fbpx 50074-001: Rural Financial Inclusion Project | Asian Development Bank

Armenia: Rural Financial Inclusion Project

Nonsovereign (Private) Project | 50074-001 Status: Active

ADB will provide a loan to Finca Armenia UCO CJSC (FIAR) in an amount of up to $6 million or dram (AMD) equivalent. ADB's funding will be used to support MSMEs and the agriculture sector, primarily outside of the capital Yerevan. Up to 75% of ADB's funding will go to Micro, Small and Medium-Sized Enterprises (MSMEs) outside of Yerevan and up to 70% will be used to onlend to agri-borrowers. ADB will also be providing technical assistance (TA) in an amount of up to $200,000 funded from an existing TA. The technical assistance will support the development of a credit scoring system and SMART certification of Finca Armenia.

Project Details

Project Officer
Colquhoun, Zarema Private Sector Operations Department Request for information
Country
  • Armenia
Sector
  • Finance
 
Project Name Rural Financial Inclusion Project
Project Number 50074-001
Borrower/Company Finca Armenia UCO CJSC
Country Armenia
Location Nation-wide
Type or Modality of Assistance
3491 Loan Ordinary capital resources USD 6.00 million Approved
Strategic Agendas Inclusive economic growth
Drivers of Change Private sector development
Sector / Subsector

Finance / Finance sector development - Inclusive finance

Gender Equity and Mainstreaming Some gender elements
Responsible ADB Department Private Sector Operations Department
Responsible ADB Division Portfolio Management Division, PSOD
Responsible ADB Officer Colquhoun, Zarema
Project Sponsor(s)
Description ADB will provide a loan to Finca Armenia UCO CJSC (FIAR) in an amount of up to $6 million or dram (AMD) equivalent. ADB's funding will be used to support MSMEs and the agriculture sector, primarily outside of the capital Yerevan. Up to 75% of ADB's funding will go to Micro, Small and Medium-Sized Enterprises (MSMEs) outside of Yerevan and up to 70% will be used to onlend to agri-borrowers. ADB will also be providing technical assistance (TA) in an amount of up to $200,000 funded from an existing TA. The technical assistance will support the development of a credit scoring system and SMART certification of Finca Armenia.
Objectives and Scope

(1) Economic diversification and widening access to finance: Access to finance is very constrained for lower income individuals and smaller enterprises in Armenia, particularly in rural regions. ADB's funding will support FIAR''s lending to this customer segment and diversification into new financial products. In addition, ADB''s funding will support FIAR's efforts to lend to women. The long tenor of the ADB loan will support FIAR''s growth focus on individual loans that have relatively longer tenors, thereby enhancing the impact of the transaction.

(2) Access to local currency funding: ADB's funding is expected to be in local currency. Providing local currency funding to FIAR will help to reduce currency mismatch thereby lowering foreign exchange risk for FIAR''s borrowers.

(3) The proposed TA will help FIAR improve its risk management through the introduction of a credit scoring system. Under the TA, FIAR will also be participating in SMART certification which will help FIAR to further strengthen its consumer protection practices.

Status of Development Objectives On-going.
Status of Operation/Construction On-going.
Linkage to Country/Regional Strategy

(1) Consistency with ADB Strategy and Country Strategy. Under the Midterm Review of Strategy 2020, ADB aims to strengthen its support for the finance sector by assisting the development of financial infrastructure, institutions, and products and services; and by promoting inclusive growth. FIAR''s emphasis on funding segments where the potential for employment and income generation is high will support inclusive growth. The ADB loan will help the borrower provide loans to MSMEs in order to realize their investment needs. This is consistent with the government's efforts to promote growth and economic diversification, and ADB''s country partnership strategy with Armenia, 2014-2018.

(2) Consistency with Sector Strategy and Relevant ADB Operations. ADB plays a tangible role in supporting the deepening of financial services in Armenia. In 2011 ADB supported 4 banks in Armenia through senior loans totaling $65 million. ACBA Credit Agricole, Ameriabank, Ardshininvestbank and Inecobank were the banks selected in the SME Finance Program through which ADB loan proceeds were on-lent to SMEs. The loan to FIAR will continue ADB''s efforts in strengthening and developing Armenia's financial market and supporting MSMEs. It complements sovereign programs in the financial sector such as the Women's Entrepreneurship Support Sector Development Program (2012).

Safeguard Categories
Environment FI
Involuntary Resettlement FI-C
Indigenous Peoples FI-C
Summary of Environmental and Social Aspects
Environmental Aspects FAIR's Environmental and Social Risk Assessment (ESRA), supported by the Subsidiary General Policies Manual (SGPM), is the current environmental and social management procedures, which follows the International Finance Corporations (IFC) procedures for micro and small to medium enterprise loans. FIAR has established the ESRA with IFC assistance. The ESRA is fully functional at all stages of lending starting from loan application and ending with regular monitoring. Based on the review of the current ESRA, FIAR will improve the ESRA to fully comply with ADB requirements.
Involuntary Resettlement The borrower's business activities have minimal or no adverse environmental impacts and are unlikely to entail impacts on involuntary resettlement and indigenous peoples.
Indigenous Peoples The borrower's business activities have minimal or no adverse environmental impacts and are unlikely to entail impacts on involuntary resettlement and indigenous peoples.
Stakeholder Communication, Participation, and Consultation FIAR has been actively engaged in client outreach, as part of its branch network expansion in the country. One of the newest FIAR Initiatives, Borrow Wisely campaign, is a financial literacy outreach Program to its clients to promote good practices on responsible finance and offer microfinance services to the poor in rural areas. This program ensures that clients understand the importance of calculating repayment capacity, are able to compare the terms and total costs of different loans, understand the contents of the contract, understand and use their right to complain, and are aware of the risks and consequences of over-indebtedness. FIAR also organizes community outreach meetings, where FIIAR staff explains to potential and existing clients how microfinance works, what it means and how one can benefit from it. This creates a great platform for questions from the clients and immediate response from the staff.
Timetable for assistance design, processing and implementation
Concept Clearance 30 Aug 2016
Credit Committee Meeting 27 Oct 2016
Approval 07 Dec 2016
Last PDS Update 12 Jun 2019

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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