“I think it is high time for banks under the administration of the Central Bank to think that perhaps it is necessary to choose any small- or medium-size city in Armenia, for example Dilijan, and turn it into a financial center. The current banking system allows creating such a center. That will also help the entire region develop more quickly,” announced Armenian PM Serge Sargsyan during the annual meeting of the Union of Banks.
It is no secret that Armenia’s development, to say the least, is disproportionate in terms of the economy and, even more so, the geography. Armenian authorities just realized that the “two-digit economic growth” must step out of the borders of Yerevan. This challenge made by Sargsyan to the bankers seemed to be one of the steps towards that. Banking institutions are mainly centralized in Yerevan, and the banks that implement their activities in the Marzes are not that active. That is why most of the Armenian population is deprived of the opportunity to fully use the banking services. But the main defect of the banking system of Armenia is not only its centralization in Yerevan, but also the fact that the bank resources are not accessible to all. Today, not everyone has access to the loans provided by the banks. Business loans are given at 18-24% annual interest rate. That is double, even triple the amount than the interest rates fixed in banks overseas. Armenian banks provide mortgage loans at 12-15% interest rates when that rate is 3-4% in almost all developed countries of the world. During the Monday meeting, Serge Sargsyan, head of the Central Bank Tigran Sargsyan, and president of the Union of Banks, Stepan Gishyan, once again repeated the standard formulation that they have to strive to make loans accessible to each businessman, each citizen must have the opportunity to improve his living conditions through the banks, and the accessibility of the loans must give all young people the chance to open the doors of educational institutions, etc. However, there is still a lot to do until then, because banks don’t have a great part in the economic growth. The specific influence of loans in the GDP doesn’t exceed 10%. That proves that bank participation in the economic development of Armenia is still unsatisfactory; meanwhile, that relativity in developed countries, as Tigran Sargsyan, is 40-60%. Bankers explain that the reason that banks don’t participate much in the economy is because they don’t have large, long-term and cheap financial means. However, today there are many funds that finance Armenian banks, and that financing grows year by year. Meanwhile, the loans provided by Armenian banks and the trade loan interest rates do not go down at the same rate. Bankers always ask, if not openly then covertly, why they should lower the interest rates when there is a high demand for loans. As in the rest of the fields of economy, as well as in the banking system, everyone works in order to get the most profit with the greatest prospects. Anyway…in his speech, Tigran Sargsyan mentioned that the number of physical persons and juridical persons (organizations, etc.) with bank accounts is also preoccupying in that it does not reflect the real image. Today, individuals have two bank accounts, and the total amount of physical persons must be divided into two so that it can be clear as to how many people have bank accounts. According to head of the Central Bank, there are 723,000 physical persons, or 350-360,000, people. Nearly 39,000 legal persons/customers have bank accounts, and that amount also has to be reduced two-fold in order to get a clear picture. Parallel to that, there are 54,000 legal persons in Armenia and 48,000 individual entrepreneurs. It turns out that only 37% of legal persons have registered bank accounts.
“We have to search for means along with the government in order to solve that problem,” said Sargsyan. “A part of the companies either work in the shady economy with no bank accounts, or they are established for other purposes.”
According to head of the Central Bank, although there have been essential changes and improvements in the banking system, the system is still not completely competitive. But the speakers on Monday talked more about the advantages of the banking system and especially the fact that besides being one of the various centers of the region, Armenia must turn into a regional finance center.