Black Sea Trade and Development Bank: We intend to expand our activities in non-oil sectors of Azerbaijani economy  – INTERVIEW

The Azerbaijan State News Agency (AZERTAC) presents an exclusive interview with Serhat Köksal, President the Black Sea Trade and Development Bank (BSTDB).

- Mr. Köksal, how does the Black Sea Trade and Development Bank assess its cooperation with Azerbaijan?

-BSTDB has been active in Azerbaijan since its establishment in 1999. In these 25 years, we have supported more than 40 projects in Azerbaijan, amounting to around half a billion EUR. As of now, Azerbaijan accounts for around 3% of our total current loan portfolio. Yes, the figure could have been higher, but Azerbaijan is a current account surplus country with an official policy of keeping external debt low. However, going forward, we plan to expand our funding to Azerbaijani entities, particularly given that we have recently increased our capital.

As a shareholder in our Bank, Azerbaijan has been very supportive of the Bank’s activities, which is reflected in its participation in the capital increase. Overall, our cooperation with Azerbaijan has been positive. Given the country's specifications, we believe that we are pretty active in the Azerbaijani economy. However, there are areas where we can improve, such as finding more ‘real’ sector projects, given that our presence has been primarily in the financial sector. We strive for more and our increased capital will allow us to fund far more projects both in Azerbaijan and in our other member countries.

- What are the main areas of cooperation between the Black Sea Trade and Development Bank and Azerbaijan in recent years?

- In terms of the number of projects, our focus in Azerbaijan in recent years has been on SMEs. Almost half of our total funding in Azerbaijan has been to the financial sector, of which a significant share has been for on-lending to SMEs.

We are aware of the challenges faced by SMEs in Azerbaijan and other countries in the Region, and we want to provide support to them to help with these challenges. Next comes the energy sector, which is a key sector in Azerbaijan’s economic development.

Our portfolio in Azerbaijan highlights our institutional commitment to supporting sectors prioritized by the Government for development. In line with Azerbaijan’s economic strategies, we have focused on fostering SMEs and advancing the energy sector, which have consistently ranked high on the country’s development agenda.

- What projects financed by the Black Sea Trade and Development Bank have been implemented in Azerbaijan?

- So far, the total funding provided by BSTDB in Azerbaijan amounted to EUR 618 million, representing 7% of the total funds disbursed to member countries since Bank’s establishment 25 years ago.

Aiming to support the development of the non-oil industries, the Bank financed in the past several projects for private companies operating in furniture manufacturing, glassware production, poultry farming, and office buildings construction.

In addition to this, supporting the development of SMEs has been among the priorities of the Bank. BSTDB was among the founders of Access Bank which was established in 2001. During the period from 2001 to 2017, when BSTDB was one of the major shareholders of the Bank, Accessbank built up a client base exceeding 150,000 Micro and SME businesses as well as private households with a special focus on regions and the agricultural sector. To date, the Bank continues working with Azerbaijani banks in offering short- and medium-term funding to support international trade and access to finance for SMEs. Diversifying access to local currency financing for banks and their customers and expanding the network of partner banks remains an important priority.

In addition to banking sector, in 2024 BSTDB rolled over its existing trade finance loan to SOCAR Trading, a long-standing client in support of cross border trade covering two of our member states, Azerbaijan and Türkiye.

- In which sectors of the Azerbaijani economy does the BSTDB plan to strengthen its activities in the future?

- BSTDB aims to expand its activities in Azerbaijan’s non-oil sectors. Notably, BSTDB was the first multilateral development bank to issue a local currency bond in manat, marking a significant step toward developing the financial sector.

While the Bank has successfully financed local banks, identifying viable projects in sectors such as manufacturing, transportation, infrastructure, and municipal development has proven more challenging. Our priority will continue to be on the projects that:

- Increase the share of non-oil sector in the economy,

- Substitute imports through local production,

- Help technological know-how transfer to Azerbaijan,

- Support MSMEs and green investments by offering dedicated wholesale funding through financial intermediaries,

- Support our potential partners in Azerbaijan to mitigate their climate impact, by reducing their emissions through investing in renewables such as hydro-power, wind and solar as well as energy efficiency in the building, transport and industrial sectors. Equally important will be supporting our potential partners better adapt to the impacts of the changing climate, and BSTDB will specifically target the vulnerable sectors, such as construction and real estate, coastal infrastructure, agribusiness, mining, water-intensive sectors and utilities.

- What steps are being taken to strengthen financial and economic ties between Azerbaijan and the Black Sea Bank member countries?

- Our Bank has a dual mandate:

• To support economic development in our member countries

• To contribute to improved economic cooperation among the member countries.

The projects that we fund should meet at least one of these mandates, and contributing to improved economic ties is one of them. For example, we financed SOCAR subordinate entity in Ukraine and Türkiye. We very much look forward to hearing about the financing needs of Azerbaijani investors in other member countries.

- How does the Black Sea Trade and Development Bank help Azerbaijan in implementing environmentally sustainable projects?

-The Bank is seeking to support environmentally sustainable projects in Azerbaijan where possible. We are already in contact with local counterparts regarding the Bank’s possible participation in some upcoming renewable energy projects. In line with our Climate Strategy and our Medium-Term Strategy and Business Plan, we seek to support Azerbaijan’s attainment of their SDG goals.

- What are the plans of the Black Sea Trade and Development Bank to expand its presence in Azerbaijan in the next 5 years?

-According to our latest strategy document, which covers 2025 and 2026, BSTDB’s overall goal right now is “to return to a business model of steady managed growth via financing of projects that promote economic development and, where possible, regional cooperation.” Given that we have increased our capital and weathered regional geopolitical challenges successfully, we are in a position to expand our portfolio.

However, we will stick with “steady and managed growth.” Expansion of our portfolio in Azerbaijan is a part of this steady and managed growth and we have an appetite to do more and strengthen our presence in the country. Given the need to promote diversification of the economy and to strengthen the non-oil portion of the economy, the Bank will pay particular attention to operations that facilitate diversification, including the promotion of small and medium-scale projects in the non-oil sector which generate new employment creation and development impact.

Given the great need for the development of the non-energy related portion of the economy, BSTDB will be open to undertaking bankable operations that support private sector development, with an emphasis on high potential sectors like: trade finance and the financial sector, energy and infrastructure, manufacturing, agriculture and agribusiness, the petrochemical industry, transport, and real estate and tourism.

This means that we continue focusing on medium-scale projects in non-oil sectors with development and regional cooperation impact. It is important to note that we also have projects in our pipeline involving Azerbaijani companies planning to expand regionally in the Caucasus and in Türkiye.

We give priority to such projects since they fit to our mandate of regional cooperation. The Bank also continues to strengthen and expand cooperation with Azerbaijani banks, mainly through rolling over existing trade finance lines and working on new medium-term financing to support access to finance for SMEs, including via the provision of funding in local currency.