Access to finance for smes in armenia
Download
1 / 12

Access to Finance for SMEs in Armenia - PowerPoint PPT Presentation


  • 384 Views
  • Updated On :

Access to Finance for SMEs in Armenia. Aristomene Varoudakis Armenia Country Manager The World Bank. OUTLINE: The financial system in Armenia confronts the global financial crisis World Bank support: Credit Line Facility for SMEs Some challenges ahead .

Related searches for Access to Finance for SMEs in Armenia

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Access to Finance for SMEs in Armenia' - Sophia


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Access to finance for smes in armenia l.jpg

Access to Finance for SMEs in Armenia

Aristomene Varoudakis

Armenia Country Manager

The World Bank


Slide2 l.jpg

OUTLINE:

  • The financial system in Armenia confronts the global financial crisis

  • World Bank support: Credit Line Facility for SMEs

  • Some challenges ahead


The financial system in armenia confronts the global financial crisis l.jpg
The financial system in Armenia confronts the global financial crisis

  • The Armenian financial sector entered the crisis from a position of strength

  • Banks not exposed to subprime assets

  • Overall good quality of loan books (low NPLs)

  • Bank borrowing at manageable levels and maturities; mostly from IFIs and parent banks

  • Banks well capitalized and liquid

  • Strong supervision and prudential regulation

  • 2007 – Central Bank of Armenia prohibits FX consumer lending


The financial system in armenia confronts the global financial crisis cont d l.jpg
The financial system in Armenia confronts the global financial crisis (cont’d)

  • But access to finance for SMEs has been severely restricted

  • Growing dollarization because of depositor “flight to safety”

  • Bank AMD liquidity restricted

  • Higher credit risk perceived by banks

  • Lack of exchange rate risk hedging (foreign exchange earnings) for foreign currency borrowing by SMEs

  • Higher AMD interest rates because of exchange rate risk


Key steps in maintaining access to finance for smes l.jpg
Key steps in maintaining access to finance for SMEs financial crisis (cont’d)

  • In December 2008 Government of Armenia established a $50MM credit line facility directed to SME sector development.

  • Access to Finance for Small and Medium Enterprises (AFSME) – a WB financed Project in effect since April 2009

  • Another $50 MM credit line was established using KFW SME support program framework out of Russian $500MM stabilization loan proceeds.


World bank support credit line facility for smes l.jpg
World Bank support: Credit line facility for SMEs financial crisis (cont’d)

  • FEBRUARY 24, 2009. – The World Bank’s Board of Directors approved US$50 million IBRD loan for the Access to Finance for Small and Medium Enterprises (AFSME) Project for Armenia.

  • The Credit was made to Armenia on IBRD terms, including 26, 5 years maturity and a 5-year grace period.

  • The credit line to SMEs helps strengthen access to finance for SME borrowers and improve the resiliency of Armenia’s private and financial sectors in the face of the global financial crisis.

  • SMEs are defined as private firms with less than AMD 500 million (or about US $1.2 million) annual recorded turnover. Thus, virtually all private small and medium enterprises may be eligible for consideration as borrowers on a commercial basis.


World bank support credit line facility for smes7 l.jpg
World Bank support: Credit line facility for SMEs financial crisis (cont’d)

  • The lending instrument is a Financial Intermediary Loan (FIL), providing funds to the Central Bank of Armenia. The CBA in turn enters into subsidiary loan agreements with eligible banks.

  • Eight banks initially became eligible to participate from the start of the project. The qualification of banks will be an ongoing process, and other banks may meet criteria to participate in the nearest future. The initial ceiling on sub-loans is set at US$150,000. Qualified banks’ on-lending rates will be at market rates.

  • German-Armenian Fund serves at PMU.

  • As a revolving facility with an initial five year maturity, banks may provide loans to additional SMEs before the repayment comes. This will enable local banks to finance a large number of loans through the life of this project, increasing Armenian small and medium enterprises’ access to medium-term finance.


World bank support credit line facility for smes8 l.jpg
World Bank support: Credit line facility for SMEs financial crisis (cont’d)

  • Retroactive financing, up to US $ 10 million equivalent, was provided for sub-loans originated after December 1, 2008 which were made in accord with the criteria and procedures set forth in the Operations Manual. By end-Sept. about US $ 7 mln was disbursed to Treasury.

  • By making medium-term finance available through local banks, the project helps minimize job losses in SMEs, while encouraging investment and firm growth. Enhancing financial support to SMEs is essential for such firms to invest in technology and capacity, thereby raising productivity and improving competitiveness.


Some challenges ahead l.jpg
Some challenges ahead financial crisis (cont’d)

  • Increasing the level of financial intermediation while maintaining a sound banking system

  • In the wake of the crisis, confidence in the banking sector remains strong and has to be turned into an opportunity for better financial intermediation

  • Banking system needs to become more internationalized

  • Promoting opportunities for mergers and acquisitions


Some challenges ahead cont d l.jpg
Some challenges ahead (cont’d) financial crisis (cont’d)

  • Fortifying Armenian financial sector:

  • strengthening surveillance and liquidity;

  • undertaking frequent banking system stress tests;

  • introducing enhanced reporting requirements;

  • making available liquidity to banks on a temporary basis through accepting a wider range of collateral


Some challenges ahead cont d11 l.jpg
Some challenges ahead (cont’d) financial crisis (cont’d)

  • Improving access to finance

  • Strengthening operation of credit bureaus and information on borrower quality. Law on Credit Bureaus is effective as of May 2009

  • Improving corporate financial transparency -- helps investors to properly evaluate corporate prospects and results in a lower cost of capital as investors perceive lower risks

  • Improving the code on corporate governance to strengthen protection of investor rights

  • Strengthening project appraisal and risk management capacity of commercial banks

  • Improving the liquidity of the mortgage market: NMC will provide refinancing to commercial banks for mortgage loans; will contribute to lower interest rates


Thank you l.jpg
Thank You financial crisis (cont’d)


ad