By Anna SaghabalianThe European Bank for Reconstruction and Development (EBRD) and a leading U.S. financial services group unveiled on Friday a joint lending program for small and medium-sized Armenian companies seeking cheap credit.
The EBRD and the Citigroup financial conglomerate said they will each lend $6 million to one of Armenia’s largest commercial banks, ACBA-Credit Agricole, that will manage the scheme. Under the terms of an appropriate agreement signed in Yerevan by the three sides, ACBA-Credit Agricole will in turn use the money to extend loans to expanding small and medium-sized firms.
According to the ACBA chairman, Stepan Gishian, the maximum amount of a single loan to be provided under the scheme will be set at $300,000. He could not specify the cost of such borrowing, saying only that it will be below his bank’s current lending rates.
ACBA, in which the French bank Credit Agricole is the principal shareholder, currently makes loans repayable in up to five years, with interest rates varying from 16 to 22 percent. With inflation in Armenia remaining in single digits and the national currency increasingly strong, such rates are hardly affordable for many small firms.
Officials present at the signing ceremony, emphasized the fact that it is the first time that an Armenian bank borrows a substantial amount of cash from a Western bank on a commercial basis. “We are talking about purely market-based relations,” Gishian said, pointing out that similar lending programs have until now been implemented in Armenia only by non-commercial development institutions like the EBRD and the World Bank.
Michael Weinstein, head of the EBRD office in Yerevan, described the deal as a “historic” event for Armenia. He said the London-based lending agency helped to negotiate it as part of its growing presence in the country. “We now pay a lot of attention to the Caucasus region and Armenia in particular,” he said. “We hope that our involvement in Armenia will continue and deepen.”
The EBRD has spent some $180 million on loans to and equity purchases in various Armenian companies ever since it opened an office in Yerevan in the mid-1990s. A large part of the sum has reached the country in the past few years.