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General overview and analysis of investment and banking systems in Armenia, Azerbaijan, Georgia

While information is in abundance about banks that operate in Western countries, as well as about the services they provide, the republics of the Caucasus in this regard are unjustly deprived of due attention, therefore in this article we will explore specifically the countries of Southern Caucasus – Azerbaijan, Georgia and Armenia, with a particular focus on overall investment climate and banking system in these countries and services they provide to both residents and non-residents.


According to the country’s Constitution, adopted November 12, 1995 Azerbaijan is a democratic, legal, secular, unitary Republic. The country is governed by a president who is elected by direct popular vote for a seven-year term.

Azerbaijan’s vast oil reserves attract foreign investment in the economy of the country. According to the report from the state statistics committee of Azerbaijan, for 2019, foreign investment in the oil and gas sector amounted to 54% (US $ 4.9008 billion).

Given the success of the oil & gas projects, the government announced a policy aimed at the development of non – oil & gas sectors as well. Due to the rapid development of the latter, the share of oil and gas investments in the total volume of foreignness ‘s investments started to gradually decline.

Monetary regulation in Azerbaijan

The official currency of Azerbaijan is Manat (AZN). Foreign companies and individuals may possess accounts in local Banks in AZN as well as in a foreign currency. All payment and settlement transactions in Azerbaijan, including the payment of wages, should be made in Manats and in rare, special exceptions – in other currencies.

Organizational and legal types of business in Azerbaijan

The following organizational forms of enterprises operate in Azerbaijan (both for residents and non-residents):

• Open and closed joint stock company;

• Additional and limited liability company;

• General and limited partnership.

Foreign investors wishing to operate in Azerbaijan may choose any of the above forms. Non-residents can also work in Azerbaijan through a branch or representative office.

In particular, foreigners may invest in business in Azerbaijan in several ways, such as:

• by establishing a wholly owned subsidiary;

• by acquisition of shares in an existing company;

• by creating a joint venture with Azerbaijani companies and individuals;

• by other acceptable forms of the investment agreements.

Foreign companies doing business in Azerbaijan have different registration requirements. For example, companies working in the field of telecommunications, maritime and air transport, insurance and other regulated industries, it is required to have special license to conduct business.

For the period from 2008 to 2019, Azerbaijan’s “Ease of doing business” rating averaged 54.75, reaching a record high of 71 in 2012 and a record low of 25 in 2018. Azerbaijan ranks 34th in the latest Doing Business 2020 rating.

Banking system in Azerbaijan in the first quarter of 2020

The total assets of the banking system of Azerbaijan as of March 31, 2020 amounted to USD 18.9 billion, as reported by local media, citing the Central Bank of the Republic of Azerbaijan (CBA). However, as of January 1, 2020, the reported assets were higher – USD 19.2 billion, that is, there was a decrease of 1.5 percent.

According to statistics provided by the Central Bank as of March 31, 2020:

• the total loan portfolio amounted to USD 8.9 billion (+ 2.2 % increase, compared with the corresponding figure at the end of 2019);

• capitalization – USD 2.7 billion (+ 3.4 % increase);

• liabilities – USD 16.1 billion (- 2.4 % decline). At the same time, banks’ liabilities to the Central Bank of Azerbaijan are estimated at USD 206.8 million (an increase of 7.5 percent);

• deposit portfolio – USD 12.1 billion ( – 3.5 % decline), including deposits of the population – 4.8 billion ( – 4.1 % decline) ;

• operating income – USD 128.3 million (+ 21.6% increase). At the same time, in the reporting period, banks allocated 17.5 million US dollars (a decrease of 2.1 times) for the formation of reserves;

• total net profit – USD 96 million (+ 31.6 % increase);

• interest income – USD 295.6 million (+ 3.8 % increase), including USD 235.2 million on loans issued (+ 16.4%);

• non-interest income – USD 102.5 million (+ 19.8 % increase).

As of March 31, 2020, 30 banks had licenses for banking activities in Azerbaijan, including 14 banks with foreign capital.

