European Bank for Reconstruction and Development (EBRD) will loan in local currency to small and medium-sized enterprises (SMEs) in Armenia.

According to EBRD official website, Armenia has become the first country to sign a Memorandum of Understanding with the European Bank for Reconstruction and Development (EBRD) to become eligible for lending to local small and medium-sized enterprises (SMEs) in local currency.

EBRD mentions that, in exchange for access to funds the country has committed itself to a reform program which will improve, broaden and deepen local currency and capital markets in Armenia. To achieve this goal the authorities will promote a macroeconomic, regulatory and market environment that supports local currency borrowing and lending with a detailed reform package.

The memorandum was signed by the EBRD, for small and medium-sized enterprises within the framework of local currency and capital market development program, which is aimed at developing capital markets of 6 countries (Armenia, Georgia, Kirghizstan, Moldova, Mongolia and Tajikistan). In addition, EUR 500 million will be allocated to realize this project.

“The development of local currency finance remains a challenge in most of the Bank’s countries of operations, and many have the highest exposures in the world to exchange rate movements. SMEs that sell their goods and services domestically in local currency, but borrow in foreign currency, are highly exposed to this currency risk”, said André Küüsvek.

According to him, availability of loans in the local currency is crucial for the development of local business.

SME Development National Center commented on this decision with Banks.am’s request, noting that it had a positive impact on Armenian small and medium enterprises.

“Upon receiving loans in local currency, SMEs will avoid the risks of exchange rate fluctuation, which will certainly affect positively on their activities”, SME Development National Center said.