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EBRD provides $3m finance to Armenian bank
Expanding farm bank ACBA borrows using EBRD’s new co-financing instrument
The European Bank for Reconstruction and Development is providing a $3 million
financing to the Agricultural Cooperative Bank of Armenia (ACBA). The loan is
the first in Armenia of a new type of EBRD instrument, the Medium-Sized Loan
Co-Financing Facility (MCFF).
The MCFF is one of several instruments offered in Armenia, Azerbaijan,
Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan, the Bank’s
seven lowest-income countries of operation, under the Early Transition
Countries (ETC) initiative. This initiative, launched by the EBRD in 2004,
aims to stimulate market activity by using a streamlined approach to financing
more and smaller projects, mobilising more investment, and encouraging
economic reform. The initiative is part of an international effort to address
poverty in these members of the Commonwealth of Independent States (the former
Soviet Union). The Bank will accept higher risk in the projects it finances in
the ETCs, while still respecting the principles of sound banking.
The MCFF is available to banks with strong credit policies and procedures, but
which are limited in the loans they can provide to local corporate clients. It
allows ACBA to co-finance, with the EBRD, bigger sub-loans to its clients and
share with the EBRD any risks involved with such lending. While ACBA’s
internal credit procedures have until now limited any credit exposure per
single borrower to a maximum of $180,000, with the help of the MCFF it will be
able to offer its most trusted and financially viable clients from $400,000 to
$1 million.
ACBA was created in 1996 to help farmers find finance after Armenia privatised
state-held land. It was modelled on France’s Credit Agricole. Its structure --
with collective ownership based on village cooperative associations, and
coffers swelled at the grassroots by more than 20,000 farmers’ sign-up fees of
$10 – is unique in the former Soviet space. ACBA has since developed business
outside agriculture in almost all areas of the economy. The EBRD is delighted
to make this co-financing available to ACBA, which is now Armenia’s largest
bank by capitalisation, and generates solid profits, said Michael Weinstein,
head of the EBRD’s Armenia Resident Office.
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