In general, as of the end of March, the banks in the country had 506 branches (a decrease of 0.6 % compared to the end of 2019) and 126 service points (a decrease of 5.3%).

It should be noted that at the end of the reporting period, 19,846 people were employed in the banking sector of Azerbaijan (an increase of 2% compared to the end of 2019).

Despite all the challenges – current and past, the general dynamics of the financial and banking system of Azerbaijan shows that in recent years it has demonstrated quite successful development trends across all the key factors, in terms of comprehensiveness, stability, efficiency.

The websites of many banks are available in English, and they offer services to non-residents, including in the form of remote opening and maintenance of accounts.

The processes of opening a bank account in Azerbaijan:

A current account can be opened in various currencies: Australian dollar, Azerbaijani Manat, British pound, Canadian dollar, Danish krone, Norwegian krone, Swedish krona, Euro, Japanese yen, Swiss franc, Russian ruble and US dollar. Opening an account in Azerbaijani Manats and foreign currency is free of charge.

To open a bank account, foreigners need the following documents:

• Passport and entry visa.

• Temporary identity card (for foreigners staying in the country for more than 30 days).

• Completed application form (the application form is provided by the bank).

Usually banks issue cards to accounts in the following currencies: Azerbaijani manat, British pound, euro and US dollar.

Savings (deposit) accounts

It is recommended that you check rates and policies applied by different banks before opening an account or making a deposit. Note that interest on individual deposits is not taxed.

Maximum rates in national currency are up to 6% per annum, in foreign currency – up to 0.3% per annum.

Corporate accounts of foreign companies

To open a bank account for a foreign company, the following documents are required:

• A copy of a legal document confirming the legal status of a non-resident or company

• Notarized copy of the registration document issued by the Ministry of Foreign Affairs; branches of companies must also receive a notarized copy from the Ministry of Finance

• Sample signatures of directors

• Certificate of registration in the Ministry of Taxation

• Certificate issued by the central bank of the foreigner’s country of residence, confirming the non-resident’s right to opening bank accounts in Azerbaijan

• Completed application form

The following banking services are available for corporate clients:

• Opening, maintaining bank accounts and settlement services

• Currency exchange

• money transfer services in Azerbaijan and abroad

• Short-term loans (up to one year) and long-term loans (more than one year)

• Salary cards for employees

• Financial transactions

• Internet banking

• Receiving payment by bank cards,

• other.

Deposit insurance

The Azerbaijan Deposit Insurance Fund provides deposit guarantee for resident and non-resident individuals in full, provided that the interest rate on deposits does not exceed 10% in national currency or 2.5% in foreign currency.

ADIF was created within the framework of the presidential decree of February 9 “On the approval and implementation of the law” On deposit insurance”, adopted on December 29, 2006. The main purpose of the fund is to guarantee the return of bank savings to depositors in the event of a bank bankruptcy and liquidation of its license to accept deposits.


Georgia is a democratic, parliamentary republic with a multi-party system. The President of Georgia is the constitutional head of state and the supreme commander of the Defense Forces, and the Prime Minister of Georgia is the head of government with executive powers to direct the functions of government. The highest legislative power is vested in the Parliament of Georgia. Salome Zurabishvili is the first woman to be elected President of Georgia, with an office of six years. Zurabishvili is expected to become the last president of Georgia to be directly elected, in the face of constitutional reforms that will take effect in 2024.

Legislative power in the country is exercised by a unicameral parliament.

Economic overview: Georgia

Over the past decade, Georgia has carried out a number of progressive reforms, including large-scale anti-corruption measures, as well as reforms of the labor and tax codes.

In view of the full-scale reforms in business regulation, Georgia received a positive rating for reforms in health care, public administration, and the judicial system. According to the World Bank’s”Doing Business in 2020″ report, the rating of Georgia in the category” Ease of doing business” is the 7th and EODB ( ease of doing business) score is 83, 7. Thus, Georgia is ahead of such successful countries as Sweden, Macedonia, Estonia, Finland, Australia, Taiwan (China) and Latvia.

