Procedures for the use of funds of the Azerbaijan National Fund for Entrepreneurship Support
I. General Provisions
1.1. These Procedures specify the mechanism and conditions of using the funds of Azerbaijan National Fund for Entrepreneurship Support.
1.2. The funds of the Fund shall be used to finance investment projects undertaken by business entities in the priority areas of the socio-economic development of Azerbaijan Republic.
1.3. The allocation of the Fund's resources to business entities shall be carried out by authorized banks and non-banking lending organizations (hereinafter referred to as authorized lending organizations) on their own behalf and at their own risk. The authorized lending organizations and the Fund shall conclude an agreement specifying the use of such funds. The Fund may demand that any agreement entered into between authorized lending organizations and business entities contain mandatory terms and conditions.
1.4. All banks and non-banking lending organizations, with a license issued by the Central Bank of the Azerbaijan Republic, may issue, as authorized lending organizations, loans on preferential terms, in accordance with the criteria set by the Supervisory Board of the Fund.
1.5. In order to ensure efficient distribution of funds by authorized lending organizations, information concerning the financial and statistical indices of such authorized lending organizations shall be presented by the Central Bank of the Azerbaijan Republic to the Supervisory Board of the Fund on an annual basis, by the 1st of February.
1.6. The Central Bank of the Azerbaijan Republic shall regularly inform the Supervisory Board of the Fund of any considerable changes observed during the year in the financial and statistical indices of the authorized lending organizations entrusted with the allocation of the Fund's fund.
1.7. Repaid preferential loan funds, as well as other revenues shall be accumulated on the Fund's account and used for the purposes indicated in Paragraph 1.2 of these Procedures. The interest, we well as penalty and commission fees paid to the Fund in regard to preferential loans shall be accumulated as special funds, and 10 per cent of such funds may be used to improve the Fund's physical infrastructure and the social protection of its staff.
II. Allocation areas of the Fund's funds
2.1. The Fund's funds shall be used to finance investment projects in areas selected by the Supervisory Board of the Fund, on the basis of their importance for the socio-economic development of the country.
2.2. Contests may be held among business entities, in the form and according to the procedures specified by the Supervisory Board of the Fund, in order to implement specific projects important for the development of certain economic areas and indicated in Decrees and Orders of the President of the Azerbaijan Republic, as well as state programs.
III. Issuing loans to authorized lending organizations
3.1. At the beginning of each year, the Supervisory Board of the Fund shall set a limit for every authorized lending organization, depending on its total capital. After this limit has been exceeded, the Supervisory Board of the Fund may, on the basis of an application by the authorized lending agency, set another limit for financing investment projects of business entities at the expense of the repaid loan funds and other revenues.
3.2. The remainder of the funds provided by the Fund to authorized banks may constitute up to 100 per cent of their total capital. In case of funding gross and large-scale project this limit may be increased to 150 per cent of the total capital of the authorized bank. The remainder of the funds provided by the Fund to non-banking lending organizations may constitute up to 100 per cent of their total authorized capital.
3.3. In case the funds provided in accordance with the limit are not completely used before 3 (three) months have left until the end of the financial year, a commission fee shall be paid for the unused part of the funds, in an amount of 0.02 per cent for every calendar day from the date on which the limit was set, while the unused part of the funds shall be provided to another authorized lending organization by order of the Supervisory Board of the Fund.
3.4. Authorized lending organizations shall pay to the Fund the principal and the accrued interest on the used funds for every month no later than the 3rd (third) banking day of the next month.
3.5. The liabilities of authorized lending organizations before the Fund are not dependent on their relations with business entities. Irrespective of the payments on preferential loans, interest and other obligations by business entities, authorized lending organizations shall completely perform their obligations before the Fund. For every day in arrears on the performance of the obligations of authorized lending organizations before the Fund, they shall pay a penalty fee in an amount of 0.1 per cent of the unpaid funds. In case an authorized lending organization fails to perform their obligations for 1 (one) month, the Fund shall take actions to return its funds, in a manner prescribed by law.
3.6. The Supervisory Board of the Fund shall examine all complains by business entities concerning the requesting of terms other than those specified in the applicable laws and those set by the Supervisory Board of the Fund, by authorized lending organizations (payment of additional interest etc) and, in case such information is confirmed the Supervisory Board of the Fund shall lower the individual limit for this such lending organization to zero.
IV. Issue of loans to business entities and the use of such loans
4.1. As per these Procedures, an authorized lending organization shall allocate the Fund's fund on its own behalf and at its own risk.
4.2. At the initial stage, a business entity shall apply to an authorized lending organization in order to obtain a preferential loan financed at the expense of the Fund's funds. The authorized lending organization shall register the application and present to the business entity a document confirming the registration of the application. The authorized lending organization shall, no later than within 10 (ten) banking days and within the limit set for it, evaluate the investment project with consideration of its own business interests and the minimal requirements and criteria for investment projects set by the Fund, and present to the Fund all information and documents concerning positively evaluated projects, in accordance with the Funds' requirements. The Fund may request other information and documents, in order to ensure full and comprehensive evaluation of the investment project. Rejection letters shall be sent to those business entities, whose investment projects were fit unsatisfactory, within 3 (three) banking days and with indication of the reasons for rejection.
4.3. The Fund shall, within 10 (ten) banking days, evaluate the projects presented to it for financing at the expense of its funds, and with the exception of small loans, conduct directing on-site monitoring of the investment project presented by authorized lending organizations.
