Barriers to Sustainable Development and Social Inclusion in Azerbaijan’s rural Communities

Abstract

The socio-economic development and social integration agenda have been Azerbaijan's significant priorities since its independence. Nevertheless, despite considerable efforts, a substantial divide persists between urban and rural populations (Asian Development Bank, 2022). These unequal living conditions including disparities in infrastructure, access to services, and economic opportunities weaken the effectiveness of national inclusion policies and hinder the overall progress of sustainable development in the country. Thus, this study aims to investigate the low level of sustainable development and social inclusion in Azerbaijani rural areas due to problems and issues related to financial infrastructure, economic orientation towards agriculture, and socio-cultural challenges, including gender ones.

The importance of this work is in its effort to propose pragmatic and specific recommendations that will allow for increasing the country’s rural areas’ sustainable development and improve their social integration. Solving these challenges is necessary for the states’ effective development and making economic opportunities available to people from different regions and social layers. Furthermore, understanding such barriers and ways of dealing with them can help provide the Third World countries experiencing similar challenges with possible solutions. Azerbaijan has undergone constant economic progress since the beginning of the 1990s, which is attributed to the country's ever-growing oil and gas industry. The landmark “Deal of the Century,” signed in 1994, attracted significant foreign investment and accelerated economic development. Nevertheless, oil revenues have shaped the country’s economic dependency and affected the socio-economic development of regions, concentrating its benefits on Baku city and neglecting the rural areas (Guliyev, 2019). This has led to an increased gap between the affluent urban areas and the poor rural regions, where most rely on farming to earn income.

This means that the agricultural sector provides employment to nearly 36% of the employed persons and contributes less than 6-7% of the GDP, so there is a need for the country to diversify its economic base to reduce overreliance on agriculture and extractive industries (UNECE, 2023). There are improper farming methods, no application of technology in the case of farming, and limited capital available for agriculture in the countryside. At the same time, over-dependence on oil revenues implies that other critical sectors for agriculture and rural development, like technology and services, have not been advanced (Guliyev, 2019). For this reason, this paper aims to establish how the strategic management of oil revenues can enhance the diversification of the rural economy, foster innovation, and support the development of accessible education and vocational training opportunities for young people in rural areas.

Access to formal financial services remains one of the significant structural barriers to sustainable development in rural Azerbaijan. According to the Country of Origin Information Report (Ministry of Foreign Affairs of the Netherlands, 2024), rural populations still lack access to essential financial infrastructure such as banks and credit cooperatives despite macroeconomic recovery. Many rural municipalities remain unbanked, and financial transactions in these regions are still heavily cash-based. Similarly, the Asian Development Bank (2022) highlights that while Azerbaijan has made strides in financial sector development, access to finance for rural communities, women, and small businesses remains limited due to underdeveloped digital payment systems and a lack of localised financial products. The 2022 and 2021 Annual Reports of the Financial Sector Development Partnership Fund reveal that only 11% of all ADB-funded finance sector projects in Central and West Asia focused on inclusive finance, with specific support for women’s financial inclusion concentrated in urban centres (Asian Development Bank, 2021, 2022).