Interview of the head of Inecobank SME Business Development Department Alla Pavlova to Banks.am

- During the last month Inecobank attracted more than USD 30 million in loan facilities from four different external resources to be directed to financing of SME and micro enterprises. What do these developments prove?  

- The above-mentioned processes are the result of the preliminarily planned work with international financial institutions, while the schedule of fund attraction is largely conditioned by the seasonal increase of funding demand on behalf of companies involved in trade. Since 2006 until now the number of our international partners has reached 25, while the amount of attracted loan facilities exceeds USD 150 million. This figure shows the confidence towards the bank and the readiness to establish a long-term cooperation.  We also highly appreciate our relationship with international partners many of which have entered the Armenian market with the launch of partnership with Inecobank.
    
As for SME and micro business lending, these two areas have always had a strategic importance for the bank. Despite the fact that in some areas we are mostly known as a bank active in retail lending, we feel that we are no less strong is SME financing as well. Besides, sales lending is also a tool for increasing the sales volumes of various trade enterprises. According to several studies Inecobank is among the top three on the SME financing market.

- What approach will be applied to the allocation of attracted funds, will there be any sector preferences or restrictions?

- I would like to note that we have the potential to become the most convenient bank for customers of this sphere. By saying the most convenient we mean speed, flexibility, a full range of products, high quality services, solutions aimed at decreasing customer’s expenses, business consulting, more effective resource management solutions, etc. Today the bank offers its business clients a complete set of financial services by which they can more quickly and efficiently make use of all banking services in one place, saving their time and resources.

Attracted resources will be provided to micro, small and medium enterprises - residents of the Republic of Armenia - without sector restrictions. Moreover, the average SME loan amount will comprise 100 000 USD, and the average microloan will make10 000 USD. The term of financing is up to 7 years.

Based on the demand we are actively engaged in the sphere of trade finance. Here we also offer a complete set of tools including purchase order financing, factoring, letters of credit, international guarantees and so on. By the way, driven by the seasonal/holiday eve/ increase in demand by trade organizations, the bank has developed a special offer within the framework of which the loan funds will be provided at the most favorable conditions.

- How accessible will the loan facilities be for regional enterprises?

- The loans will be provided to micro and SME enterprises both in Yerevan and in the regions. 8 out of 16 branches of the bank are located in the regions and offer universal banking services also ensuring full business lending processes. As for the micro lending, according to the development program of this direction, at least 70% of microloans should be provided in the regions based on the higher demand towards this loan product in the regions.

- From the point of view of loan servicing micro loans are often considered to be a more resource consuming and "uncomfortable" loan product. Is it true for your case?

- I think it all depends on the bank's strategy and effective organization of processes. Naturally, if the bank’s processes are tailored for large corporate customers, micro lending can become an "uncomfortable" and expensive product. However if this segment has been selected initially and all necessary conditions for its servicing have been created, this issue cannot arise. This is the case in our bank, at least.

We have always been strong in providing high-quality mass customer services, which comes from our rich experience in terms of sales lending, using which in adjacent areas is considered to be a reasonable solution.

- Overall, how would you assess the quality of SME loan applications? Which are your main requirements to approve the loan application?

- We consider ourselves to be a responsible financial institution and as we are acting based on the interests of a wide range of depositors we must balance and control our risk appetite. Therefore, we pay great attention to the quality of the loan portfolio which is currently estimated as stable high. In particular, the overdue loans make about 1.5% of the loan portfolio which is surely one of the strong sides of Inecobank and makes our bank more attractive for international partners. The main lending condition has always been and will be the quality of the client's business, prospects, transparency and, of course, the possibility of servicing the loan.

Although we do not notice any negative trends in the quality of loan applications, it is no secret that high quality customers generally already have “their” banks, and attracting a new “high quality” client becomes increasingly difficult. For this reason the bank pays particular attention to the constant improvement of the customer relationship management and high quality of services.

- What do you think of SME participation in the “Green” lending program launched by the bank? Are our entrepreneurs interested in the concept of “Green” lending?
   
- Inecobank continuously develops new loan products aimed at providing more targeted financial services to customers. In 2012, we launched a new “Green” energy efficient loan product in cooperation with GGF (Green for Growth Fund) with the help of which the customers will be able to significantly reduce energy consumption-related costs, which is very important especially in the context of the growth of energy prices.

I think there is a certain lack of information in this area and our goal is to introduce to the customer all the benefits that he would receive in case of replacing his equipment with a new and a more energy efficient one. Within the framework of this program, we will also provide free consultation and energy audit. We plan to increase our efforts in this sphere because we think that our existing big potential can be particularly useful for the SMEs.

- What is the impact of international cooperation on the bank's internal procedures first of all from the point of view of increasing the efficiency of services provided to the borrowers ?

- We receive not only resources but also technical support in the form of consulting or trainings from our international partners. The main objective is to enhance the professionalism of the staff and the management of the bank including risk management functions, as well as the service quality, bringing it in line with international standards.

Cooperation with international partners has had its positive impact not only on Inecobank but also on our country's economy. After all, international funding becomes available to the real sector of the economy through the banks.

In this context I am happy to note that the micro and SME loan portfolio of our bank has nearly tripled over the last three years. Our goal is to further strengthen our position and to increase the number of our customers, positioning ourselves as the most convenient and  the first choice bank for the customers.

Alla Pavlova was interviewed by Khoren Ormanyan