Syndicate content

Improving Credit in Armenia

The 2006 and 2007 Doing Business reports both found that Armenia has been reforming in the area of credit. Armenian lenders can now rely on a credit registry when deciding on loan applications. But have these reforms really had an impact?

The recently-released enterprise surveys country note on Running a Business in Armenia shows that these reforms have indeed resulted in improved access to credit, which in turn is making it easier for Armenian firms to operate efficiently.

Both prepaid sales and sales on credit nearly doubled in recent years, from 15 to 16 percent in 2005 to 30 percent in 2009. Furthermore, the figure below shows that the value of collateral (expressed as a percentage of the loan amount) necessary to secure a loan has decreased substantially across all sectors of the economy.


The Armenian business climate, however, is still hampered by several serious problems. The Enterprise note goes on to say:

Corruption remains a problem, and Armenia ranks at the bottom in firms having their financial statements reviewed by an external auditor. Armenian firms also face challenges in making use of all of their potential capital, both human and physical. Female participation in management and in the labor force as well as capacity utilization are below regional averages.

Highlighting the accomplishments of a country is important so that other countries with similar problems can find successful models of reform. Highlighting the remaining problems is important because it sets the stage for future reforms. This country note does both.


Submitted by Saumya Mitra on
In explaining the improved outlook for credit and particularly the steep fall in the value of collateral required, it is surely significant that a thorough reform of secured transactions was implemented between 2005-07 that developed the legal and financial basis for the creation, perfection and seizure of collateral. Together with judicial reforms and some strengthening in corporate governance, confidence by banks in collateral-backed lending was bolstered -- and SMEs as well as borrowers for housing have benefitted as a result.

Add new comment