Supporting consolidation in Armenia’s banking sector

By Loretta  Martikian


EBRD to provide equity finance for Inecobank to support acquisition of ProCredit Bank Armenia

The European Bank for Reconstruction and Development (EBRD) is making an equity investment of AMD 9.8 billion (equivalent to US$ 20.3 million) for up to 22.7 per cent of shares in Inecobank, a specialist MSME and retail bank in Armenia.  Inecobank will use the proceeds of the EBRD investment to finance the acquisition of ProCredit Bank Armenia, another local bank oriented towards micro, small and medium-sized enterprises (MSMEs). The merged bank will become a leading MSME lender in the country, serving over 10,000 businesses and 200,000 individuals.

This investment marks a milestone, providing an excellent platform for more consolidation in the Armenian banking sector and further improving standards of corporate governance. With a strong management team in place, a more efficient branch network and well-tested products and services, the combined bank will be able to provide Armenian MSMEs with better access to finance.

Inecobank was established in 1996 and is owned by two local founding shareholders, as well as by Deutsche Investitions- and Entwicklungsgesellschaft (DEG), International Finance Corporation (IFC) and other minority shareholders. It is a commercially successful retail and MSME bank and a longstanding EBRD client. Since 2005 Inecobank has received EBRD funding through the Trade Facilitation Programme (TFP), MSME and energy-efficiency credit lines.

Mark Davis, head of the EBRD Yerevan office, said: “The EBRD is excited to support this landmark transaction that will promote consolidation in the very fragmented banking sector, acting as a catalyst for further consolidation activity. In addition, this transaction will support the MSMEs which are vital for economic development.”

Inecobank’s CEO Taron Ganjalyan said: “We are excited to welcome our long-term and trusted partner the EBRD as a shareholder of Inecobank. The acquisition of ProCredit bank and the capital increase will enable us to significantly enhance our services to MSMEs based on the tradition of excellent customer service that we share with ProCredit Bank. Support from the EBRD—and from our existing shareholder IFC in the form of a senior loan —shows their confidence in Inecobank’s business model and the Armenian banking system.”

The EBRD is the largest single investor in the Armenian private sector. To date, the Bank has committed almost €950 million in over 140 projects across all major sectors of the economy.