The European Bank for Reconstruction and Development (EBRD), an international finance institution, has made a synthetic loan in Armenian drams (AMD) equivalent to USD 4 million to FINCA Universal Credit Organization Closed Joint Stock Company (FINCA Armenia), a non-bank credit organization serving micro- and small enterprises (MSEs). Under the synthetic loan structure, FINCA Armenia will pay back a fixed AMD amount to EBRD and thus reduce its foreign exchange risk. The synthetic local-currency loan, the first one provided by EBRD to a microfinance institution in Armenia, will help FINCA Armenia to offer longer-term loans and expand its portfolio of loans in AMD to entrepreneurs in remote areas. The EBRD loan is complemented by a technical assistance grant of unspecified size from EBRD’s Early Transition Countries Multi Donor Fund, which will be used to strengthen risk management practices at FINCA and to help the institution develop new products.
“Through this transaction, the EBRD is boosting its support for the development of the private sector in Armenia, which is dominated by micro- and small enterprises. The local-currency loan will enable FINCA Armenia and its clients to reduce foreign exchange risks”, said EBRD President, Thomas Mirow.
By: Christine Chang, Research Associate
About FINCA Universal Credit Organization Closed Joint Stock Company (FINCA Armenia):
Wholly-owned by US-based FINCA International, FINCA Armenia is a non-bank credit organisation serving micro- and small enterprises (MSEs), with a special focus on the smallest borrowers in rural areas. According to the Microfinance Information Exchange (MIX), FINCA Armenia has a gross loan portfolio of USD 26.2 million, total assets of USD 27.6 million and 29,146 active borrowers.
About European Bank for Reconstruction and Development (EBRD):
The European Bank for Reconstruction and Development (EBRD) is an international finance institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries and is now owned by 61 countries as well as the European Investment Bank and the European Union. It aims to finance operations that are both commercially viable and assist development in 29 countries in Central Europe and Central Asia. It does this by providing loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses as well as commercial banks and non-bank microfinance institutions (MFIs).
Additional Resources:
European Bank for Reconstruction and Development Press Release: New local currency financing for micro and small businesses in Armenia, March 18, 2010: http://www.ebrd.com/new/pressrel/2010/100318.htm
MicroCapital Universe: FINCA Armenia: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FINCA+Armenia
MicroCapital Universe: European Bank for Reconstruction and Development: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+%28EBRD%29
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