Less and less companies in Armenia apply for bank loans, as they prefer dealing with credit companies

Less and less companies in Armenia apply for bank loans, as they prefer dealing with credit companies, according to the Business Environment and Enterprise Performance Survey (BEEPS) for 2008-2013 conducted by the WB and EBRD. The survey is based on the opinions of 360 Armenian companies.

The reason is the complicated procedures of lending at banks, while at credit companies they are easier, though the rates are higher, the survey says.

About 22% of the surveyed companies applied for a bank loan in 2008, and 10% in 2013. Meanwhile, 3% of the polled companies borrowed from credit companies in 2008 and 7% in 2013.   A similar situation is in Europe and Central Asia: from 23% to 15% decline demand for bank loans by companies for the last five years, amid insignificant growth of demand in the funds of credit companies  - from 3% to 4%.  13% of the surveyed companies in Armenia and 16% in Europe and Central Asia point at "inadmissible" rates of banks. The second reason is the loan registration procedures according to 18% of the surveyed companies in Armenia and 5% in Europe and Central Asia. Meanwhile, in 2008, only 6% of Armenian companies complaint of the complicated procedures.  Only 1% of Armenian companies say the collateral requirements are high versus 4% in 2008.

According to the survey: in 2008 76% of Armenian companies did not apply for loans, as they did not need any.   In 2013, this indicator totaled 65%, in Europe and Central Asia 67% of companies applied for loans in 2008 and 71% in 2013.  45% of companies in Armenia applied to banks for financing of their circulating assets (41% in 2008), while in Europe and Central Asia this indicator was 65% (63% in 2008). 53% of Armenian companies have no borrowings  (43% in 2008), in Europe and Central Asia - some 34% (27% in 2008). The companies whose loans for 50% of the circulating assets total 13% in Armenia (23% in 2008) and 33% in Europe and Central Asia (46% in 2008). 

Actually, Armenian companies prefer operating on their own despite the unfavorable economic situation, while in Europe companies settle problems mainly through borrowings from banks.

BEEPS was conducted in five phases: in 1999, 2002, 2005, 2008, and 2012-2013 (the last survey on Russia was held in 2011-2012) in Central and Eastern Europe, almost all the post-Soviet countries, and Turkey.