Wednesday, August 4 2010 11:22
In Jan-June 2010 the clientele of Armenia's credit market grew by 2.8%
Interview with Director of the National Credit Bureau of Armenia (ACRA) Artak Arzoyan
Mr. Arzoyan, it was expected that lending in Armenia would start to actively grow in Q2 2010. Do your indices justify these expectations?
The expectations of growth are coming true. The credit market is actively growing due to an inflow of resources into the banking system. In the last years the peak of lending was in Nov-Dec. So, we did not expect any growth this January. We proved to be wrong: the first month of this year saw an 82% jump.
In Q1 and Q2 2010 lending showed symmetrical growths. In Jan-June 2010 it grew by 91% due mostly to the Government’s anti-crisis programs and consequent economic revival.
Consumer lending has also broken the last year’s ice and is starting to unfold like a spring: all the loans set aside last year are being given out.
As regards our business, such a high activity on the market implies growth in credit report inquiries.
As of today, our inquiry satisfaction rate has amounted to 130%. Such a high rate is due to two major factors. 40% are inquiries by creditors for borrowers whose applications have been declined. Besides, some creditors ask us to provide the credit reports of not only borrowers themselves but also related persons. We also offer an opportunity of limitless fixed-tariff inquiries.
Thus, our expectations of growth have been justified.
What do you think about the situation on the Lombard loan market considering that during and after the crisis this type of lending has substantially grown?
The share of lombard loans keeps on growing in the summary credit portfolio of the Armenian commercial
banks. For instance, if the share of gold secured loans made up 12% in the credit portfolio of banks and credit companies in 2009, it reached 17% or 64 bln AMD in the first half-year of 2010.
At present these loans make 50-60% of the summary credit portfolio. The supply of Lombard loans has starting
gaining momentum in Armenia especially over the post-crisis period. For instance, in the first half-year of 2010 the growth of lombard loans made up 30-40%. "On the one hand, complication of the financial state made citizens resort to gold secured loans; on the other hand,
the banks, which suspended providing installment loans, received a good opportunity to actively circulate at least a small part of their resources among individuals.
The supply of lombard loans has also increased due
to the fact that banks have started gradually expanding the geography of crediting individuals, particularly, in the regions of Armenia. If earlier small gold secured loans were considered unprofitable and unable to cover transaction expenses, no such questions are irrelevant as the market has single regulation conditions for all players, and the loan interest rates are quite high.
Mr.Arzoyan, as far as I know, your credit report base is not enlarging and this is like some endless circle: you lend money to the same people again and again…
The business of a credit bureau has several peculiarities. The key factor curbing our growth is the population of Armenia. We have just 2,000,000 full-aged people in Armenia, so, we cannot have more borrowers than we have citizens. Besides, only one or, at most, two members per family can afford borrowing money. So, the 950,000 credit reports we have are quite normal a figure. In Jan-June 2010 our clientele grew by 2.8%.
In Armenia the average age of the people borrowing money for the first time ranges within 20-21 while the maximum age of borrowers is 55. Such a short age span is typical of countries with low living standard. Logically, in such countries people should borrow money for improving their lives but in Armenia most of residents prefer cutting and contriving rather than borrowing a loan as they regard loans as a debt, something that may have bad consequences for them.
As a result, in Armenia there is no social stability. In contrast, in the United States people start up in life due to loans, in the middle age they save money and, when old, live on their savings.
Today, banks in Armenia prefer crediting only those people who have already borrowed money from them. I think in the near future they will become less suspicious of new borrowers. Tough lending standards are good for the time of crisis but under other conditions they may lead to quite negative consequences.
Today, we have almost 19,000 credit reports on legal entities. This figure is growing very slowly but I think that this is quite normal as banks can repeatedly credit the companies who have already proved their efficiency while the new ones should first achieve something. Today, our banks have no lack of resources and a good borrower will not be left without a loan.
I would like to know if you have any changes in your list of the most active partner banks?
There are certain changes within the top five, mostly due to the seasonal nature of agricultural and consumer lending. The changes are also caused by shifts in the banks’ credit specialization.
Mr.Arzoyan, the development of banking systems in the world urges credit bureaus to diversify their services. What are you doing to enlarge your services?
ACRA is the only bureau in the South Caucasus having such a comprehensive database. Today, we offer different services to banks and credit companies and provide data to individual experts.
Presently, we are going to launch new projects to diversify its services.
In the coming 1.5-2 months we will refresh our database.
By the end of this year we are planning to introduce a scoring system. We have already developed the relevant methodology and have tested the system. This system will help creditors to forecast the behavior of their borrowers. The forecast will be 75% and more accurate as is the case worldwide.
The tariff policy of the new system is to be approved by the shareholders and the board of ACRA. Since there is no alternative on the market, one score may cost 100-200 AMD.
In 2011 we are planning to launch a system of online inquiries. This system will allow borrowers to see their credit histories online.
Presently, ACRA, jointly with Armenian Card, are developing a system of security and borrower identification. We will start with virtual cards and then will proceed to ordinary plastic cards. We are also planning to offer a data monitoring service, allowing individuals to see their credit histories.
Mr.Arzoyan, when will you start working at profit?
Today, we are showing quite good operating figures. The profit is being used for zeroing the losses. In countries like Armenia a credit bureau needs 8 years for full development. ACRA was established in 2004. In 2008 its expenses and revenues were already equal. By 2011 we are planning to zero our losses.
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