BAKU, Azerbaijan, August 7. Fitch Ratings has affirmed the Mortgage and Credit Guarantee Fund of the Republic of Azerbaijan (MCGF)'s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB-', with a Stable Outlook.
Fitch views MCGF as a government-related entity (GRE) with strong links to Azerbaijan, whose sovereign rating is also 'BBB-' with a Stable Outlook.
The agency said MCGF has an important policy role in providing affordable housing, which supports the equalisation of the fund's IDRs with those of Azerbaijan under Fitch's Government-Related Entities (GRE) Rating Criteria.
MCGF's financial profile is supported by ongoing and substantial state assistance, which Fitch said is reflected in the fund's stable but modest profitability and resilient business model.
The fund receives annual capital injections from the state, with total injections reaching AZN172.7 million in 2024-2025. The funds have been used to finance social mortgages.
Another form of state support is the Central Bank of Azerbaijan's buyback guarantee on MCGF bonds. Under the guarantee, the central bank is required to buy back the fund's bonds from bondholders upon request. The central bank currently holds around 80% of MCGF's outstanding bonds.
Fitch expects regulatory and political influence to remain strongly supportive of MCGF, at least over the medium term.
The state provided AZN100 million in financing to MCGF in 2026 as planned. Most of the funds were allocated to social mortgages, while the remainder was intended for SME loan subsidies. The latter activity was discontinued following its transfer to another government-related entity in June 2026.
"We expect continuing support on a broadly similar scale," Fitch said.
MCGF is a regular issuer and one of the largest participants in Azerbaijan's domestic bond market.
According to Fitch, a default by MCGF would materially undermine confidence in Azerbaijan's national financial system and negatively affect the availability and cost of funding for the sovereign and other national GREs.
However, Fitch noted that this risk is partly mitigated by the relatively modest size of Azerbaijan's financial market.
The fund also has no exposure to foreign capital markets, which limits the potential for financial contagion. Fitch therefore assesses MCGF's contagion risk as 'Strong'.
