From: SME Support through Financial Sector Development
"New System Proposed for Secured Transactions in Azerbaijan"
Taking into consideration the certain problems and lack of sufficient information
with the secured transaction issue in Azerbaijan, USAID funded ACDI/VOCA organization
held round-table meeting with the participation of representatives of government
authorities, credit organizations, international organizations at IPC (International
Press Center) on 3 May 2006 within the framework of "SME Support through
Financial Sector Development" Project. Mr. Muhammad Junaid, Chief of Party
and Mr. Everet Wohlers, a secured transactions expert of the project made a
speech at round-table meeting.
Currently in Azerbaijan capital is difficult to obtain by small and medium
sized companies. Part of the problem is that banks and other financial institutions
are reluctant to lend to companies when they are unsure of the collateral and
if other lenders may have priority over them in case of default or bankruptcy.
Mr. Wohlers presented a system that would greatly alleviate this problem.
At the beginning of round-table meeting, after having informed of basic stages
of SME development and project plans, the chief of party provided participants
of meeting with information on short-term expert's activity where he made research
on the regulation of secured transaction in Azerbaijan.
The project's senior lawyer, Ms. N. Rustamova informed participants of the
standing order and format of round-table discussion. She informed the participants
about the meetings of Mr. Everett Wohlers held with Mr. Ali Masimli, National
Parliament Deputy, a Member of Economic Commission of National Parliament (Milli
Mejlis) of Azerbaijan, Mr. Islam Rafibayli, Deputy of Economic Legislation Department
at Milli Mejlis, executives of State Committee for Securities, National Bank,
Mortgage Fund, State Register Service for Immovable Properties, several banks
and other credit organizations, donor organizations and international agencies.
Afterwards, Mr. Everett
Wohlers addressed the existing situation of secured transactions, including
the regulation of this area in Azerbaijan and the current problems as well as
solutions. He then presented the case for establishment of unified secured transactions
law and filing office for notices of interests in movable properties in Azerbaijan.
He explained and showed a mock-up of filing office model which participants
of the round-table meeting will need to implement the secured transactions and
presented the discussion draft of a new law as well.
The proposed filing office would be established electronically and give immediate
access to decision makers in financial institutions. The system has been successfully
established in the US, Canada, Mexico, Ukraine, Romania, Slovakia, Latvia, Estonia
and many countries in the Pacific Ocean. Turkey, Russia and other CIS countries
are also examining such systems. The system would supplement and enhance secured
transactions in the country and make credit decisions both more reliable and
easier to obtain. The system's two primary functions would be:
1. To notify other potential lenders that a borrower had already pledged certain
2. To establish a priority if multiple creditors provide financing to a single
The system would not provide for collateral registration or establish asset
ownership, its purpose is simply to serve notice if a borrower has already pledged
collateral to another party and to establish a system of clear priority in the
case of multiple loans made to the same borrower.
The participants of round-table meeting had different point of views on speech
made by expert. The representatives of government authorities noted the necessity
to hold discussion on proposals and after this, a final decision can be made
on the importance of establishment of such agency.
Although the commercial banks had positive attitude about this initiative,
they expressed some anxiety that several questions being remained unanswered
and that there could arise technical issues during the implementation a new
law and agency. The participants agreed of the importance to carry out a more
extended analysis on this topic was also mentioned after length discussions
held around the presentation.