17:26 - 25.11.2022

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November 25, Fineko/abc.az. Fitch Rating has revised the Outlook on Mortgage & Credit Guarantee Fund of the Republic of Azerbaijan's (MCGF) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to Positive from Stable and affirmed the IDRs at 'BB+', ABC.AZ reports with reference to Fitch Rating.

The revision of the Outlook follows the revision of Azerbaijan's (BB+/Positive) Outlook to Positive from Stable. The affirmation reflects Fitch's unchanged view on the fund's strong link with the Azerbaijan and its strategic importance in the provision of affordable housing and development of business environment through facilitating financing to small and medium enterprises (SMEs).

The assessment of support rating factors under Fitch's Government-Related Entities (GRE) Criteria resulted in a score of 50 leading to equalisation of the ratings with the sovereign irrespective of the company's Standalone Credit Profile (SCP).

“The provision of affordable housing to population is among the government's top strategic priorities. The fund is the only entity entitled to provide subsidised mortgages in the country, for which there is no potential substitute. According to management's estimates, the fund's share of the country's mortgage loans to households is currently around 80%.

As a state agent in implementing the national housing policy, MCGF channels low-cost funding to the mortgage market, making mortgage loans affordable for the population. This makes the fund dependent on regular access to financing,” Fitch says.

The rating agency says that MCGF continues to benefit from solid support from the state. For social mortgage funding it receives capital injections annually from the state, which totaled AZN166 million in 2021-2022. The Central Bank's buy-back guarantee on the fund's bonds is another form of support. It implies the Central Bank's obligation to buy back the fund's bonds from bondholders on request. The Central Bank holds more than 30% of MCGF's outstanding bonds. The fund is among four organisations in the country that are exempt from the payment of income tax. The state provides indirect support through special risk group classification of the fund's bonds and its products, making them more attractive for banks.

Fitch expects regulatory and political influence to remain strongly supportive of the entity at least over the medium term. The state plans to provide AZN 100 million of financing in 2023. Most of these funds are for the provision of social mortgages, but also include funding for subsidising loans to SMEs.