The number of credit cards in circulation in Azerbaijan dropped sharply this summer, reflecting the Central Bank’s push to slow consumer lending and ease household debt.
According to official statistics, the number of active credit cards fell from 2.22 million in July to 2.12 million in August – a monthly drop of 4.5 percent and a 7 percent decline year-on-year. The volume of card transactions also slipped by 7.6 percent from July, though it remained slightly above last year’s level.
As Musavat.com notes in its analysis of Central Bank data, the decline in card numbers but continued rise in transaction volumes suggests that consumers are increasingly relying on existing credit lines rather than opening new ones. Between January and August, the total volume of credit-card operations reached 6.49 billion manats – up 18.5 percent from a year earlier. Electronic commerce accounted for nearly 3.8 billion manats, while POS terminals and ATMs made up most of the rest.
The Central Bank has repeatedly warned that the rapid expansion of consumer credit – driven largely by credit cards – poses risks to financial stability. It noted that while disposable incomes rose by just 7 percent last year, the used portion of credit-card balances jumped by 17 percent.
“Credit-card borrowing remains the main driver of the increase in household debt,” the regulator said, estimating that a 10 percent rise in consumer loans adds roughly 0.34 percentage points to inflation.
To contain that risk, the Central Bank this year limited the size of individual credit cards to no more than five times a borrower’s post-tax monthly income. The new rule aims to tie lending more closely to repayment capacity and strengthen banks’ early risk detection.
Even so, total lending in the economy continues to expand. As of September 1, Azerbaijan’s overall loan portfolio stood at 28.7 billion manats – up 10 percent from a year earlier. Consumer loans rose fastest, increasing 14 percent year-on-year to 9.1 billion manats, followed by mortgages and business loans.
The trend has also pushed up the share of overdue loans, which reached 530 million manats in September – 12 percent more than a year ago. Most of the increase came from manat-denominated loans, where interest rates now average 18.5 percent annually.
While the Central Bank’s tightening measures are beginning to show some effect, Musavat.com’s review concludes that household demand for credit remains strong.
Stagnant real incomes and rising living costs continue to push more citizens to rely on loans to meet basic needs. For now, consumer demand remains the main force behind the growth of Azerbaijan’s credit market – and one of the most persistent risks for inflation.
