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Servicing Armenian clients: The ACBA bank

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Hakop Andreasyan -deputy general manager of ACBA Bank

Keeping thousasnds of customers happy

If there's one thing that gives Hakob Andreasyan confidence in his nine-year-old agricultural cooperative bank's future, it's going into the Armenian countryside to see where most of its business is done.

"Armenia is a different country from what it was a decade ago," the bank's deputy general manager says breezily, from his modest headquarters in downtown Yerevan. "When we set up, our job wasn't just lending to farmers but teaching them. Not how to sow their crops, but how to do their accounts and count their profits. They had no experience of business. Now people are building, buying cars, leasing equipment. The countryside has completely changed."

Created in 1996 to help farmers find finance once Armenia privatised state-held land, ACBA (the Agricultural Cooperative Bank of Armenia) was modelled on France's Credit Agricole. 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, it's unique in the former Soviet Union. As Armenia has slowly recovered from the shock of the Soviet collapse, the model has proved so succesful that ACBA has developed new business outside agriculture in almost all areas of the economy. With the Armenian authorities now moving to consolidate the small banking sector – introducing a $5 million minimum capital requirement by July – ACBA finds itself the country's largest bank by capitalisation and generating solid profits.

This success story – and ACBA's determination to continue offering more new banking technologies to more clients in all walks of life – has won the bank two new contracts with the EBRD.

One is a $3 million credit to expand the micro and SME lending that is ACBA's lifeblood. The other is a more aggressive $3 million loan to be signed shortly – the first of a new type of ETC product, the Medium-sized Loan Co-Financing Facility. This is available to banks with strong credit policies and procedures, but which are limited in the loans they can provide to local corporate clients. ACBA's internal credit procedures have until now limited any credit exposure per single borrower to a maximum of $180,000. Now it will be able to offer loans to its wealthiest and most trusted clients from $400,000 on up to $1 million.

Andreasyan says ACBA has already identified corporate clients – in the food-processing industry – who could, "in principle", handle a loan of this size to grow their businesses up to the next level. The emergence of such successful companies is an indication of Armenia's country in re-establishing its old markets with neighbours including ex-Soviet Russia and Ukraine, Iran and Turkey, and growing its economy.

"We import food now, but less than before," adds Andreasyan, a former tax inspector who has been with the bank since its creation was first discussed in 1995. We used to import sausage from Russia and eggs from Iran. But now the domestic market is saturated and we've begun to export again. There's a chicken factory that exports to Iran. The Russian market is a good one for us. And we're even exporting to America: quality products, canned goods, jams, juices, brandy and wine."

"It's reached the point where we can use bigger credits – credits that can be spent on buying new equipment and taking the next step in growing a business," Andreasyan added. "So gaining access to this kind of funding in Armenia is more than timely – it's a real breathrough."

Contact: Yerevan Resident Office

10 May 2005