4.4. Depending on the results of the evaluation, the Fund shall officially inform the authorized lending organization of its decision either to grant the application or to reject it.
4.5. After a loan agreement has been entered into with business entities, the authorized lending organization shall send to the Fund an order concerning the allocation of funds. The Fund shall, within 3 (three) banking days, ensure the allocation of the requested funds to the lending organization. After the allocated funds have been transferred to the correspondent account of the authorized lending organization Fond, the lending organization shall, within 2 (two) baking days, transfer said funds to the account of the business entity and notify both the business entity and the Fund that the funds have been transferred.
4.6. Information about all business entities presenting their investment projects in order to obtain preferential loans financed by the Fund, shall be presented by authorized lending organizations to the Fund no later than within 5 (five) banking days of the month following each quarter of the year. The information shall be submitted in a form determined by the Fund. In case of necessity, the Fund may request such information before the indicated date.
V. Loan limits
5.1. The limits set for preferential loans that may be issued to business entities at the expense of the Fund's funds are as follows:
5.1.1. AZN 5 000 - 50 000 - small loans;
5.1.2. AZN 50 001 - 500 000 - medium loans;
5.1.3. AZN 500 001 - 10 000 000 - gross loans;
5.2. The maximum amount of a loan obtained by a business entity at the expense of the Fund's funds may not exceed AZN 10.000.000.
VI. Loan terms and interest rates
6.1. The terms set for the Fund's preferential loans are as follows:
6.1.1 small loans - up to 2 (two) years;
6.1.2. medium loans - up to 3 (three) years;
6.1.3. gross loans - up to 5 (five) years;
6.1.4. large-scale loans - up to 7 (seven) years.
6.2. The initial interest rates for the Fund's loans are as follows:
6.2.1. for financing projects aimed at the development of mass media - 0.5 per cent;
6.2.2. for financing other projects - 1 per cent.
6.3. The maximum limit of the annual interest rate set by authorized lending organization for the Fund's loans may not exceed 6 per cent of the total loan amount (4 per cent for the financing of projects aimed at the development of mass media), including the interest indicated in Paragraph 6.2 of these Procedures.
6.4. Paragraphs 7.2.2 and 6.3 shall be applied to funds obtained by the Funds from sources other than the budget, with consideration of the interest rates specified in the agreements concluded with such sources.
VII. Grace period
7.1. The loan grace period shall be set on the basis of information concerning the cash flow depending on the activities of the business entity, and may encompass two-thirds of the loan use term. During the grace period the business entity shall only pay the interest, and not the loan principal. Authorized lending organizations shall inform the Fund of the grace periods set for business entities.
VIII. Repayment of the funds by business entities
8.1. Business entities shall pay the interest on the preferential loans by the last day of every month. The payments of the principal shall commence the next month following the end of the grace period, and shall be made on an annuity basis by the end of every month.
Payments on the principal and the interest made by a business entity before the appointed date shall be transferred by the authorized lending organization to the Fund's treasury account no later than within 3 (three) banking days. In case the authorized lending organization fails to transfer such funds to the Fund's treasury account in time, it shall pay a penalty fee in accordance with Paragraph 3.5 of these Procedures. In case such transfer is delayed for over 30 (thirty) banking day, the Supervisory Board of the Fund may suspend the allocation of new funds to the lending organization in question or may revoke the privileges of such lending organization.
8.2. The Fund may address authorized lending organizations in regard to the terms of the repayment of the principal and the interest by business entities, and may apply to the Central Bank of the Azerbaijan Republic in this regard. In case such application has been submitted, the Central Bank of the Azerbaijan Republic shall investigate, within the powers entrusted to it, this matter during an inspection of lending organizations and shall inform the Fund accordingly.
8.3. The failure of business entities to repay the allocated funds completely or in a timely manner shall not free authorized lending organizations from their liabilities before the Fund.
IX. Project monitoring
9.1. Authorized lending organizations shall, in accordance with the rules set by the Fund, conduct monitoring of the use of the Fund's funds by business entities for the purpose of the investment projects at least twice a year, and shall submit appropriate reports to the Fund. The form and structure of the report shall be specified by the Fund. In case the authorized lending organization finds, during monitoring, that the business entity does not use the preferential loan proceeds for the intended purpose, the authorized lending organization shall demand that the business entity repay the preferential loan and the interest before the appointed date. Irrespective of the performance of the obligations of the business entity, the authorized lending organization shall transfer the principal and the accrued interest on the preferential loan in full to the Fund's account within 10 (ten) banking days.
9.2. In order to exercise control over the use of funds for their intended purpose, the Fund may conduct independent monitoring of the sponsored business entity. In case the Fund finds, during such monitoring, that the preferential loan proceeds are not used for the intended purpose, the principal and interest of the preferential loan issued to the business entity shall be transferred by the authorized lending organization to the Fund's account no later than within 10 (ten) banking days, upon the Fund's written request and regardless of the performance of the obligations of the business entity. In case the authorized lending organization fails to transfer such funds to the Fund's account in time, they shall pay a penalty fee in accordance with Paragraph 3.5 of these Procedures. In case the transfer of such funds is delayed for more than 30 (thirty) days the Fund may take actions in a manner prescribed by law, in order to ensure the repayment of the funds.
9.3. In case an authorized lending organization fails to observe monitoring rules specified by the Fund for at least 3 (three) times, the Fund may cancel the primary and additional limits set by the Fund for the lending organization or exclude such organization from the list of authorized lending organizations.