Ivana Fernandes Duarte, Regional Manager of the International Finance Corporation (IFC) for the South Caucasus gave an exclusive interview to the Azerbaijan State News Agency (AZERTAC).

-Do you have or are you planning a new strategy for cooperation with Azerbaijan for the coming years? What are IFC’s key short- and medium-term priorities in Azerbaijan?

-The World Bank Group Board of Directors has recently endorsed a new Country Partnership Framework for Azerbaijan for the next five years, focusing on a more competitive, inclusive and greener economy. Key priorities include increasing productivity, helping create better jobs, and enhancing resilience and sustainability.

As part of this effort, IFC—a member of the World Bank Group focused on the private sector—will support investments to enhance infrastructure, energy access, and sustainability, including green buildings and financing for MSMEs, with a focus on green finance and women entrepreneurs. We will also work on expanding private sector participation in agriculture, water, transport, and digital connectivity to foster growth, job creation, and resilience.

-What is IFC’s position on the development of renewable energy in Azerbaijan? How does IFC support the development of this sector?

-Investments and policy reforms are crucial for Azerbaijan's economic diversification and resilience. These measures will require significant investment, estimated at $44 billion by 2060, according to the World Bank Group’s Country Climate and Development Report for Azerbaijan. IFC aims to support Azerbaijan's renewable energy sector, which holds immense potential—including an estimated technical potential of 23 gigawatts of solar energy and 157 gigawatts of offshore wind capacity.

Developing large regional transmission infrastructure, such as the Black Sea Submarine Cable or Green Energy Corridor, could enable Azerbaijan to leverage its vast resources and position itself as a significant green energy exporter on the global stage.

-How does IFC plan to increase its support to Azerbaijan’s small and medium enterprises (SMEs)?

-IFC supports smaller enterprises through investments in partner banking institutions like Bank Respublika, providing funding that is channeled to MSMEs. We plan to continue this approach through both our existing and new partners. We also offer advisory services to financial institutions to improve sustainable finance and governance practices on an as-needed basis.

To enhance SME financing, we promote asset-based financing, which allows smaller businesses to use their movable assets, such as inventory, equipment, and other assets, as collateral. This approach helps more businesses access funding, especially those that were previously underserved. With this in mind, we are supporting the Azerbaijan Banks Association in creating a national asset-based finance tool.

-What is the volume of investments made by IFC in Azerbaijan since the beginning of cooperation?

-Since Azerbaijan became a member of IFC in 1995, IFC has invested approximately $900 million in nearly 60 projects across sectors, including financial services, infrastructure, and manufacturing. Our advisory services have helped enhance the business environment, strengthen the financial sector, improve corporate governance, and support SMEs and agribusiness development.

-What are IFC’s future investment plans, given Azerbaijan’s aspiration to diversify its economy? Which sector does IFC consider a priority for investment?

-We are prioritizing agriculture, water security, and sustainable construction as key areas for support.

Given agriculture’s strong potential to create rural jobs in Azerbaijan, we are collaborating with the government to introduce innovative financing tools such as crop receipts and warehouse receipts. These tools will help small farmers access working capital by using future harvests or stored crops as collateral. This approach aims to integrate farmers into global value chains, boost growth, and support rural employment.

-How does IFC help Azerbaijan in addressing water issues and ensuring water security?

-In water, we aim to help address the country’s growing water scarcity. Between 50 and 70 percent of its runoff enters the country from neighboring states, which are also facing increasing water demand and declining water resources. This high dependence on transboundary water sources, combined with declining water availability and increasing droughts, salinization, and pollution, poses a significant water security risk.

IFC can support Azerbaijan in developing a comprehensive strategy to bolster the sector’s sustainability and address water scarcity and wastewater treatment challenges. We commend the country for increasingly turning to the private sector to tackle these issues, with the first public-private partnership (PPP) ongoing tender for the Baku desalination plant demonstrating this approach. We are also interested in exploring financing opportunities in desalination.

- How does IFC support the development of green building in Azerbaijan?

- In construction, IFC is supporting the government’s green building initiatives. Globally, construction value chains—including the construction and operation of buildings and the production of materials like cement and steel—account for 40 percent of energy and industrial CO2 emissions. Building green not only has the potential to reduce such emissions by 23 percent by 2035 but can also benefit companies financially through cost savings, and Azerbaijan is no exception.

A recent example: AlatBay Logistics Center, operating within the Alat Free Economic Zone, has successfully completed the design, construction, and audit stages of EDGE—an innovative green building certification system implemented by IFC—and been awarded the EDGE Advanced certificate. As part of these efforts, the company has reduced its energy use by over 40 percent and water consumption by over 25 percent.

We have presented green building solutions to Azerbaijan’s government and private stakeholders and signed a Memorandum of Understanding to develop a Green Buildings Roadmap. Additionally, we’re exploring investments in transport, logistics, and e-mobility to further advance sustainability and connectivity.

-IFC has also implemented a number of advisory projects aimed at stimulating private sector growth in Azerbaijan. What are the next steps in this direction?

- IFC continues to support the development of the private sector in Azerbaijan through the implementation of advisory projects. A key tool in this process is public-private partnerships (PPPs), which play a crucial role in attracting private capital and expertise for the development of infrastructure and other critically important sectors.

IFC plans to deepen its cooperation with the government of Azerbaijan in the field of PPPs, facilitating the expansion of private sector participation, particularly in infrastructure projects. This will enhance efficiency, accelerate the implementation of initiatives, and create a sustainable foundation for the country's further economic growth.

- How does IFC support the development of e-mobility and transport infrastructure in Azerbaijan?

-A key focus is on e-mobility. The transport sector currently accounts for 22.6 percent of total energy consumption. This could be reduced through investments that boost the roll-out of charging infrastructure for privately financed electric vehicles and increase urban transport options—for example, by renewing the country’s bus fleet, a process that has already started. We also welcome the government’s tax breaks for electric vehicles. Other measures such as increasing fuel efficiency standards, providing incentives to replace old vehicles, and making freight transport operations more efficient are also important. The government is currently developing the necessary regulatory, policy, and institutional frameworks, and IFC aims to provide both advisory and investment support along the value chain where private sector solutions can be deployed.

We are also committed to supporting Azerbaijan’s ongoing efforts to attract more private investment in transport and logistics, and other productive industries.

- How does IFC support the development of sustainable finance in Azerbaijan?

-To enhance sustainable finance, we collaborate with financial institutions to strengthen their capacity to develop sustainable finance products. With our assistance, banks from Azerbaijan engaged in a program on green bonds and participated in various events focused on sustainable finance, covering topics such as blue finance, formulating sustainable finance strategies, identifying sustainable finance opportunities, and green building. Additionally, IFC jointly with the World Bank supported the Central Bank of Azerbaijan with a technical review of regulations for green bonds and green lending, and sustainable finance principles.

- How does IFC support the development of digital financial services in Azerbaijan?

-To enhance digital financial services, we welcome the Central Bank’s launch of a regulatory sandbox, which will allow companies to test new digital products in a controlled environment. This will foster innovation while managing risks. At the private sector level, we provide advisory services to support financial institutions in their digital transformation journey. This not only brings the latest industry practices to the financial sector but, more importantly, enhances access to financial services, particularly for people in rural and remote areas.

We will continue working with financial institutions to implement best practices in risk management, establishing mechanisms for better informed decisions, well-mitigated risks, and stronger credit portfolios.