Reforms in the Georgian economy have led to a large inflow of foreign investment. According to GeoStat, foreign direct investment increased by 19% from 2016 to 2017 (USD 1,650 million in 2016; USD 1,963 million in 2017). According to preliminary data for 2020, the volume of foreign direct investment (FDI) in Georgia in the first quarter of 2020 amounted to USD 165.4 million, which is 41.7% less than in the corresponding period of the previous year.

The distribution of GDP by sector is as follows: services 67.9%, industry 23.7% and agriculture 8.2%.

Investment climate of Georgia

Georgia open to foreign investment, and the National Investment Agency of Georgia is implementing a large-scale marketing campaign to attract more foreign investors in Georgia. The legislation establishes a favorable environment for foreign investment, although it does not provide a privileged regime for foreign investors. The law on the promotion and guarantee of investment activity protects foreign investors for up to ten years from the subsequent changes in legislation that may have impact on investment environment.

Georgia has concluded bilateral agreements on investment promotion and mutual protection with 32 countries. This is the largest number of free trade agreements in force in the region.

On June 27, 2014 Georgia signed the Association Agreement (AA) and Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union.

In 2016, the government signed a free trade agreement with the countries of Iceland, Liechtenstein, Norway and Switzerland of the European Free Trade Association (EFTA). On May 13, 2017, Georgia signed a free trade agreement (FTA) with China, which entered into force on January 1, 2018. On June 28, 2018, Georgia and Hong Kong signed the Free Trade Agreement, which entered into force on February 13, 2019. The country also has executed Free Trade Agreement with CIS states, as well as bilateral agreements with Ukraine, Russia (although trade is limited by the Russian Government), Kazakhstan, Azerbaijan, Armenia, Moldova, Turkmenistan and Turkey .

Banking system in Georgia

The reliability and stability of the banking system plays an important role in the decision to open an account in Georgia, especially for a non-resident. Compared to 2019, the capital structure in the banking system has not changed: 14 banks have foreign shareholders and only 1 is a Georgian bank. The number of bank branches is 148, during 2019 their number increased by 13. It should be noted that the last bankruptcy was recorded 10 years ago, which indicates the stability of the country’s financial system.

The stable profitability of the banking sector is precisely the factor that attracts foreign investment in this area. By the volume of investments in 9 months of 2019, the financial industry of Georgia (USD 117 million ) takes the third position, leaving behind Energy (USD 152.4 million) and Hospitality sectors (USD 140.7 million).

You can familiarize yourself with the banking system of Georgia for non-residents in great detail under the article how can a non-resident open an account in a Georgian bank in 2020.

As of June 2020, there are 15 commercial banks (including foreign bank branches) operating in Georgia:

• JSC”TBC Bank”

• JSC”Bank of Georgia”

• JSC”Liberty Bank” (Former JSC”Peoples Bank of Georgia”) ; (Former JSC”AgroIndustrial Bank”)

• JSC”Basisbank”

• JSC”VTB Bank – Georgia” (Former JSC”United Georgian Bank”)

• JSC”Cartu Bank”

• JSC”ProCredit Bank” (Former JSC”Microfinance Bank of Georgia”

• JSC”Silk Road Bank” (Former JSC”BTA Bank”, Former JSC”BTA Silk Road Bank” , JSC”Silk Road”)

• JSC”Ziraat Bank Georgia”

• JSC”Isbank Georgia”

• JSC”TeraBank”

• JSC”Halyk Bank Georgia”

• JSC” PASHA Bank Georgia”

• JSC” FINCA Bank Georgia”

• JSC” Credo Bank”

The National Bank of Georgia exercises oversight on the financial sector to ensure financial stability and transparency of the financial system, as well as to protect the rights of consumers and investors. Through the Financial Monitoring Service of Georgia, a separate legal entity, the NBG ensures that measures are taken against money laundering and terrorist financing.

In addition, the NBG is a banker and tax agent for the government. ( Two of the largest Bank of Georgia – TBC and Bank of Georgia (comprising 80% of the market) have correspondent banking relationship with the United States through Citibank, N.A..

