Armenia is a country that has been deeply affected by the fall of the Soviet Union and the corresponding lack of markets for its products and subsequent collapse of industry.

This, plus the war with Azerbijan over Ngorno-Karabagh (and the related economic blockade by Turkey) and the devastating earthquake of 1989 means the country has faced very difficult circumstances. The limited avenues for import or export are through Georgia and Iran. The Armenian genocide of 1920 is still very much alive in the public consciousness, as is the accompanying loss of land in Turkey.

The country boasts a very high level of education and most people have housing, though the population is described as very very poor, very poor, poor and rich. The small middle class work for NGOs and banks. The average salary is US$25 per month though average monthly living expenses are US$80. The difference seems to be made up of remittances from the diaspora. There are very few beggars or homeless people. Half of all Armenians live in other countries and emigration continues. It is common for people to have a brother, cousin, etc who sends home US$100 or US$200 per month. This same sort of assistance provides seed capital for projects. Many people also saved in gold during the Soviet period. Those savings are now being used. People generally seem to be better off than in 1994 when there was a severe crisis and the country was left without power or fuel as a result of the war. Fighting has stopped and there is hope for a peace settlement. Fuel is imported by truck and costs remain high; many families still live without heat in winter and on basic diets. Growth has resumed but a UNDP report notes that even with 6-8% growth annually it will take 20 years for the economy to double.

Interest rates in Armenia vary from 66% for urban micro lending programs to 0% for some multilateral loans. The largest rural lending programs lend at 18% declining balance. By law, loans are made in Drams, the local currency. Because of the low confidence in banks, savings rates start at 16% on the US$ and go up from there to attract savers. The public has little confidence in banks as a result of savings that were lost at the end of the Soviet era. Inflation is very low and the local currency has maintained a stable exchange rate against the dollar for over one year. A period of very high inflation was experienced, however, just after the introduction of the currency in the mid 90s. There are a large number of Micro Finance Institutions (MFIs) in Armenia, though one expert advises, “few are effective”. A “Credit Forum” has been established and meets monthly. ECLOF Armenia is a member.

Collateral is a problem for many farmers. Banks will not accept their houses or land. Solidarity guarantees are working with some MFIs and need to be explored by ECLOF. The major problem for farmers is the lack of a market. They cannot market themselves, there are no co-operatives and there is almost no export market due to the problems already mentioned. Rural households live on barter to a great extent.

The ECLOF Geneva Board recognised ECLOF Armenia in November 1998. The National ECLOF Committee became operational in 1999 with the first loans being disbursed in June 1999. In the first twelve months of operation, the committee has approved 32 loans with a total value of US$340,000. Due to the high level of emigration from rural areas because of the lack of work, the NEC has focused on rural lending. During the first few months, the committee relied on the support of Board members and one staff member who they recruited in September 1999. During this time the support from the World Council of Churches Roundtable was very important, and was a major factor in the committee becoming operational so quickly. The committee has now recruited a Programme Manager and accountant, in addition to the Executive Secretary previously appointed, and today staff are fully responsible for all operational matters. A primary objective now is to develop a full credit policy.

The program has great potential and could grow into an important Armenian MFI. The current leadership wishes to develop a rural based agricultural programme. The need for this kind of lending is extensive. As lending capital grows, regional offices would need to be established to manage loans on a regional basis. Apart from revolving the existing capital, the committee projects it will require up to US$400,000 in new lending capital annually.