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Objectives and Scope |
(1) Economic diversification and widening access to finance: Access to finance is very constrained for lower income individuals and smaller enterprises in Armenia, particularly in rural regions. ADB's funding will support FIAR''s lending to this customer segment and diversification into new financial products. In addition, ADB''s funding will support FIAR's efforts to lend to women. The long tenor of the ADB loan will support FIAR''s growth focus on individual loans that have relatively longer tenors, thereby enhancing the impact of the transaction.
(2) Access to local currency funding: ADB's funding is expected to be in local currency. Providing local currency funding to FIAR will help to reduce currency mismatch thereby lowering foreign exchange risk for FIAR''s borrowers.
(3) The proposed TA will help FIAR improve its risk management through the introduction of a credit scoring system. Under the TA, FIAR will also be participating in SMART certification which will help FIAR to further strengthen its consumer protection practices.
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Linkage to Country/Regional Strategy |
(1) Consistency with ADB Strategy and Country Strategy. Under the Midterm Review of Strategy 2020, ADB aims to strengthen its support for the finance sector by assisting the development of financial infrastructure, institutions, and products and services; and by promoting inclusive growth. FIAR''s emphasis on funding segments where the potential for employment and income generation is high will support inclusive growth. The ADB loan will help the borrower provide loans to MSMEs in order to realize their investment needs. This is consistent with the government's efforts to promote growth and economic diversification, and ADB''s country partnership strategy with Armenia, 2014-2018.
(2) Consistency with Sector Strategy and Relevant ADB Operations. ADB plays a tangible role in supporting the deepening of financial services in Armenia. In 2011 ADB supported 4 banks in Armenia through senior loans totaling $65 million. ACBA Credit Agricole, Ameriabank, Ardshininvestbank and Inecobank were the banks selected in the SME Finance Program through which ADB loan proceeds were on-lent to SMEs. The loan to FIAR will continue ADB''s efforts in strengthening and developing Armenia's financial market and supporting MSMEs. It complements sovereign programs in the financial sector such as the Women's Entrepreneurship Support Sector Development Program (2012).
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