Thursday, December 16 2021 19:39

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.