ProCredit Bank Armenia
The Republic of Armenia is a small landlocked country with 3.0 million inhabitants as of June 2013 (source: National Statistical Service of the Republic of Armenia). It has only limited natural resources, and faces challenges stemming from its complicated regional relations, in particular its long-running conflict with Azerbaijan over the Nagorno-Karabakh region and its tense relationship with Turkey. The border between Armenia and Turkey has been closed since 1993, and attempts to restore diplomatic ties remain stalled.
Armenia’s economy has undergone a profound transformation since independence in the early 1990s, with sustained growth, ambitious reforms, and inflows of capital and remittances from abroad fuelling the young market. Up until the global financial crisis, economic growth gradually picked up from 5.9% in 2000 to 13.7% in 2007, driven mainly by the mining sector and, to a lesser extent, agro-industries (source: National Statistical Service).
Throughout the post-independence period, a strong informal and small business sector has been crucial for job creation and the diversification of the economy. In 2009 SMEs accounted for 42.5% of GDP and employed 42.2% of Armenia's labour force (source: SME Development National Centre of Armenia, http://www.smednc.am/?laid=1&com=module&module=menu&id=189) and the importance of very small, small and medium-sized enterprises is steadily increasing.
The global financial crisis hit the real sector of the Armenian economy in the fourth quarter of 2008, cutting GDP by 6.8%. The downturn deepened during 2009 leading to a 14.1% slump in GDP, one of the highest levels of recession among CIS countries (source: IMF World Economic Outlook Database). The crisis penetrated the Armenian economy through three channels: a significant drop in foreign capital inflow, a decrease in private remittances and a fall in commodity prices on global markets. During 2009, the government initiated anti-crisis measures (tax relief for SMEs, government guarantees for larger businesses in the construction and industrial sectors, acquisition of credit lines for SME support) that stabilised the economy and helped to speed recovery. In 2010, the Armenian economy started to revive, with 2.2% year-on-year growth, rising to 4.7% in 2011 and 7.2 % in 2012. Growth is expected to decelerate in 2013, however, reflecting slower growth in the agricultural sector, rising gas and electricity tariffs, and budget underspending.
The banking sector still plays a relatively small role in the overall economy. In 2011, the ratio of loans to GDP (including investments in the financial sector) was 31.6%, and the ratio of deposits to GDP (including accounts and placements from financial institutions) was 24.5% (source: ArmInfo information agency: Analyses and ranking of commercial banks operating in the RA). With 21 commercial banks, Armenia would appear to be well served by banks; however, access to high-quality financial services for small businesses and people with limited incomes remains insufficiently developed. Despite a number of challenges in recent years, Armenia's financial system demonstrated considerable resilience during the crisis and managed to restore growth rather quickly.
The founding of ProCredit Bank in Armenia marked an important step forward in the development of the local financial sector. In February 2008, this fully-fledged bank launched its operations and opened its first branch in the city centre of Yerevan. The institution aims to substantially increase access to credit for small businesses and to provide straightforward, transparent banking services for the local population. By entering the Armenian retail banking market and mobilising a large share of deposits and remittances, the bank is able to channel these funds to very small, small and medium-sized enterprises and thus contribute measurably to the country's development.
ProCredit Bank strives to be a true "house bank" for very small and small businesses. In the meantime, it has established itself as a bank with excellent customer service provided by friendly, professional and efficient staff. ProCredit Bank also aims to foster a savings culture among ordinary people by investing in financial education activities for its customers which highlight the benefits of regular saving. In the autumn of 2009 ProCredit Bank Armenia started offering financial services to agricultural businesses and expanded this service to all regional branches by the end of 2010. 2011 was marked by the introduction of another service tailored towards SMEs’ long-term financing, as well as the opening of branches in two more districts in Yerevan. The introduction of the Business Client Adviser concept was the key project in 2012, which was designed to improve the quality of the service provided to business clients and continues to invest intensively in staff training and development to ensure that clients receive the sound advice they need. The bank also expanded the branch network by opening three more branches in Yerevan and one in a regional city.
By the end of September 2013, ProCredit Bank had 15 branches: 11 in Yerevan and one each in Artashat, Armavir, Vanadzor and Gyumri. During the first nine months of the year, the bank’s loan portfolio grew to USD 97.4 million while customer deposits increased to USD 52.6 million. The bank will continue to pursue its targeted approach to becoming the leading bank for very small, small and medium-sized businesses in Armenia.