Agricultural Sector Support

(Financed by KfW)

“The Agricultural Sector Support” (GAF-AF) 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.

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 elaborated 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.

The lending process within the Program still continues after the full disbursement of the received loans from the special revolving fund accumulated based on the repayments made by the PFIs. Since the Program start until 31 December 2020 nearly 23,571 loans have been disbursed to agricultural SMEs for the amount of AMD 60.8 billion. As of the end of 2020, the outstanding loan portfolio within the framework of the program includes 4,974 loans with total amount of AMD 12.9 billion.

During the Intergovernmental negotiations in 2016, the German and Armenian governments agreed to continue the successful cooperation in the agricultural financing sphere by implementing the third phase of GAF Agricultural Finance program. For that purpose, KfW and the Central Bank of Armenia signed the respective loan agreement on 06.12.2019 for a loan of EUR 20 million.

In general, it was decided to keep the financing scheme of GAF-AF program phase II as the main component. The loans will be provided to primary producers, suppliers, processors and service providers in the agricultural sector. In addition, the parties decided also to implement pilot programs of financing value chains, organic farming investments and investments in agricultural cooperatives (both formal and informal) as the second component.

The program 3rd phase includes also a technical assistance component, for the implementation of which from KfW and the Central Bank of Armenia have started the selection tender of the program consultant. Based on the tender results, Switzerland-based “BFC Business and Finance Consult” company was selected as the Program Consultant. The Consultant has started its activities since October 2020 with signing of the respective Consulting contract.

The technical assistance consists of two Lots. Lot 1 includes the assistance of PFIs in the development of general agricultural lending technologies, as well as the above mentioned pilot components of value chain financing, organic farming and agricultural cooperatives. Lot 2 is aimed at the development of the Environmental and Social Management System of PMU GAF, as well as in the partner financial institutions.

Below partner financial institutions have been selected for the program 3rd phase:

araratbank  acba  ardshinbank
 armbusinessbank inecobank conversebank
 aeb uni  finca
 kamurj dica  fast