Supreme Court of Azerbaijan warns on interest-bearing lending risks

The Supreme Court of Azerbaijan has issued a warning regarding the legal risks associated with lending money for interest. While the Civil Code allows individuals to charge interest on loans between private parties, the court emphasized a critical distinction between lending to a single person and engaging in systematic, regular lending to various individuals for profit.

If an individual provides loans to an unlimited number of people on a regular basis with the intent to generate income, the activity may transition from a simple civil matter to a regulated financial activity that requires specific legal authorization. To mitigate legal risks, the court advises that all interest-bearing loan agreements must be formalized in writing, clearly stating the principal amount, interest rate, calculation method, repayment period, and payment terms.

Furthermore, the court stressed the importance of maintaining verifiable evidence of transactions. Bank transfers are recommended as a secure method, whereas cash payments should be supported by appropriate receipts and documentation to ensure validity during potential court disputes.