Fitch affirms Azerbaijan mortgage fund at BBB- with stable outlook

International credit rating agency Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of Azerbaijan's Mortgage and Credit Guarantee Fund (MCGF) at "BBB-" in both foreign and local currency, with a Stable Outlook.

According to Fitch, the fund's ratings are aligned with Azerbaijan's sovereign rating of "BBB-" with a Stable Outlook.

The agency described the MCGF as a government-related entity that maintains close ties with the state and plays a key role in implementing government housing policies aimed at improving access to affordable housing.

Fitch said the fund's financial position continues to benefit from regular government support. In 2024 and 2025, the state injected a total of 172.7 million manats ($101.6 million) into the fund to finance its social mortgage programs.

The Central Bank of Azerbaijan supports the fund through a bond repurchase mechanism and currently holds around 80% of the MCGF's outstanding securities. The fund is also exempt from corporate income tax, while its bonds benefit from preferential risk treatment, making them more attractive to banks.

The government allocated 100 million manats ($58.8 million) to the MCGF in 2026, primarily to support social mortgages and subsidize lending to small and medium-sized enterprises. However, the fund's SME support functions were transferred to another state institution in June 2026.

Fitch said the MCGF remains profitable, reporting net profit of 26.8 million manats ($15.8 million) in 2025, up from 23.2 million manats ($13.6 million) a year earlier, driven by the expansion of its loan portfolio. Asset quality also remained strong, with non-performing loans accounting for no more than 0.1% of the combined mortgage and leasing portfolio.

The agency noted that the MCGF holds a dominant position in its sector, accounting for around 80% of Azerbaijan's household mortgage lending market.

The fund operates as a non-commercial organization and can only be dissolved or reorganized by presidential decree. Its activities are overseen by a supervisory board appointed by the president and comprising representatives of the Presidential Administration, government ministries and the Central Bank of Azerbaijan.