ArmInfo.The European Bank for Reconstruction and Development (EBRD) has approved $15mln loans under the micro-, small and medium sized enterprises (MSMEs - $5mln) and Women in Business (WiB - $10mln) for Ameriabank. According to an EBRD report, loans are provided under the SME Competitiveness Programme in Eastern Partnership (EaP SMEC).
Projects description
Provision of a senior loan to Ameriabank of up to USD 5 million under the SME Competitiveness Programme in Eastern Partnership ('EaP SMEC'), established by the EBRD in cooperation with the EU to help finance investments in micro-, small and medium sized enterprises ('MSMEs') to support sustainable investments in technologies, meeting best standards in the field of product quality, occupational health and safety, environmental protection, and promoting the use of green technologies, thereby enhancing MSMEs' competitiveness locally and regionally.
Provision of a senior unsecured loan in the amount of up to USD 10 million to Ameriabank for on-lending to women-led MSMEs under the Women in Business (WiB) Programme in the Eastern Partnership countries.
Projects objectives
The EaP SMEC project will enable Ameriabank to finance long-term investments of Armenian MSMEs in upgrading their technology and equipment necessary to meet EU standards in terms of product quality, health and safety measures and environmental preservation. At least 70 per cent of all financed sub-loans are expected to be compliant with EBRD Green Economy Transition (GET) approach. In addition to long- term financing, eligible sub-borrowers will receive technical assistance and grant support in the form of investment incentives upon the completion of their investment projects.
The proposed loan under the EaP WiB project will promote further women's entrepreneurship and women's participation in business facilitating access to finance, know-how and advice. It will further strengthen Ameriabank`s customer base and further support and encourage developing new products in the local banking sector with specific focus on women-led SMEs and growth of medium and long-term financing.
Transition Impact
Inclusive: The EaP WiB Project will address the "medium" gender related inclusion gap for access to finance in Armenia. In conjunction with TC and non-TC, the WiB loan will encourage Ameriabank to continue undertaking changes in their business model and delivery mechanisms and to develop, test and roll out new financial products tailored for the women-led MSMEs, with a specific focus on micro enterprises, start-ups and outreach to new customers. Competitive: In line with FIF market expansion objectives, the project will support Ameriabank's lending to women-led MSMEs in Armenia by 1.3x of EBRD's funding. This transaction is expected to encourage Ameriabank to further expand its lending to women-led MSMEs above the EBRD investment, with a focus on regional outreach and new clients.
The EaP SMEC project is expected to address existing market barriers that SMEs face to undertake necessary investments (limited access to medium and long-term financing, lack of technical expertise for identification and design of related improvements). The project will also further strengthen the capacity of Ameriabank in assessing and financing targeted investments.
Technical cooperation and grant financing
TC EaP SMEC: Ameriabank will benefit from a TC programme funded by the EU for successful implementation of the facility and, additionally, a verification consultant will be engaged to verify the technical implementation of sub-projects before investment incentives are released to relevant MSMEs. Non-TC EaP SMEC: Sub-projects will be eligible for incentive grants (up to 15% of the lower of the investment cost or the respective disbursed sub-loan amount) funded by the European Union. TC EaP WiB: Ameriabank will benefit from the TA support under the EaP WiB TC Programme, funded by Sida (Sweden), EBRD Early Transition Countries Fund (ETCF) and the EU-NIF through the EU4Business Initiative. The TC includes two linked components: (i) capacity building to PFIs to implement the Programme and a range of cross-cutting activities in support of the Programme promotion and management; (ii) women-led SMEs access to know-how (Advice for Small Businesses). Non-TC EaP WiB: The project is supported by First Loss Risk Cover of up to 10% of the loan portfolio with a cap of 70% for any single sub-loan funded by the EBRD Small Business Impact Fund.
Additionality
Financing structure EaP SMEC: EBRD offers financing that is not available in the market (e.g. a longer grace period and tenor than the market average) from commercial sources on reasonable terms and conditions, which are necessary to structure the project.
Innovative financing structures and/or instruments EaP SMEC: EBRD offers an innovative green finance instrument that integrates aspects such as climate and environmental, social and governance (ESG) standards and/or climate and ESG risk considerations into the financing structure. For instance, adjusting loan pricing and/or level of concessionality to reflect level of climate risk and/or positive climate benefits, such as GHG reductions, climate resilience benefits.
Knowledge, innovation and capacity building EaP SMEC: EBRD provides expertise, innovation, knowledge and/or capabilities that are material to the timely realisation of the project's objectives, including support to strengthen the capacity of the client.
Financing Structure EaP WiB: EBRD will provide targeted term funding (medium to long term tenors), which otherwise will remain unavailable for financial institutions and companies in Armenia.
Standard-setting EaP WiB: helping projects and clients achieve higher standards: WiB Loan will address the gaps in available financing for Women SMEs and the lack of an integrated response to such gap, either from private sector institutions or other IFIs. Additionality is evidenced by the presence of TC support and a risk cover aimed to support Ameriabank to increase lending to the underdeveloped WiB segment. Ameriabank will also benefit from EBRD's experience in previous ASB activities and stand-alone WiB operations in the EaP countries, as well as relevant activities in other countries of operation.
Environmental and Social Summary
Categorised FI (2019 ESP). Ameriabank's past performance and annual environmental and social (E&S) reporting to date for the existing exposures has been satisfactory. Ameriabank will be required to continue to comply with PRs 2, 4 & 9, implement the applicable environmental and social procedures and submit annual environmental and social reports to the Bank.
Ameriabank is the largest of the 17 banks in the Armenian banking sector by total assets (market share of 15.7% and a balance sheet of USD 2.2bln as of Q3 2021). AB is also the market leader by equity size, loan portfolio and net profit. It operates through 22 branches in major cities and most populated regions, employing staff of over 1100.
Ameriabank is the leader in terms of assets exceeding AMD 1,100bln ($2.2bln) - the only case in Armenia`s banking market. The bank is also the leader in terms of lending (AMD 649.2bln or $1.3bln), total capital (AMD 124.1bln or $256.3mln), total liabilities (AMD 954.8bln or $1.97bln), net profit in January-September 2021 (AMD 14.5bln or $29.9). Moreover, Ameriabank is in the TOP-3 in terms of retail credits and lending to corporate clients ($914mln and $461mln), time deposits ($573mln), and involvement of international agencies ($461mln). The bank is the leader in terms of demand liabilities ($586.2mln).
About 40% ($512mln) of Ameriabank loan portfolio is the share of small- and medium-sized businesses and industry. Ameriabank`s share in the loans to small- and medium-sized businesses and industry by the banking sector is 16-20 percent. Ameriabank is the only Armenian bank with the EBRD and the Asian Development Bank (ADB) being its majority stockholders.
Ameriabank has been cooperating with the EBRD since 2010, funding SMEs under the Caucasus Energy Efficiency Programme (CEEP) and women-led MSMEs under the EBRD WiB project.
