2.1 Banks
2.2 Other Sources
2.3 Credit Bureau
In-Country Assessment Information

Limited medium- and long-term funds in the financial system create difficulties for banks to lend to SMEs. Therefore, the vast majority of business loans are short term. Internal bank policies mandating fixed levels of collateralization (usually 50-80 percent of the market price of evaluated property) and high interest rates (12-22 percent) also exclude many small businesses from the commercial debt markets.

In addition, the availability of commercial mortgages is very limited. Most entrepreneurs use business loans to obtain commercial property. The lack of diversified property-related financial products further restricts credit. Angel investing (capital for new businesses provided by affluent individuals, usually in exchange for ownership share) or venture capital for high-potential but high-risk start-ups is also currently not available.


Goal – An efficient, transparent financial sector that provides a broad range of citizens with access to multiple forms of competitive credit so that they can start businesses, build wealth, and purchase property

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2.1 Banks



Core Question: Are traditional banking services robust and extensive enough to serve the needs of the population to help them build wealth and purchase property?

No – Weak, the banking sector still suffers from insufficient long-term funding and market segmentation. Commercial mortgages are not available.

2.1.1 How easy is it to obtain a bank loan? Weak – Ranking 85th out of 142; Score 2.53 out of 7

2.1.2 How sound are the country’s banks? Strong – Ranking 69th out of 142; Score 5.24 out of 7

Source: The Global Competitiveness Report 2011-2012, World Economic Forum


2.1.3 Microlending
Status – Strong, the majority of MFIs have achieved operational and financial self-sufficiency. However, microfinance suppliers are very limited in number and operate in restricted areas . Microfinance allows citizens without traditional creditworthiness to build a credit history. How many microfinance institutions are operating in the country? 12

CBA – Credit Agricole Bank
AREGAG – Universal Credit Org
FINCA Armenia
Microenterprise Dev Fund Armenia What is the number of active borrowers per institution?

ACBA – Credit Agricole Bank 96,106
AREGAG – Universal Credit Org 30,180
FINCA Armenia 30,190
INECO Bank 40,774
Microenterprise Dev Fund 12,493

Source: Microfinance Information Exchange

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2.2 Other Sources


Core Question: Are entrepreneurs free to raise capital outside the banking system including venture capital and/or by issuing stock in a well-regulated stock exchange? No – Very Weak, the banking sector accounts for over 90% of financial sector assets.

Financial Freedom
2.2.1 How much control does the government exert over financial services? Strong for entrepreneurs – Score 70 out of 100 – Limited government control

Source: 2011 Index of Economic Freedom, Heritage Foundation 

Venture Capital
2.2.2 How easy is it for entrepreneurs to find venture capital? Very Weak – 109th out of 142; Score 2.14 out of 7 Trend ↑

Equity Investors
2.2.3 How easy is it to raise money by issuing shares on the stock market? Very Weak – 120th out of 142; Score 2.47 out of 7 Trend ↓

Source: The Global Competitiveness Report 2011-2012, World Economic Forum

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2.3 Credit Bureau


Core Question: Is comprehensive credit information available through public and private credit bureaus? Yes – Strong, private credit bureau in operation since 2004.

Overall Ranking 40th out of 183 Trend ↑

2.3.1 What is the depth of information available in credit bureaus? Very Strong – Score – 6 out of 6 with a higher number indicating more information is available

2.3.2 What is the extent of public credit registry coverage? 23.7% Strong

2.3.3 What is the extent of private credit registry coverage? 46.6% Strong

Sources: 2012 Doing Business – Getting Credit, World Bank

Armenia Credit Reporting Agency

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In-Country Assessment Information


FQ11: How available are mortgage loans for purchasing commercial property (office, retail, industrial and logistics), who is the typical user and what are the prevailing trends?
Mortgage loans for purchasing commercial property are not available and business entities can purchase commercial property only by getting business loans. Mortgage loans are for individuals for purchasing real property. Many entrepreneurs consider obtaining any type of loan impossible because they have no collateral to meet the high liquidity required by the bank, so small businesses are effectively excluded from commercial debt markets. Small business development and enterprise growth is therefore restricted.

FQ12: What are the interest rates, term and loan-to-value ratios?
Interest rates are very high compared with western banks (around 12-22% per annum).

FQ13: What services other than loans such as insurance, funds transfers, and business development training are available from microfinance organizations for formal businesses?
Microfinance institutions provide mainly loan services. Most other services also are available from specialized SME organizations.

FQ14: What professional financial services are available outside state-owned banks including insurance, credit cards and investment management?
In Armenia, there are no state-owned banks. All commercial banks are private. Loans, credit cards, and investment management services are available and widely used. Private banks can carry out insurance agent’s functions but cannot provide insurance directly. Commercial banks sometimes offer trade financing and currency hedging instruments as well as swap contracts.

FQ15: What has been the appreciation (or depreciation) rate for commercial property over the last several years?

The last two years were bad for real estate values in all its sectors. No quality statistics are available but according to experts for the last 2 years: office and retail 10-15% depreciation, industrial property 5-10% depreciation.

There is a small difference between the conditions in the capital and other cities. Approximately 20-30% depreciation was mentioned for Dilijan. FQ16: How available is seed money or angel investors for the start up of small businesses? Angel financing or venture capital does not exist in Armenia. None of the focus group attendees had experience dealing with angel investors or seed money for start-ups.

FQ17: Do small businesses have access to credit information about potential customers?
Businesses are entitled to inquire and receive total or partial credit reports only about their own records.

FQ18: Can businesses gain access to information about them contained in credit bureaus and correct inaccuracies?
Correcting inaccuracies is possible but cumbersome. Legislation stipulates that if an entity or a person finds inaccurate or incomplete data, they can inform the credit bureau. Credit bureaus are supposed to have defined procedures for an entity to inform and correct inaccuracies.