New partners for EBRD financing in Armenia

By Christopher  Booth

In a deal that increases assistance to small businesses in Armenia, the EBRD has arranged a loan to Araratbank for on-lending – and secured the participation of three international commercial banks.

The EBRD will contribute US$ 3 million to the total US$ 12 million financing package, with the balance syndicated to Russia’s OJSC Promsvyazbank, VDK Spaarbank nv of Belgium and Lebanon’s Byblos Bank S.A.L.

It is the first time the EBRD has worked with these banks on the lending side. The deal also represents Promsvyazbank’s first ever loan to an Armenian bank and the first to Araratbank by VDK Spaarbank and Byblos Bank.

The loan to Araratbank falls within the EBRD’s Armenian Multi-Bank Framework Facility, a programme which supports the sustainable development of the country’s banking sector. It provides equity and debt financing to leading financial institutions, focused on supporting micro, small and medium-sized enterprises.

The deal marks the first syndicated loan to Araratbank and will promote its credibility with potential international partners in the future.

In terms of assets, Araratbank is the 10th largest in Armenia. It has a strong customer base and aims to expand its network of 37 branches. The EBRD owns 25 per cent of the bank’s capital.

"With this new loan, Araratbank will be able to continue to meet the demand for finance from local micro, small and medium-sized enterprises. Such businesses have traditionally found commercial financing difficult to obtain and will benefit from this new facility," said Mike Taylor, the EBRD's Director for Financial Institutions, Central Asia, Caucasus and Mongolia.

"This new project with the EBRD allows Araratbank to access loan funds directly from commercial banks and a diverse group of financial institutions. The syndication will promote the reputation of Araratbank as a successful local bank in the international syndication market. It is a significant achievement for Araratbank. As one of Armenia’s leading banks in the area of micro and small business finance, we intend to enlarge our loan volume and geography. This US$ 12 million loan will support the realisation of this goal,” said Ashot Osipyan, Chairman of the Executive Board of Araratbank.

The EBRD is one of the largest investors in Armenia. Since the start of its operations in the country in 1992, the EBRD has invested more than US$ 600 million in 101 projects in the  financial, corporate, energy and infrastructure sectors, with 92 per cent of projects representing investment in the private sector.