Hakob Andreasyan: We try to ring-fence farmers from untypical risks

ArmInfo. It has already been 100 days since Hakob Andreasyan was appointed as CEO of ACBA-Credit Agricole Bank. On this occasion, he has agreed to give an interview to ArmInfo. 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.

by Emmanuil Mkrtchyan