AraratBank is one of the banks with an impressive network of international partnership which - during many years of its activity - has concluded agreements with over 20 international financial institutions, having borrowed funds and having fostered the economic growth in Armenia.

We talked to Zaruhi Melkonyan, Head of International Operations Department and Executive Board member, about the target directions of lending, successful international cooperation and achievements of the Bank.

- Ms. Melkonyan, please give an insight into the international financial institutions AraratBank has been cooperating with for years. What are the benefits of international partnership?

- AraratBank has been cooperating with international financial institutions since 2007. The first major achievement was the signing of two agreements with the European Bank for Reconstruction and Development (EBRD) aimed at fostering international trade and financing the SME sector. Cooperation with such a reputable institution was binding since the Bank was gaining a certain position, recognition, and new opportunities were created for the latter. Further cooperation was quite efficient. Due to our diligent work and results reported over the years, we succeeded in signing a number of loan agreements with EBRD which were combined with technical assistance programs. At that, we managed to increase the limit for international trade facilitation program (TFP) several times. It is noteworthy that for the fifth year running the Bank has been given an honorary award by EBRD and recognized as the Most Active Issuing Bank in Armenia in the frame of trade facilitation instruments.

In 2008, the European Bank for Reconstruction and Development became a shareholder of AraratBank and made its own contribution to the development of the Bank. The Institutional Building Program (IBP) was implemented for about two years within the framework of cooperation, during which almost all the subdivisions of AraratBank underwent relevant trainings, processes were brought in line with international standards, a corporate governance culture was rolled out, and risk management and evaluation processes were improved.

Another major accomplishment of the Bank was the cooperation with the European Fund for Southeast Europe (EFSE). It is no secret that small and medium enterprises are the pillar and backbone of Armenian economy and in this context this agreement was very important for us within the framework of which we also received technical assistance by improving a number of SME lending processes. We held trainings for our credit officers which later enabled them to carry out the process of lending to small and medium enterprises efficiently and at minimum risk.

Over the years we have expanded the list of IFIs by concluding agreements with a number of development banks and funds, which are widely recognized around the world. At present, AraratBank actively cooperates with about 20 international financial institutions, such as the Netherlands Development Finance Company (FMO), the German Investment and Development Corporation (DEG), European Bank for Reconstruction and Development (EBRD), the World Bank (WB), the Black Sea Trade and Development Bank (BSTDB), the European Fund for Southeast Europe (EFSE), the German-Armenian Fund (KfW), the Green for Growth Fund, Belgium-based Incofin Investment Management, responsAbility Global Microfinance Fund, BlueOrchard Finance Ltd, the OPEC Fund for International Development (OFID) finance institution, the Eurasian Development Bank (EDB), and Symbiotics SICAV, to name but a few.

The international institutions above are the partners that contribute to the progress of the Bank with their knowledge and extensive background, provide technical assistance, which enables to develop the directions of SME lending and trade financing through the use of the best and cutting-edge international technologies.

- Which lending directions are a priority for AraratBank? Why?

- AraratBank is a universal bank that provides services to individuals and legal entities in almost all sectors.

Lending to micro, small and medium enterprises has always been a target direction for us. We also highlight the importance of mortgage lending, where we have a rich experience and have been involved in almost all Government programs. At this stage, we have diversified the scope of small and medium enterprises even more and have separate ad-hoc projects for women and youth. The goal is to ensure equality, equal opportunities, rights and healthy competition for all in the business environment.

Thanks to the flexible borrowing policy, at present we have the opportunity to lend to the agricultural production chain. Of course, the volume of agricultural loans is still inferior to other sectors. However, at present we are actively working to make it a priority sector.

- What kind of green lending projects are financed? Why is this direction especially important?

- Joining the global processes of combating climate change, the Bank focuses on developing the "green economy". The borrowers whose activities have a minimum negative impact on the environment and result in energy saving, reduction of CO2 emissions, use of renewable energy and roll-out of alternative technologies, to name but a few, have always been in the spotlight of the Bank.  

The individuals and businesses that are ready to make safe investments with no environmental damage through the acquisition of new equipment or solar panels, through the use of new building and construction and other technologies are considered a target sector. Using state-of-the-art technologies in their activities reduces the cost of borrower processes, thereby increasing a borrower's competitiveness in both domestic and foreign markets, while the reduction of the negative impact on the environment is the most important result.

Each project is sure to undergo audit, in-depth and comprehensive analysis, and all potential risks and opportunities are identified.

- You have mentioned that lending to female entrepreneurs is one of the important directions where the funds borrowed from international partners are used. What is the dynamics of women doing business in Armenia?

- Women have always played a key role in the development of economy. Programs aimed at supporting women in business have always been at the forefront in the strategy of AraratBank. We try to involve women in the development of the Armenian economy as much as possible through our credit, business-education and business- literacy programs. Today, we have already many successful and inspiring projects that once again demonstrate the importance and benefits of engaging women in business. Along with the roll-out of the lending instrument, the Bank, jointly with the consultants involved, arranged numerous events aimed at enhancing women's entrepreneurial knowledge and skills, assisted in an accurate market research, developed a marketing strategy, helped to effectively organize business and financial management, understand competitive advantages, and provided an insight into tax legislation.  

The purpose is to support and encourage female entrepreneurs for them to be more active in doing business, and if they are not yet involved in any business, start doing it. It is noteworthy that the majority of businesswomen who are customers of AraratBank are involved in trade and service sectors.

If we present information in numbers, about 28% of corporate business goes to women and 11% - to the youth. Over 50% of the corporate business portfolio goes to the entities involved in trade, followed by the service sector, the share of which makes over 15% of the portfolio.

- How would you assess the dynamics of lending programs? What new programs does AraratBank have in place?

- AraratBank is involved in many Government programs, such as agricultural loans subsidy programs, mortgage lending programs, and programs to address the economic impact of the coronavirus.

Speaking of consecutive crises, I consider it important to mention that in the conditions of the pandemic, economic and post-war crises, in 2020 AraratBank managed to raise USD 5 million and EUR 3 million from two entirely new partner financial institutions, such as Triodos Investment Management and Microfinance Investment Facility, while, in early 2021, it attracted USD 5 million from another reputable international financial institution, BlueOrchard Covid-19 Emerging & Frontier Markets MSME Support Fund. The funds were intended to support local businesses, foster the SME sector and support MSMEs affected by Covid-19 in Armenia.

As to new projects, AraratBank is in the process of working out several new programs, which will be engaging and will stand out in the banking system, but we will keep it under wraps for a while. However, in the next two years, the Bank intends to increase the share of loans to female entrepreneurs to 12% in its total loan portfolio through additional allocation of funds for a total volume of about 10 million U.S. dollars.