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 Press release - Secured Transactions Seminar (ACDIVOCA)

 Press release date: 08.05.2006

Azeri version

 

 

Press Release

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 assets
2. To establish a priority if multiple creditors provide financing to a single borrower

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.

 



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