YEREVAN, December 12. /ARKA/. IFC signed agreements with three Armenian banks to enhance access to finance for smaller businesses, including women-owned and rural enterprises and climate projects.
Smaller businesses are key drivers of economic growth, innovation, and employment in Armenia, with micro, small, and medium enterprises (MSMEs) accounting for the majority of jobs. But they face a $1.1 billion finance gap because of challenges including limited collateral and poor financial management. Women-owned MSMEs face even greater hurdles, with many less likely to hold collateral or have access to formal bank accounts and loans.
To address this, IFC is establishing the country’s first risk sharing facilities with two Armenian banks and providing a loan to a third for on-lending to micro and smaller businesses. Risk sharing facilities enable IFC to share the risk of losses on portfolios of eligible loans or other assets. The three agreements are all part of IFC’s strategy to support Armenia’s banking sector and enable smaller businesses to grow.
In the first agreement, IFC will provide Acba Bank with up to $25 million equivalent in a risk sharing facility that will cover 50 percent of losses on an up to $50 million-equivalent portfolio of loans to small and medium enterprises (SMEs). They include women-owned enterprises, agribusinesses, and businesses in rural areas.
In the next agreement,IFC will provide a risk sharing facility of up to $5 million-equivalent to Converse Bank to cover 50 percent of principal losses on an up to $10 million-equivalent portfolio of loans to SMEs, which also include women-owned enterprises, agribusinesses, and rural businesses.
Both projects are part of IFC’s Small Loan Guarantee Program, which is supported by a financial guarantee from the European Commission’s European Fund for Sustainable Development (EFSD). The Small Loan Guarantee Program pools together IFC risk-sharing facilities with IFC’s partner financial institutions to help de-risk and scale up financing for smaller businesses.
Finally, IFC will provide a $10 million loan to Evocabank and also aims to syndicate up to $10 million from other partners to support on-lending to MSMEs. Half of the proceeds will be allocated to climate projects and 25 percent to women-led enterprises. The partnership will also support the development of climate finance by promoting green lending standards.
In Armenia, IFC aims to help close infrastructure gaps and reduce carbon footprints through investments in renewables, and climate adaptation. It boosts access to finance for MSME and supports a greener economy with financial institutions. IFC also plans to support capital markets development, public-private partnerships, and improve connectivity, focusing on transport and information and communication technology.
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2024, IFC committed a record $56 billion to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilizing private capital to create a world free of poverty on a livable planet. For more information, visit www.ifc.org.
About the European Fund for Sustainable Development
The European Fund for Sustainable Development (EFSD) is part of the EU’s investment framework for external action. The EFSD offers financial guarantees that allow private investors to finance projects in more challenging markets, by assuming the risks of more unstable environments while avoiding market distortions. Because the EFSD covers a share of the risks, the EU’s development finance partners such as IFC can match the EFSD guarantees with their own resources, which in turn will attract additional investors. The Small Loan Guarantee Program (SLGP) is supported by a €58 million pooled first loss guarantee from the European Union under the EFSD. SLGP provides SMEs with access to financial services as well as risk-sharing support to encourage financial institutions in partner countries to expand their SME lending portfolio, with a particular focus on the harder-to-reach smaller SMEs.
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