Wednesday, September 17 2014

 

Mr. Andreasyan, I would like to start our
interview with a question about one of the most crucial fields for our country,
agriculture and agribusiness, the fields where your bank has always been the
leader. Today the government is paying increased attention to agriculture and
your bank is actively involved in relevant projects. But few banks are
following your example, which means that there are serious risks in this
sector. What risks do we have here? What instruments do you use to minimize
them? We still have no developed agriculture insurance system, nor do we have a
proper hail guard, so, our farmers continue sustaining losses.

 

For 16 years already
ACBA-Credit Agricole Bank has actively financed agriculture as its core mission
is to serve this sector. Today our bank has substantial experience in this
field. I think that the key advantages of any bank are its employees and
customers. I can say that we have both, and this helps us to be in the vanguard
on this market. In Jan-June 2014 our loan book grew by 13bln AMD to 176bln AMD,
where the share of agricultural loans grew from 32% to 40%.

 

There are a number of
factors that have ensured this growth. The first factor is our strategy. The
current situation in agriculture has proved that we must be consistent in
financing this sector and must continue increasing its share in our loan book,
especially as our wish is backed up by the government’s policy. Over three
years ago the government launched a program to subsidize the interests on
agricultural loans. This program is supposed to provide almost 15bln AMD
annually for small-sized loans. The interest on the loans is 14%, with 4-6%
(depending on community) subsidized by the government. This program is a chance
for farmers to get cheaper loans. Even though this resource is open for all
banks, ACBA-Credit Agricole Bank has the lion’s share of it – over 14bln AMD
annually. This year we have used our own resources to lower the interests on
AMD loans and to make them more affordable.

 

Many banks complain of high risks in financing
farmers, especially as they are forced to borrow part of the money in foreign
exchange.

 

Yes, of course, forex risks are really
tangible for our bank as the greater part of the funds we attract, including
the money borrowed from international donors, are in foreign exchange. Hence,
we are taking certain steps to get AMD resources as well as to hedge part of
our forex risks when attracting funds from different international donors. By
doing this, we are seeking to ring-fence farmers from untypical risks. The key
thing we are doing here is cutting our margin as hedging results in growing
interests and more expensive resources. But we are ready to do this so as to
free our borrowers from forex risks and to give them easier access to our
resources. This year we have provided AMD loans worth 3bln AMD at 14% against
15% in the past. We got this money from KfW in the framework of GAF programs.
We already had this money last year but were unable to actively place them for
different reasons.

 

Was it targeted?

 

Yes, of course. It was meant
for agriculture. It is important that the loans were both medium- and long-term
as well as both small- and big-size. Short-term loans were aimed to help
farmers to replenish their floating funds, while medium- and long-term loans
are invested mostly in development programs.

 

What could you say about investment activity in
the country? How much money have you spent on investment loans?

 

Unfortunately, in the last
years our investment loan book has shrunk. A couple of years ago we had high
activity and high demand for such loans. And we successfully met it using
different sources, including own funds. Other banks were also active in this
field. Today I am not sure what a share investment credits have in our
agricultural loan book. I think some 10%. In the past when farmers were more
active in planting orchards and building greenhouses, almost 15% of our
agricultural loans were medium- and long-term investment credits. 

Can we
say that agribusiness in Armenia is pending?

 

This is a global tendency.
Things are almost the same in Europe and Russia. Some developments in Russia
have direct impact on us. For example, in early 2014 the Russians were actively
discussing the problem of labor migrants. Now they have reviewed their attitude
towards our compatriots, but at the beginning of the year lots of people with
stable monthly earnings in Russia were forced to go back home. And the problem
here is that the money they sent home was the only source of income for our
customers in rural areas.

 

As
far as I understand, this money shapes the demand for banking services and
additional financing?

 

Yes, if a customer is
solvent, if he or she earns a stable income, we invest money in serving him.
Today agribusiness in Armenia is facing not bad chances to regain its positions
on Russia’s agricultural and food markets. Today we are actively developing and
are already applying new lending products in agriculture. Particularly, we are
planning to introduce technologies that will allow farmers to reduce their
costs. Our technologies are very expensive, while in many other countries they
are much more economical. One of the best examples is Israel, where they have
farms amid deserts and even sell their agricultural products worldwide.

 

Yes, I fully agree with you, Israel is a
painful subject for Armenia as many experts wonder why they can do it and we
cannot?

 

Just one example: one
Israeli company wants to launch a new drip irrigation system in Armenia and
they have asked us to find a farm where they could test it. We are ready to
finance such projects.

 

I think autumn is the best
time for a bank to appear with new products. In autumn customers are more
active borrowers as compared with summer.

You can read the continuation of the interview this thursday, September  18th, on the website of ArmInfo.