The official currency of Georgia (GEL) is the only legal tender on the territory of Georgia, with the exception of export – import and trade operations in the free industrial zone. However, usually Georgian banks provide services on opening multicurrency accounts (in lari, euro, dollar, pound sterling). Moreover, there is no currency regulation in Georgia, and the country is not a member of the system of automatic exchange of tax information.

Capital Markets

The Georgian Stock Exchange (GSE) is the only organized securities market in Georgia. Designed and created with the help of USAID and acting on a legal basis, developed with the assistance of US experts, the GSE is in line with the best international practices in the trading of securities and offers efficient investment mechanisms to local as well as foreign investors.

GSE’s automated trading system is designed to accommodate trading operations for over thousand securities transactions by brokers, from workstations on the GSE platform or remotely from their offices.

Deposit insurance in Georgia in 2020

The deposit insurance system in the country started operating relatively recently – from the early 2018. The adoption of the respective legislation was a positive step towards enhancing confidence and stability of the Georgian banking system. Georgian banks are members of the deposit insurance system, so non-residents can open personal account in Georgia, without fear for their finances. From July 1, 2020, the limit for deposits insured in commercial banks has been increased from 5,000 to 15,000 lari.

It should be noted that the following are not subject to insurance:

• deposits, access to which is restricted by the legislation of Georgia (seizure of property or the collateral to secure credit);

• deposits of legal entities;

• deposits of executives of commercial banks;

• deposits of shareholders of banks holding a share of at least 5%, and their family members.


According to the UNCTAD World Investment Report 2020, foreign direct investment (FDI) inflows to Armenia in 2018 amounted to USD 254 million, unchanged from the previous year. In 2019, total foreign direct investment was estimated at USD 5.7 billion. Russia, Greece, Cyprus and Germany are the four main investors. In Armenia, significant investment volumes are attributed to the Armenian diaspora (about 6 million investors ). The main FDI sectors are energy, telecommunications, metallurgy, hotel services and air travel.

Armenia has recorded significant achievements towards liberalizing its economy. According to the World Bank, Armenia ranks first among the CIS (Commonwealth of Independent States) countries in terms of FDI attractiveness. The government recently introduced conditions and reformed laws favorable to foreign investment, and thanks to its economic dynamism, the country has been nicknamed the”Caucasian Tiger”. These measures include free trade zones for high-tech industries, which provide companies with preferential treatment for corporate income tax, VAT, property tax and customs duties. The country does not impose restrictions on foreign control and rights to private property and establishment, and business registration turnaround is quite fast. FDI inflows are also facilitated by the Comprehensive and Enhanced Partnership Agreement between the EU and Armenia. According to the World Bank ‘s 2020 Doing Business Report, Armenia is ranked 47th out of 190 countries, losing six positions compared to the previous year.

Since January 2015, Armenia has been a member of the Eurasian Economic Union (EAEU), which creates the following opportunities:

• Duty-free import of raw materials from the EAEU member states.

• Lack of customs formalities during mutual trade between the EAEU member states, which leads to a decrease in financial costs and time consumption for business.

• Absence of non-tariff trade measures and trade technical barriers between the EAEU member states.

• Favorable import tariffs for about 750 products.

Armenia has signed free trade agreements with Georgia and most of the CIS countries. Currently, Armenia has a GSP beneficiary status with Canada, Japan, Norway, Switzerland and the United States. Since 2009, Armenia has also been included in the list of countries with GSP + by the European Union.

Banking services in Armenia

The largest participant in the financial market of the Republic of Armenia is the banking sector, which accounts for 83.5% of the assets of the financial system.

