Armenia has become the first country to sign a Memorandum of Understanding with the European Bank for Reconstruction and Development (EBRD) to become eligible for lending to local small and medium-sized enterprises (SMEs) in local currency.
In exchange for access to funds the country has committed itself to a reform programme which will improve, broaden and deepen local currency and capital markets in Armenia. To achieve this goal the authorities will promote a macroeconomic, regulatory and market environment that supports local currency borrowing and lending with a detailed reform package.
The Memorandum was signed in Yerevan on Tuesday by Armenia’s Minister of Finance, Gagik Khachatryan, Central Bank Governor Arthur Javadyan and André Küüsvek, EBRD Director, Local Currency and Capital Markets.
The signing follows the approval of the EBRD’s Local Currency Programme for SMEs in its countries of operations to mitigate their exposure to exchange rate movements. It includes a new €500 million SME Local Currency Lending Facility that will combine EBRD capital and donor resources to provide eligible companies with access to affordable funding.
The development of local currency finance remains a challenge in most of the Bank’s countries of operations, and many have the highest exposures in the world to exchange rate movements. SMEs that sell their goods and services domestically in local currency, but borrow in foreign currency, are highly exposed to this currency risk.
Based on previous experiences with a local currency programme in countries at an early stage of transition to market economies, the EBRD has now designed a wider framework to accelerate the development of local money and capital markets and increase availability of local currency financing for SMEs.
André Küüsvek, EBRD Director, Local Currency and Capital Market Development, said: “This new framework combines investment, policy dialogue and donor support and builds on the successful local currency programmes we have developed over the years. Expanding the availability of local currency financing is crucial for the growth of local businesses by providing them with fund at affordable rates and manageable risk.”
The EBRD’s Local Currency and Local Capital Markets Initiative, launched in May 2010, aims to enhance the macroeconomic, regulatory and market framework to ensure long-term sustainable and liquid local currency markets. The initiative’s goal is to strengthen local capital markets and encourage the use of local currencies in the Bank’s countries of operations. Technical cooperation and donor support provide vital backups for the programme.
The EBRD streamlined its work in the small business sector by launching its Small Business Initiative in late 2013. The Bank sees a well-developed and functioning small and medium-sized enterprises sector as a backbone of any successful economy. About a third of the EBRD’s total investments benefit small businesses.
Share this page:
Your email address will not be published. Required fields are marked *
ICRA: US sanctions on RUSAL put Indian automobile industry on crossfire
Atlas Copco India Launches “Smart Connected Assembly”– supporting the vision of Industry 4.0
Hon. Union Minister Suresh Prabhu presents Chemexcil awards in Mumbai
2014 The Global Indian New Network (TGINN)