IFC establishes risk sharing mechanism in Armenia - Acba Bank, Converse Bank and Evocabank will act as partners

ArmInfo.The International  Finance Corporation (IFC) has signed agreements with three Armenian  banks, Acba Bank, Converse Bank and Evocabank,  to enhance access to  finance for smaller businesses, including women-owned and rural  enterprises and climate projects. It is planned to provide loans for  a total amount equivalent to $40 million. In particular, Acba Bank  will receive $25 million, Converse Bank - $5 million and Evocabank -  $10 million, as noted in IFC's statement.

Within the framework of the agreements with Acba and Converse banks,  the risk sharing mechanism (the so-called refinancing) proposed by  IFC will be used for the first time. 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 $0  million-equivalent portfolio of loans to small and medium enterprises  (SMES).  In the next agreement, IFC will provide a risk sharing  facility of up to $5million-equivalent to Converse Bank, to cover 50%  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.

The funds provided to Evocabank will be used to refinance loans to  micro and small enterprises. The report notes that these projects are  part of IFC Small Loan Guarantee Program, which is supported by a  financial guarantee from the  European Commission's European Fund for  Sustainable Development (EFSD). This program pools together IFC  risk-sharing facilities with IFC's partner financial institutions  to  help  d-risk and scale up financing for small businesses.

IFC intends to raise an additional $10 million from other partners to  support on-lending to MSMEs in Armenia. Half of the proceeds will be  allocated to climate projects and 25% to women-led enterprises. The  partnership will also support the development of climate finance by  promoting green lending standards.  The IFC statement notes: "Small  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 (69%), but they face a  $1.1 billion finance gap due to 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 loans."

It is to address this issue that IFC is establishing risk-sharing  facilities in Armenia with three Armenian banks (Acba, Converse,  Evocabank). These three agreements are all part of IFC's strategy to  support Armenia's banking sector and enable small businesses to grow.   In Armenia, IFC aims to help close infrastructure gaps and reduce  carbon footprints through investments in renewables, and climate  adaptation. IFC boosts access to finance for SMEs and supports a  greener economy with financial institutions. IFC's also plans to  support capital markets development, public- private partnerships,  and improve connectivity, focusing on transport and information and  communications technology.