As of December 31, 2019, the participants of the RA financial market are:

• 17 banks with 551 branches,

• 43 credit institutions with 233 branches,

• 7 insurance companies and 4 insurance intermediaries (brokers),

List of commercial banks in Armenia:

1.” Ameriabank” CJSC

2. “Araratbank” OJSC

3. “Ardshinbank” CJSC

4. “Armbusinessbank” CJSC

5. “Armekonombank” OJSC

6. “ArmSwissBank” CJSC

7. “Artsakhbank” CJSC

8. “Byblos Bank Armenia” CJSC

9. “Converse Bank” CJSC

10. “Evocabank” CJSC

11.”HSBC Bank Armenia” CJSC

12. “InekoBank” CJSC

13. “Mellat Bank” CJSC

14. “UniBank” OJSC

15. “VTB Bank Armenia” CJSC

16. “ACBA-Credit Agricole Bank” CJSC

17. “ID Bank” CJSC

In addition to an extensive network of branches, representative offices, ATMs and POS-terminals, commercial banks of Armenia have individual programs for servicing corporate clients. Financial institutions supply a wide range of additional services, including automation of payments and transactions, accounting services, and asset diversification. Here non-resident companies and individuals receive a full range of banking services with the ability to service specific types of activities on an individual basis. Another advantage is the low cost of opening and supporting non-resident accounts.

Securities market in Armenia

The participants of the Armenian securities market include 13 investment companies, 5 investment fund managers, the Central Depository of Armenia, the Armenian Stock Exchange, commercial banks, insurance companies, credit organizations and 25 reporting issuers, in particular:

• 108 pawnshops,

• 211 currency exchange points (branches not included),

• 10 money transfer services,

• 6 payment instruments and a company for processing payment and settlement instruments,

• 25 reporting issuers.

As of December 31, 2019

• total assets of banks amounted to 5.828 billion AMD

• the total capital of banks amounted to 824 billion AMD

• total amount of liabilities amounted to 5.4 billion AMD

58.6% of the assets of the banking system (or AMD 3 trillion 415 billion) are attributable to the lending in economy. 65.1% of banks’ liabilities (or AMD 3 trillion 255 billion) are funds attracted from individuals and legal entities (except for financial organizations). The amount of the authorized capital in the capital system of the banking system (actually amended) is 525.6 billion drams. The concentration in the banking system of the Republic of Armenia is assessed as low. As of December 31, 2019, the concentration ratio of Herfindal-Hirschmann in the banking system of the Republic of Armenia is 0.089, for total liabilities – 0.095, for total capital – 0.068.

Two investment fund managers are licensed to operate in the territory of the Republic of Armenia. Each manages 3 mandatory pension funds.

Two investment fund managers are licensed to operate in the territory of the Republic of Armenia. Each manages 3 mandatory pension funds.

Bank deposit insurance

Individual deposits are insured in the Republic of Armenia. Limit of insurance deposit amount in the bank is 10 million AMD (about 20,000 US dollars) for deposits only in the Armenian currency and 5 million AMD (about 10,000 US dollars) for the deposit only in foreign currency.

Why is it profitable to invest in Armenia?

Armenia’s investment policy is aimed at developing a favorable investment and business climate, increasing the transparency of the regulatory environment, identifying the country’s competitive advantages, increasing investments in Armenia, developing market infrastructure and, as a result, contributing to economic development based on all of the above factors.Further development of the country’s industry and technologies is mainly due to the development and effective implementation of targeted investment policy. Increased investment in Armenia will allow solving several key issues, such as creating new jobs, attracting know-how that is characteristic of a market economy (general and financial management, marketing, new technologies, skills, etc.), identifying new markets and their availability, enhanced access to new markets etc.

Why choose Georgia for doing business?

Georgia serves as a link for several economic regions and is a particularly important transit country. Located at the intersection of Europe and Asia, it is a natural transport corridor. Georgia is the shortest and most convenient transit route for transporting oil, gas and cargo between the west and Central Asia. To strengthen the transit role of Georgia, the government is actively working on the development of international projects.

Is deposit insurance available in Azerbaijan?

Yes. Moreover, the Board of Trustees of the Azerbaijan Deposit Insurance Fund (ADIF), on the recommendation of the Financial Stability Council of the Republic of Azerbaijan, in agreement with the Central Bank of Azerbaijan, decided to increase the threshold of the guaranteed deposits in national currency from 10% to 12% from June 1, 2020. The threshold on annual interest rate for guaranteed deposits in foreign currency in the ADIF member banks will remain at the same level – 2.5%.

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