IFC Increases Funding in Armenia to Help Small Farmers
April 4, 2012 -- Inspired by a steady demand for fresh milk and dairy products in Kotayk, a rural area in central Armenia, 31-year old Mamikon Yepremyan decided to start his own business. IFC’s $20 million loan last March to ACBA-Credit Agricole Bank for lending to micro and small farmers helped Yepremyan get financing for his new dairy farm. In total, the loan supported about 3,000 local clients like Yepremyan in 2011.
“Milk is a profitable business in Kotayk, but it was not so easy to get financing to start the business,” says Yepremyan. “The few credit organizations operating in the region were offering loans based on security and with very high interest rates.”
In spite of credit growth recently, funds are still not easily accessible for small and medium enterprises in Armenia, especially start-ups. To help address the challenge, in January 2012, IFC made its second loan to ACBA-Credit Agricole Bank, adding an additional $30 million to lending capabilities of the leading microfinance provider. ACBA-Credit Agricole has a strategic focus on the agribusiness sector.
“Agriculture accounts for 17 percent of Armenian GDP and 46 percent of employment, but only 6 percent of bank lending,” says Thomas Lubeck, IFC Regional Head for the Caucasus. “We are funding ACBA-Credit Agricole Bank because they understand the potential of Armenian agribusiness.”
IFC’s loan will enable the bank to provide its clients with more term financing, which has become scarce as a result of the recent financial crisis. The financing will directly benefit farmers and small companies in the agribusiness sector.
Yepremyan was a legal historian before becoming a dairy farmer, and understands better than most entrepreneurs why banks might be hesitant to lend to a start-up business. “I’m grateful that IFC financing really does make its way to those who need it,” he says.