Agriculture Finance and Agrilending in Armenia

The agricultural sector accounts for only about 6% of the Armenian banks’ overall loan portfolio despite its key role in the economy. The importance of the agricultural sector is not yet reflected in the banks’ lending figures. Major constraints to lending to agricultural MSMEs are: general perception of banks that lending to agricultural businesses is risky and addressing agricultural MSMEs implies high transaction costs; lack of appropriate lending technologies and processes of banks; low level of formalisation among agricultural businesses; and low level of financial education of agricultural entrepreneurs or farmers. The objective of the project is to contribute to the expansion of sustainable lending to agricultural MSMEs in Armenia, thus contributing to the broadening and deepening of the financial sector as well as to creating and securing employment and income in rural areas. The project will be implemented in cooperation with participating financial institutions (PFIs) via the German Armenian Fund (GAF). The project will be financed from a concessional loan of EUR 15 million under the umbrella of the German-Armenian Financial Cooperation. The Government of Armenia will provide additional financing for an amount of approx. USD 5.5 million for the project. A limited number of PFIs will be supported by an independent, qualified international consulting company/consortia/joint venture experienced in agricultural finance, training and capacity building in financial institutions, implementation of agricultural credit lines and training of small farmers in “financial literacy”. Consulting services are required in the following main areas: Support of PFIs to introduce or improve specific agricultural credit technologies and procedures; Development of a training concept and manual for PFI staff and management; Conduct of training and capacity building measures for loan officers, including coaching and on-the-job training; Training in environmental and climate risk assessment of agricultural investments; Training of small farmers and MSMEs in a pilot scheme in 1-2 pilot regions to improve their “Financial Literacy”.