FSSP completes pilot program in Armenia

PanARMENIAN.Net - The Financial Sector Stability Pilots (FSSP) activity, implemented by the USAID-funded FS Share project, has completed a pilot program, aimed at increasing small and medium enterprise (SME) lending and access to finance to help mitigate the effects of the financial crisis in Armenia.

The main purpose of this activity was to pilot non-collaterized lending that could be replicated and adapted by the Armenian banking sector to help reinvigorate SME lending, severely restricted by the effects of the global financial crisis. To this end, FSSP designed, introduced and implemented purchase order finance (POF) products to two selected banks – Inecobank and Ameriabank – to generate loans as a vehicle to expand access to finance for SMEs. FSSP also facilitated the Armenian translation and expert review of the International Financial Reporting Standards (IFRS) for SMEs 2009, IFRS for SMEs Basis for Conclusions, and IFRS for SMEs Implementation Guidance 2009, as well as discussed the future maintenance of the standards with the RA Ministry of Finance.

On June 30, 2010, FSSP held a close-out conference to report on the work accomplished, present an outlook of the Central Bank of Armenia, and facilitate a discussion on the results of the pilot and the potential for replication and scalability. Representatives of USAID, local banks, business associations, and other active members of the SME and the business community participated at the event.

USAID/Armenia’s Acting Deputy Mission Director Timothy Alexander noted that although the financial crisis seems to have abated in Armenia, access to finance for SMEs continues to remain restricted, impairing the economic recovery. “We recognize that innovative financial products by themselves are not sufficient to generate renewed economic activity, but in combination with improved market information, technology and management practices, financial innovation is an essential element needed to stimulate private sector competitiveness and diversification,” he said. Vache Gabrielyan, Deputy Chairman of the Central Bank of Armenia, discussed the macroeconomic environment in Armenia and how purchase order finance is relevant to the current status of the availability of credit for SMEs in the country.

Melissa Scudo and Michael Gold from FS Share then presented the pilot activity components and described how the POF product works. Followed by a panel discussion with Ramiro Ortega Landa from FS Share, Levon Arevshatyan from Ameriabank and Aram Baloyan from Inecobank, the process of partner bank selection, their different experiences and action plans for product marketing were shared.