Kamurj UCO and USAID FED Program launch a new credit program "Integrated Financial and Non-Financial Services"

ArmInfo. Kamurj Universal Credit Organization (UCO) and Farm and Veterinary Service Center (FVSC) of the CARD Foundation with the support of USAID Finance for Economic Development (FED) program commenced implementation of an innovative pilot credit program for dairy farms in 34 communities of Sisian region. Under the program, the borrowers in addition to financial services will be simultaneously offered integrated non-financial (veterinary - under the given program) services as well.

This integration of financial and non-financial services in one credit program is a new innovative approach of MSME lending in Armenia.

The financial component under the program assumes milk producers, both private farmers and enterprises will be provided with targeted loans on preferable terms (for purchase of cattle and feeding, construction/repair of cattle houses, purchase of equipment and financing of other milk production-related activities). The credit terms are as follows: 12% annual interest, maximum amount is 10.5 million drams, 2-7 years of maturity. An individual loan repayment plan will be available for every borrower based on the peculiarities of the loan case. 

The compulsory requirement for processing of the loan application and provision of the loan under the given program is an agreement with the FVSC for integrated non-financial (veterinary) services such as highly qualified veterinary service of livestock enterprises, timely preventive and treatment services (both compulsory and additional), related consultations, artificial insemination of cattle and other services at prices below their market cost. 

Integration of financial and non-financial services is a popular and successful strategy of making financial resources more accessible for developing small and medium-sized enterprises. This innovative approach will help Armenia reduce SME financing risks for financial organizations and boost borrowing power of enterprises. In particular, reduction of credit risks in livestock production can be achieved through compulsory veterinary services and surveillance.  Through the reduction of business risks of the borrowers, the financial institution will eventually be able to reduce the interest rate as well. With an increase in the number of the served farms, the FVSC will be able to reduce the service prices. As a result, the expenses of borrowers will decrease too. Actually, the agricultural enterprises that will use the integrated financial and non-financial services will get an opportunity to not only reduce their expenses but also improve the livestock and milk production, receive more income and become more solvent.

In case of successful implementation of this pilot program, a similar program might be implemented in other regions of Armenia as well as in other agricultural sectors, told FED representatives to Arminfo. 

According to ArmInfo's Ranking of Armenian Credit Companies, capital stock of Kamurj UCO totaled 5.9 bln. drams as of July 1 2015 (4th rank in list of UCOs). Assets of the company totaled 15.8bln drams (5th rank). Credit exposures totaled 13.9 bln. drams (6th rank). Kamurj UCO received 345.9 mln. drams net profits in the first half of 2015 (5th rank). Assets of the company increased 28.3% year over year, with credit exposures growing 22.3%.