Banks to Reduce Interest Rates on Timely SME Loans by 1-1.5%: CBA President

The conference titled "SME Sector: Impact and Development Challenges" held in Yerevan focused on the prospects for the development of small and medium enterprises (SMEs) in Armenia. It included presentations of ongoing support programs implemented by international and local partners, as well as discussions of existing problems and challenges.

The President of the Central Bank of Armenia, Martin Galstyan, made certain observations regarding the initiatives of the Central Bank in line with the event's themes. "As a rule, the Government and we have always tried to support companies and individuals facing challenges in Armenia. This time we have significantly changed our approach. We believe that as a society, we should be grateful and, in my view, primarily support those companies that generate results, are diligent in their operations, have no issues with the banking system, and work for the benefit of our country. Our banking partners have responded to our actions, and many of them have already declared that the interest rates on loans for such companies will decrease by 1-1.5% for both future and existing loans. As a result, I believe we will provide a new impetus to the development programs that our successful small and medium companies have," said Martin Galstyan.

According to Daniel Azatyan, the President of the Union of Banks of Armenia, under the new regulations introduced by the Central Bank in April, commercial banks could start reducing the interest rates on loans for timely repaying SMEs by 1-1.5% from May. "According to our data, this decision affected around 20,000 loans, or a total of 200 billion drams in loan balances. Additionally, with this change, banks will now have the opportunity to direct larger volumes of resources towards SME lending, having to hold less capital in return," he stated.

The Minister of Finance of Armenia, Vahe Hakobyan, noted that the growth and stability indicators of the Armenian economy significantly impact SMEs, which are particularly sensitive to various fluctuations. "In recent years, our indicators have been so good that we have had the opportunity to improve our rating as well. Of course, the rating is derived from the interest rates on securities we have issued in the international market, which are at a historical low. If our risk premium was around 600 basis points a few years ago, it is now 150 basis points. This reflects the evaluations of the Government's policies and the international situation, which also creates accessible resources for our banking system, as well as for small and medium enterprises. However, I believe there is an issue that we need to work on in the coming years: it is crucial to create a healthy competitive environment for small and medium enterprises, as analyses indicate that in Armenia, resources do not always flow towards areas with high productivity and innovation," he said.