From its headquarters in Baku, IBA is expanding regionally and globally.

ith the opening of the BTC pipeline, Azerbaijan is fêting a new era of prosperity. But for Jahangir Hajiyev (INTERVIEW), Chairman of the Board at the International Bank of Azerbaijan (IBA), paying honor to the country’s economic takeoff is more like a wake-up call. At an investment conference sponsored by the U.S.-Azerbaijan Chamber of Commerce (USACC) in Washington last April, the IBA Chairman explained the importance of weaning the economy off the oil sector. There is homework for all economic agents—banks first and foremost.

“Development of the non-oil sector has become the top priority of the Azeri government. It is a formidable challenge,” Mr. Hajiyev told the USACC audience. For IBA, the largest bank in the southern Caucasus region, it means implementing new technology, improving management practices and making headway in global finance. The bank has offices in London, Frankfurt and Moscow. It plans to penetrate the dynamic Georgian and Turkish markets next. With more than 50 percent of the market share in domestic banking and $1.5 billion in assets, IBA is preparing for the injection of petrodollars.

Growing demand for capital goods and higher disposable incomes are ushering in a new banking era. In 2005, net profits increased by 25 percent and bank assets were up 34.5 percent. Fixed deposits grew 16 percent and IBA’s credit portfolio closed the year with a gain of 63 percent. The bank has opened 25 new regional branches in the last year alone. ATMs with the IBA logo now number about 500.

IBA has also maintained its leadership in terms of total credit to the national economy, as it did with its own plastic card business. At end of 2005, the total number of Azericard holders was 650,000. Euromoney magazine awarded IBA its title of Best Bank in Central and Eastern Europe this year. In March, Global Finance cited it as the most rapidly developing bank in Asia.

At IBA, confidence is high. Robust indicators have led to improvements in customer service and a repositioning in the market. The bank has become a group of companies, with subsidiaries in sectors such as insurance and leasing. Mr. Hajiyev wants to use IBA’s new versatility to invest in the non-oil sector’s productive potential. Project finance is going to value-creating sectors like the cotton industry, where IBA-financed ginning technology has doubled output and created 1,500 new jobs. Through the U.S.-based Eximbank, it has linked Azeri agribusiness with the Valmont Industries and John Deere. IBA schemes have even revived the ancient Azeri craft of silk production, an eminently export-oriented industry. A restored factory now employs 1,800 people. Other IBA programs are jumpstarting tobacco plantations, juice-processing plants, car-makers and SMEs in the food-processing sector.

In international financial markets, the bank’s solid reputation has allowed it to sign syndicated credit agreements with Commerzbank and Citibank, valued at $56 million. It has obtained credits worth €45 million ($59.15 million) from Société Générale, as well as a $102 million credit from Barclays PLC. Foreign participation in IBA activities has also prompted partnerships with Bayerische Landesbank, Credit Suisse, the Sumitomo Mitsui Banking Corporation and BNP Paribas. Through these institutions, Azeri SMEs are able to obtain credit lines for factory equipment at relatively low interest rates.

From 2000 to 2005, foreign trade turnover in Azerbaijan rose threefold to $8.5 billion. The government is spearheading investments in infrastructure, such as the road network, that will facilitate trade in the regions. With the BTC pipeline, the country has regained its historic role as a transportation conduit between East and West. According to Mr. Hajiyev, revenue from the BTC will significantly increase electricity production in rural areas, as well as other basic infrastructure. Soft infrastructure is equally critical. “We have risen to the challenge to ensure our human capital also meets the requirements of Azerbaijan’s integration into the global economy,” says Mr. Hajiyev.