The development of the Middle Corridor is set to bring indirect benefits to commercial banks in Azerbaijan, Kazakhstan, and Georgia, according to a recent Moody’s forecast cited by Day.Az.
Moody’s notes that while regional commercial banks are not expected to play a major direct role in financing the Middle Corridor, as funding primarily comes from governments, state-owned entities, international development banks, and private investors, they can contribute to supplementary infrastructure projects. However, short-term funding dominates, with nearly 80% of Kazakh banks’ and 90% of Azerbaijani banks’ resources being short-term, limiting their capacity for long-term lending due to high financing costs. Georgian banks, while also facing high costs, rely moderately on market funding, with 60% sourced from long-term financing by international financial institutions.
The report highlights that private sector lending by banks in Kazakhstan and Azerbaijan remains limited, at 25% and less than 20% of GDP, respectively, compared to 66% in Georgia. In Kazakhstan, government support through the Baiterek National Management Holding offers guarantees, direct financing, and a mutual guarantee fund to encourage private sector involvement. Large private banks are increasingly participating in infrastructure projects, likely indirectly supporting the Middle Corridor by financing logistics hubs and related investments. Interest in providing such financing, including through syndicates, is growing.
Moody’s emphasizes that, despite limited direct involvement, banks in these countries will benefit significantly from increased economic activity. “This presents an opportunity for private banks in Kazakhstan, Georgia, and Azerbaijan to expand and diversify lending in a competitive corporate sector, offering loans to subcontractors, funding ancillary construction activities, and supporting road infrastructure tied to the main route. Over time, banks could finance a broader range of transport services along the Middle Corridor,” the report states.
The Middle Corridor is a vital trade and transport route connecting Asia and Europe through Central Asian countries like Kazakhstan, Uzbekistan, and Turkmenistan, crossing the Caspian Sea, Azerbaijan, Georgia, and Türkiye. As a land-based alternative to longer maritime routes, it links eastern Asia, including China, to Europe, enhancing regional connectivity.
https://news.day.az/economy/1779953.html