Anzhela Barseghyan, Head of Corporate Services Department of Armswissbank. The EBRD award and the use of trade finance tools.

Mrs. Barseghyan, this year Armswissbank has been awarded “the Most Active Issuing Bank” award.  Please provide details, what does this award given by EBRD prove?

This year, within the framework of the 30th annual meeting of the EBRD, a virtual information session of the Trade Finance Program (TFP) was held, during which awards were given to the EBRD partner banks, which were more active during the previous year. Armswissbank is the only bank in Armenia that received this award. The main purpose of the Trade Finance Program is to support and develop international trade financе in EBRD partner countries. The bank joined this program in 2010. The awards in this field reflect the depth and scope of the Trade Finance Program. Due to this program, the bank was also able to continue to support its customers and maintain the level of international trade finance in terms of coronavirus outbreak.

As far as we know, this is the third time the bank has received this award.

Yes, you are right. Moreover, the bank has received this award for the third year in a row. The EBRD has been the strategic partner of the bank for about 10 years, and the award for the third time in a row is a clear indication of the bank's expanding effective cooperation with the EBRD in the field of trade finance. During the cooperation, the initial limit set for the bank has been increased about 10 times, which is currently one of the largest limits in the Armenian banking system.

Taking into account the bank's success in this area, is it possible to assume that the demand for trade finance instruments has increased in the market? What is the reason for the growing interest in these products?

Increasing demand for trade finance instruments is a dynamic process, but there are factors that particularly influence that process. In this case, the first factor is that in crisis situation transaction risk are getting even worse. The level of awareness among customers also plays an important role, in the direction of which the bank carries out continuous active work. First of all, regular seminars on trade finance products are organized for clients, moreover, which is more important, the bank does not offer only traditional lending to its clients, but finds the most appropriate trade finance tool, which will allow to maximally cover the risks in the transaction. As a result, by the example of our bank I can say that in 2020 the volume of trade finance transactions has increased about 2.5 times as compared to 2018, amounting to about AMD 25 billion and the number of transactions increased by about 40%.

What are the risks of trade finance instruments?

Proper management of transaction risks is one of the keys to the success of any business, regardless of whether the relationship is formed with local or foreign partners. In the case of international trade, these risks increase significantly due to business cultural, legislative and currency differences in business. The main risk for exporting companies is non-payment by the buyer for the exported product/service. Importing companies often face problems with the supplier's improper performance of contractual obligations, for example, in case of violation of the delivery time of the product. International trade finance products are designed to cover above mentioned risks and make cooperation between partners more comfortable.

In order to be successful in trade finance, the bank needs to build relationships with international financial institutions. How do you solve this problem?

Designing and developing trade finance tools have always been a priority for Armswissbank. The bank has been working closely with both foreign banks and international financial organizations in this area.

The bank appears to be a member of the Factors Chain International (FCI) since 2008 and is still the only member in Armenia. Besides EBRD, the bank's partner in the field of trade finance since 2014 is another international financial organization, the Asian Development Bank. Moreover, in 2014 the Bank started cooperating with the Export Insurance Agency of Armenia (EIAA). Moreover, the cooperation with EIAA started at the stage of designing and development of insurance products by EIAA. As a result, in 2015 the first export transaction was financed by the Bank based on the certificate issued by EIAA and up to date the Bank is the most active partner of EIAA.

Which are the most demanded trade finance products among customers?  

At present, the bank offers a comprehensive set of trade finance products in accordance with all internationally accepted standards: letter of credit, bank guarantee, international factoring, various types of loans aimed at export promotion. In addition to the tools listed, due to the specifics of the supply contract concluded between the customer and his partner, the Bank often offers its customers combined products, trying to match financial needs of the clients.

In order to find the most acceptable financing option, sometimes working with a client starts even from the negotiation phase with his partner and even representatives of the partner bank, where the financing schemes pre-designed by our specialists are presented to all parties involved in.  
 
Are there any products with more favorable terms?

All the listed products are provided at fixed prices in the market, sometimes even on better terms. But there is one important fact that I would like to emphasize: export promotion has always been a priority for the bank. So, in order to support economic activity, export promotion financing is provided without collateral, and, as a rule, on more attractive terms than other products.

What are your predictions for the upcoming developments in the field of trade finance in Armenia and what is your message to customers?

Despite some economic tensions caused by the epidemic and the hostilities, our forecasts are still optimistic. Taking into account the success of the bank in 2020, which has been full of difficulties, we are confident that in terms of current trends of economic recovery and growth trade finance products will be widely used.

Therefore, we encourage all economic entities, especially manufacturing and exporting companies, not to ignore the risks typical to international trade and apply to the bank for international trade finance products. We, in our turn, with our professional team are ready to provide the best financial solutions to our customers.