MFI CIA - Azerbaijan - 6% p.a. loan for carpentry
Gasan Mammadli, the client, lives in the Bina Khojavar village of Masalli region of Azerbaijan (246 km to Baku). He is engaged in the production of semi-finished products (frames for chairs) for large furniture shops. The client has the necessary machines and conditions; he gets raw materials or wooden boards for frames and dries them himself in his furnaces, and makes frames. As raw material for 1 cubic meter of wood, he pays 240 AZN and that allows him to produce 13 sets (6 frames for chairs in each set). So he receives 78 frames from 1 cubic meter of raw materials. His is in his own yard, he does not pay rent, and the drying of raw materials in furnaces and electricity consumption and other small expenses is 13 manats per 1 set. In other words, his costs are 409 AZN (240 + 13X13). The price for 1 set of frames is 42-46 AZN, which allows the Client to benefit from the sale of 13 sets 572 AZN (13X44), in this case the Client gets 163 AZN from processing (572-409). Taking into account that the Client processes 2 cubic meters of raw materials a month, he earns 326 AZN. After deducting 200 AZN for family expenses, the Client is ready to pay 126 AZN per month for repayment of the loan. We consider it possible to issue a loan for a period of 12 months, with a 25% interest rate; it means 1000 AZN, equivalent to 588 US dollars (1000 AZN : 1.70). In this case, the Client, G.Mammadli will pay 95.04 AZN (55.91 US dollars) on a monthly basis, which in principle is acceptable and comfortable for the Client. Also, in order to minimize credit risks, 2 persons are being attracted by the Client as guarantors for the loan who will sign the relevant agreement. The guarantors receive monthly pensions in the amount of 150 and 300 AZN, which will be an additional guarantee for the loan granted by us to G.Mammadli.
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