Best regards,

Taleh Kazimov
Governor of the Central Bank of the Republic of Azerbaijan

January 26, 2024