“I as a head of a lending agency will not issue agricultural loans. We face the problem of agricultural inefficiency. For the present, the banking system is not ready to cooperate with villages,” yesterday told the Chairman of Garni Invest lending agency, former chair of the CB Bagrat Asatryan. Armenian President Serzh Sargsyan ordered Chairman of the Central Bank of Armenia (CBA) Artur Javadyan to take measures to make agricultural loans affordable. Armenia has been carrying out certain agrarian policy until 1991, however, agriculture has been consigned to oblivion since 1991. Currently, credit interest rate is one of the most important agricultural problems, according to the speaker. Besides, he prioritized the agricultural employment problem. Besides Asatryan the discussion hosted Ashot Osipyan, CEO of Ararat Bank, Chairman of the Union of Banks of Armenia and Artsvik Minasyan, ARF MP. Let us mention that a debate as such didn’t take place because all three of them were sure that the financial system of Armenia is currently not involved in the financing of agriculture (and economy is general). According to Asatryan the loan security of agriculture is very low. In 2010 the loan resources to agriculture amounted to 8,3 of the total agricultural production in the case when in the sector of industry the index is 25%, in construction – 12,6%, in trade – 16%. According to the expert, as of late January the volume of outstanding loans extended to agriculture made only 6% in their overall portfolio of loans. Under a government decision, farmers in some regions of the country are entitled to soft loans with 14% interest rate, 4% of it will be subsidized by the government. The government has earmarked 300 million Drams to that end. He cited other reasons making agricultural loans too risky, naming, particularly, absence of infrastructure. He said it is actually impossible to have agricultural machinery secured as collateral, the cattle is not registered and there are also liquidity problems. But despite these constraints lending to agriculture rose by 19% last year. “Today virtually all commercial banks offer loans to farmers and five or six banks have their focus on agro lending. If the problems we have mentioned above are resolved, agriculture will become more attractive to banks,” he said. In many countries, according to him, in order to neutralize the risk of climate the system of insurance is applied, which costs about 20% of the insured land. If we add to this the fact that the consumption of mortgage in villages is very low then we should thank the banks for providing loans to the villagers because it implies a lot of risk. Currently, credit interest rate is one of the most important agricultural problems, according to the speaker. Besides, he prioritized the agricultural employment problem. "We face the problem of agricultural inefficiency. For the present, the banking system is not ready to cooperate with villages," Asatryan said in his remarks. The reason for Armenian Minister of Agriculture Sergo Yeritsyan’s discontent is unclear, Osipyan, told journalists as he commented on Minister Karapetyan’s statement in Parliament. The Minister was critical of banks for delaying agricultural loans. "The problem will be resolved quickly. We need work rather than statements. Making statements is not correct during negotiations," Osipyan said. However, according to Artsvik Minasyan, the provided loans can hardly be considered agricultural. In his words 70% of the credits allocated for the agriculture are small and short-term. So those are not subject to serious investments in the agriculture sector but are consumption loans. “People have taken these loans to resolve their current issues and are waiting for the new year to slaughter their cattle and sell the meat in order to acquit the loans,” says the MP. The latter thinks that instead of the villagers asking for money the banks should offer loans to the villagers in order not to leave their resources inactive. For them it should be beneficial to make their resources circulate. Do you recall the words of Pavlov from a famous movie? “First of all we are not sheep sellers. It is the state that buys sheep. So it should be us knocking the doors of the government to sell our sheep. They should come to us by 100 trucks and ask us if we sell sheep…” For the sake of justice let us mention that in regard of sheep the dream of the forest shepherd has come true because people really go to them with trucks and wish to buy sheep. Indeed the ones that offer deals are not the state and the meat doesn’t go to the meat factory. It goes to a totally different place but that’s not important. As of the banks then there are cases when they really go to the businessmen and offer loans (it mostly happens during high-profile exhibitions) but when on the next day the businessman goes to the bank after the loan it turns out that he has to submit hundreds of documents so that the bank would start to review the case. According to Minasyan, the CBA actually thwarted the development process in the Armenian financial system as commercial banks are its priority. Other financial institutions are unable to develop, he added. Under the circumstances, MP believes, the CBA must stop supervising other financial institutions. According to Artsvik Miansyan the situation gets worse in agricultural field because of the fact that 77% of crediting was done by foreign currency, which means that currency rate fluctuation risk was transferred to the villagers. As a result of all this, in his opinion, more than 30 thousand people have become insolvent. If in the credit system of state banks the specific weight of agriculture is only 6 %, then, according to the MP, one may not speak about the contribution of financial system to the agricultural growth: “The economic market of Armenia is not developed”. The 92 % of financial assets is at the disposal of trade banks. In spite of the power the banks have they do not contribute to the economical development”. Asatryan B. mentioned as well, that the situation now is much worse than at the beginning of the 20th century, during the first Republic of Armenia. According to Asatryan B. several dozen financial-credit organizations financed over 37 thousand economies, whereas this index is currently about 30 thousand. In a word the journalists present at the discussion were finally convinced that the efforts of the government to improve the situation through financial system and decrease of interest rates of agricultural credits were a failure from the very beginning. Moreover the initiative to give credits to the agricultural sphere by 14% privileged interest rates was not welcomed by the banks. During the parliamentary hearings 2 days ago, the Minister of Agriculture Sergo Karapetyan complained that banks delayed giving credits to the villagers. In response to this question Osipyan replied that the negotiations with the Ministry of Agriculture were still in process and there was no need to be worried since the problem would be solved soon. To the statement that the spring sowing will be over before the negotiations finish, Asatryan intervened saying that there was no need to wait till April to know that there was a need for spring sowing. “Money goes to the place where it feels good. Village is not a place like that.” concluded Asatryan.
