FINANCING FOR DEVELOPMENT Session 4

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1 FINANCING FOR DEVELOPMENT Session 4 CASE OF ARMENIA Finance for SMEs and Attracting Investments in Sustainable Cities Mr. Armenak Darbinyan, Board Member, Central Bank of Armenia

2 LOCAL AND INTERNATIONAL FINANCING INSTITUTIONS FOR SME SECTOR IN ARMENIA Local banks and UCOs SME support government projects World Bank International Finance Corporation KfW EBRD Asian Development Bank Black Sea Trade and Development Bank (BSTDB) EIB

3 THE ROLE OF ENABLING POLICIES FOR INVESTMENTS AND FINANCING Loan Guarantees The objectives of these schemes are to help small entrepreneurs with good projects but little collateral to obtain loans; to encourage banks to overcome their reluctance to deal with SMEs; and to provide banks with the opportunity to venture into new lending areas. The major LGPs currently operating in Armenia are: USAID Development Credit Authority (DCA), IFC Global Trade Finance Program (GTFP), ADB Trade Finance Program, EBRD Trade Facilitation Program. Credit enhancements This approach has succeeded in pushing banks to deliver some financing to SMEs. The reason for this large funding by international agencies is because banks and UCOs do not have adequate access to capital on the domestic market to satisfy the demand for SME credit.

4 INCREASING ACCESS TO FINANCE FOR SME s Main obstacles for SME s to access to finance. Lack of sufficient collateral- banks heavily prefer land and real estate as collateral instead of movable assets Credit enforcement and creditor priority issues Lack of knowledge and capacity in SME s Lack of information and transparency- it increases the borrowers risks and the interest rates of lending Possible solutions for increasing access to finance for SME s Initiating secured transactions reform Creation of registry for moveable property Improvement of legislation and introduction of relevant mechanisms for enforcement procedures Development and implementation of Financial literacy programs for targeted groups of population

5 PROMOTING INCLUSIVE BUSINESS MODEL Dilijan Development Project The program of Dilijan's development seeks to attract local and international investors, create the town's master plan, support the micro and small enterprises, develop the tourism infrastructures, create resort and sport centers, preserve the historical and cultural heritage of the town. Core components of the project: Economic development of the city; Development of urban services and infrastructures; Education, culture and community life; Creation of educational, scientific and cultural infrastructure in the city and surrounding towns; Preservation of cultural and historical heritage; Participation in local community life and helping it to develop. To achieve the stated goals, as part of the project, plans call for implementation of longterm programs fostering the region s development, growth of investment attractiveness and tourist potential, as well as constructing Dilijan itself in compliance with contemporary urban development standards.

6 Dilijan Development Project UWC Dilijan College. Officially was opened in 2014 UWC Dilijan will play an integral role in the region s evolution. As an international educational institution, it has begun to foster joint initiatives with public and private organizations contributing to the development of the area in a harmonious and sustainable manner, making it ideal for the proactive and immersive international education UWC schools and the International Baccalaureate Diploma seek to deliver. Through service and action programs, students will have the opportunity to engage with the implementation of urban and social development plans. Central Bank Training and Research Centre. Part of the Central Bank of Armenia moved to Dilijan in 2013, which developed new infrastructure to accommodate a number of expected new investors.

7 THANK YOU FOR ATTENTION