Lincy Begins Implementing $100 Million Loan Program in Armenia


The Lincy Foundation has begun funding loans under its $100 million Entrepreneurial Lending Program. The four initial commercial loans mark the first step in Lincy’s program to foster the development of small and medium size enterprises in Armenia.

Banks in Armenia usually provide only short-term loans (less than 12 months) at very high interest rates (around 50 percent per year). To create jobs–develop new production and expand the volume of exports–Armenian businesses desperately need longer-term–low-interest rate loans.

In October of 1997–a fact-finding group including Sen. Bob Dole–Jim Aljian–the Chairman of The Lincy Foundation–this writer–and several others traveled to Armenia to discuss the proposed loan program with the then Prime Minister Robert Kocharian and other high-ranking officials.

After serious consideration of various economic and financial factors–including the potential impact on Armenia’s fledgling banking system and on existing lending programs by the World Bank–the Eurasia Foundation and others–Lincy decided to provide long-term loans to Armenian businesses at an interest rate not to exceed 15 percent per annum.

The funds contributed by The Lincy Foundation are not a donation. They are no-interest loans to the Central Bank of the Republic of Armenia which then loans these funds to local Armenian banks at a 3 percent per year interest rate. These banks in turn will lend to local businesses at an interest rate not to exceed 15 percent per year. The loan amounts are for a minimum of $100,000 and a maximum of $1,000,000. The loans are made in Armenian currency (drams) rather than in US dollars in order not to create an additional financial burden on the businesses should the dram in the future decline in value in comparison to the dollar.

All credit evaluations and decisions are made by the 14 domestic banks selected to participate in this program. These banks–not Lincy–decide the approval or rejection of loan applications–since they are the ones that assume all financial risks. If a borrower does not pay back his or her loan–the bank has to cover the loss from its own funds and pay the loan back to the Central Bank–which must then pay back the corresponding principal amount to The Lincy Foundation.

Following the signing of a loan agreement between The Lincy Foundation and the Government of the Republic of Armenia on July 15–1998–the terms and conditions of the Loan Implementation Program were translated into Armenian and published as a full-page announcement in the Hayastani Hanrabedutiun newspaper–the official organ of the Armenian Parliament.

The Program stipulates that in order to apply for a loan–a minimum of 51 percent of the business must be owned by Armenian residents and no more than 20% of such an entity should be owned by the Armenian Government.

The first four disbursemen’s of the loan program–aggregating to $1.3 million–have been made for the following businesses: 1. A company that raises flowers–fruits and vegetables; 2. a company that plans to construct a hotel and associated facilities; 3. A company engaged in furniture manufacturing; and 4. A company engaged in manufacturing of bottles.

The intent of The Lincy Loan Program is to provide employment–alleviate poverty–and boost the economic development of Armenia. These four companies plan to add around 200 new employees to their payroll as a direct result of receiving the loans. Several more loans are on the verge of being funded.

All those who are interested in these loans should apply directly to one of the following 14 banks in Armenia: Anelik Bank LLC–Ardshinbank–Armagrobank–Armeconombank–Armimpexbank–Converse Bank Corporation CJSC–Credit-Service Bank–Credit-Yerevanbank–Gladzorbank JSC–Inecobank CJSC–Lendbank CJSC–Shirakinvestbank–Trust Bank–and United Bank JSC.

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