YEREVAN (Noyan Tapan)–The Lincy Foundation will soon sign an agreement with the Armenian government on the allocation of the second installment of the small and medium-sized business development credit amounting to $10 million–Executive Director of the Center for Foreign Financial Programs Management of the Ministry of Economy and Finance Bagrat Yengibarian told journalists on September 17.
$10 million had already been allocated for small and medium-sized business development under the agreement signed between the government of Armenia and the Lincy Foundation on July 18–1998. At present–of the 13 projects worth a total of $12 million provided to the Lincy Foundation projects worth a total of $7 million have been approved. Eight enterprises have already received over $2 million. The estimated cost of the projects–which mainly concern the spheres of processing–services and agriculture–is $300-400 thousand. None of the projects submitted for the consideration of Lincy were rejected.
Credits from $100 thousand to $1 million are repayable within 3 years at an annual interest rate of up to 15 percent. Currently–the program embraces 14 banks–including Gladzor–Agrobank–Anelik–Hayeconombank–Armimpexbank–Lendbank–Conversebank–Yerevan-Credit–Shirakinvest–Ineco–Trust–Credit-Service–United Bank–and Ardshinbank. New banks may be drawn in on the basis of the Central Bank’s proposals.
The Foreign Financial Programs Management–which is involved in the implementation of the Lincy programs and provides consultations to banks and enterprises–is to notify banks of the presence of inaccuracies in the documen’s within seven days after obtaining the project. The governmental commission on Lincy’s program–which is empowered to discuss the risks and viability of projects–fixes only their fitness to certain criteria. 51 percent of an enterprise’s shares must belong to Armenian residents. The highest share of the government can be 20 percent. Programs must be audited. Banks involved in the program cannot hold the shares of enterprises concerned. An enterprise should not have debts to the pension fund–the budget–etc.
The head of the governmental commission Movses Dzavarian positively assessed the fact that the sums are not accumulated on the accounts of the government and the Central Bank. After paymen’s are effected by the Lincy Foundation an enterprise must have the sums transferred on its own accounts within five days.
Projects are mainly submitted by enterprises based in Yerevan–which is the number one problem–Dzavarian said. Banks do not approve projects because of the inaccurately drawn up business plans and absence of guarantees. To solve these problems–the government assists in the establishment of a venture capital fund–whose authorized capital should be no less than $10 million. By October-November the World Bank will have completed studies of the program to establish the fund–which is expected to be assisted by the German Government–EBRD–IFC–and private investors.
There is no shortage of credit resources in Armenia–while there are problems with their realization–and–according to Dzavarian–the government should help enterprises draw up projects which will be attractive and interesting to banks. Thus–the Ministry of Industry and Trade has rendered assistance to 6 or 7 enterprises whose projects are now being considered by the fund. Businessmen may get consultations also at the TACIS Program Implementation Offices. It is remarkable that the mechanism of insurance is now being applied–which is unprecedented for Armenia. Four projects are insured by Lloyds of Britain; the banks started to take floating funds as guarantees–which–however–has not become a tradition yet.