On May 29, the International Financing Corporation (IFC), part of the World Bank, signed a contract with ArmEconomBank (AEB) for a one million dollar trade development project, which will be implemented throughout the course of one year. Both sides say that this project will help develop import and export in Armenia and give businessmen the opportunity to use accredits and guarantees as financial tools. The IFC and the AEB also signed a Plan memorandum, which includes two projects. The first project is a 2 million dollar loan for 8 years. Half of the loan will be provided to small and medium businesses, while the other half will go to the hypothec market. The second project, which also costs 2 million dollars, will give ICF the opportunity to play a role in regulating the AEB capital. According to director of the ICF Central and Eastern Europe department, Edward Nasim, the 2 million dollar loan is exchangeable and it will be substituted for AEB’s shareholdings years later. It is worth mentioning that AEB already has foreign shareholders, including the European Bank of Reconstruction and Development (EBRD).
“Find your foreign partner. We are ready to negotiate and if you are an exporter, we can guarantee that you will get the income for the exported product. If you are in importer, then we guarantee that you will get the money that you have ordered,” said head of the AEB administrative department Ashot Osipyan. According to him, the bank will go along with this principle when spending the money. The banker places emphasis on two international organizations for the project-the EBRD and the ICF. After all, they are the two organizations financing the project.
The Armenian dram has been evaluating for the past two years now. Hasn’t that had an influence on Armenian businessmen’s desire to use the financial tools for foreign trade?
“Financing for foreign trade has gone up and it’s due to the fact that financing is much cheaper. Within the framework of this project, we plan on providing financing at 6-9% interest rates and an average 16% for the Armenian loan market,” said A. Osipyan.
Although he didn’t mention the word “exchange” in his response, however it was all clear: the devaluation of the dollar actually has an influence on export and also the process of financing foreign trade, but the cheap tools “help” the latter. The next project has to do with one of the major issues facing Armenian society-the affordability of the hypothec credit. Will there really come a time when all levels of Armenian society will have access to the hypothec credit? It turns out that Armenian banks are not really interested in that.
“The National Assembly of Armenia must look at that from the perspective of solving social issues, while the trade bank looks at it as a profitable active,” says A. Osipyan.
This is obvious in that Armenian banks provide financing with the hypothec credit interest rates and the money from international organizations. Let the state take care of the rest.
“The market is the real thing and it fixes the interest rate. The newly founded hypothec credit association has a problem with making the hypothec credits less risky and prolonging the terms. The interest rate is not as important as the terms,” says Osipyan.