Agricultural Sector Support

(Financed by KfW Banking group)

"The Agricultural Sector Support" loan Program is implemented within the framework of financial cooperation between Republic of Armenia and Federal Republic of Germany. The overall objective of the Program is to make the financing of private farmers and SMEs engaged in agriculture business profitable and effective for the financial institutions, through providing long term funding and required technical knowledge. Successful implementation of the Program will result in development of Agricultural sector of Armenia and increase of investments in the field.

For the Program implementation, KfW has provided in total EUR 30 million loan in two phases, each of them for EUR 15 million. The Government of Armenia has also provided USD 5.5 million as a co-financing to the Program first phase out of the remaining grant funds of the former "Credit Guarantee Fund" (CGF) program. The CGF program was provided under the umbrella of the German-Armenian Financial Cooperation and has been terminated in December 2010. Both phases had been fully distributed by the PFIs in April 2017.

Within the framework of the GAF-AF program the loans are provided exclusively in local currency. Only resident SMEs and private farmers engaged in agricultural business on the territory of Armenia can be considered as Program beneficiaries. Currently loans are provided only for investment and agricultural value chain financing purposes. The latter was implemented as pilot component into the program second phase.

Besides the loan component, the Program had also a technical assistance component, in the scope of which loan officers of PFIs have received relative trainings, as well as new technologies in agricultural finance and the so-called "agricultural technical cards" have been implemented in PFIs.

International consulting companies have provided the technical assistance. "Frankfurt School of Finance and Management" company was the consultant of the program first phase.

BFC consulting company was the consultant of the second phase. The latter has closely cooperated with the PFIs, potential beneficiaries, suppliers and other stakeholders to implement the pilot component of the agricultural value chains, and has also implemented special schemes and documentation for their financing. Besides, the consultant has helped the program PFIs in increasing the operational efficiency of their lending process in the sake of decreasing operational costs, which in its turn has resulted in the decrease of loan interest rates.

The loans are being provided to the PFIs based on refinancing scheme, for 5 years and with market interest rate.

Since the Program start until 31 December 2018 nearly 18,837 loans have been disbursed to agricultural SMEs for an amount of AMD 44 billion. Out of which 1,080 loans were provided within the "value chain" component for AMD 415 million. As of the end of 2018, the outstanding loan portfolio within the framework of the program includes 8,751 loans with total amount of AMD 14.8 billion.