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USAID leads donors supporting EBRD Armenian microfinance
Credit and technical advice to banks removes borrowing bottlenecks
In Yerevan today, USAID announced its contribution of $1.5 million to fund
consultants providing expert technical advice to Armenian banks to help them
improve their small business lending practices. This is the largest donation
to date in support of the EBRD’s €10 million Armenia Multi-Bank Framework
Financing Facility through which the EBRD and USAID are working in partnership
to improve access to bank loans by local Armenian businesses.
The USAID-funded experts are helping local lenders to better understand and
assess clients’ prospects and thus to reduce borrowing bottlenecks such as
collateral requirements. Additional technical support amounting to €300,000
($350,000) is being provided by the multi-donor Early Transition Countries
(ETC) Fund which supports the EBRD’s increasing activities in its poorest
countries of operation.
At a press conference today, John Evans, US Ambassador to Armenia said “The
United States sees the development of micro-, small- and medium-sized
enterprises as tremendously important in Armenia and all countries in
transition from command to market economies.”
The financing facility is designed to strengthen local banks’ financial
discipline, development of good standards of banking practice, and channelling
of medium-term credit to the real economy of Armenia. The facility currently
operates through four partner banks: Anelik Bank, the Agricultural
Co-operative Bank of Armenia, Armeconombank and Ineco Bank. The EBRD will
widen the programme by working with new banks in the future.
“One key issue is that banks often take the easy route of demanding collateral
worth two or three times the amount of loan requested by a business,” said
Mike Davey, the EBRD’s country director for the Caucasus, Moldova and Belarus.
“It is much better that they use financial analysis rather than collateral to
determine a client’s creditworthiness.
“So with donor help we are teaching local bankers to help clients to work out
business plans – such things as expense and income projections, for example –
and to use the plans as the basis for lending. It takes a mind shift and is
much more hands-on than simply accepting a car as collateral for a loan. But
it will improve banking operations and business access to credit which are
essential in building the country’s economy.”
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