Tropentag, October 6 - 8, 2009 in Hamburg "Biophysical and Socio-economic Frame Conditions for the Sustainable Management of Natural Resources"

The Role of Micro-Financing in Poverty Reduction in Azerbaijan

¹Azerbaijan Agriculture Universty, Agricultural Economie and Management, Azerbaijan
²Technische Universität München, Institute of Agricultural Economics and Farm Management, Germany

Abstract

In this contribution the poverty level in Azerbaijan and the influence of the micro-financing on the poverty reduction is analysed. For this analysis reports from micro-finance associations were used.
It was found that a higher GDP growth as influenced by increasing income from oil reduced the poverty rate in the country from 49,0% in 2001 to 15,8% in 2007.
The weak development of the the non-oil sector, missing infrastructure in the regions, and weak structures for small enterprises play a considerable role on the low income level of the rural population. The small and medium sized companies in the non-oil sector do not dispose of enough funds to finance their production cycle, or to develop their business.

World wide is it shown tha, especialy in poor countries, micro financing can be an important instrument in poverty reduction. The micro finance sector is well developed in Azerbaijan over the last 10 years. The number of people borrowing money via these financial institutions has become more than 300 000 and the loan portfolio amounts approx. 600 thousand $ (1.5% of the GDP).
Through micro financing small and medium sized enterprises they get access to funds to continue their production and to extend. Also, the short treatment time to obtain a loan and the little security demand are also decisive. The trust of the population in the financial systems has grown although the higher inflation rates since the fall of the Soviets have reduced their savings.
The investigation of 2 000 borrowers showed that through the micro financing their poverty level decreased. Further, the analysis showed that old borrowers have higher income levels and lower poverty levels as compared to people that are just starting to get loans through micro finance institutions. In conclusion the micro financing has a strong positive influence on the reduction of poverty and raise income in the rural area of Azerbaijan.

Keywords: Azerbaijan, microfinance, poverty reduction

Contact Address: Zaur Aliyev, Technische Universität München, Institute of Agricultural Economics and Farm Management, Fabrikstr. 12, 85354 Freising, Germany, e-mail: zzaur_aliyevyahoo.de