Micro and small enterprises in Armenia will benefit from a US$5mn loan the EBRD is providing to Inecobank, a growing local bank with a strong business focus. In addition, the EBRD will also increase Inecobank’s limit under the Trade Finance Programme to US$1mn.

Technical cooperation funds provided by USAid and the EBRD’s Early Transition Countries Multi-donor Fund will complement the agreement and be used to strengthen lending procedures and skills at Inecobank.

The EBRD loan will be used for on-lending to local micro and small enterprises thus addressing a major constraint for the growth of this segment of the economy. At present the still very small Armenian banking sector does not deliver finance to micro and small enterprises on a large and sustainable scale. By broadening Inecobank’s potential customer base, the loan will also support the bank’s expansion.

Inecobank and the EBRD have been partners since 2005 when the Armenian bank received a first US$1mn loan to expand its capacity to serve micro and small enterprises. In the same year Inecobank also joined the EBRD’s Trade Finance Programme which supports trade to, from and within the bank’s countries of operations.

Michael Weinstein, head of the EBRD’s office in Armenia, says the new loan is expected to boost the involvement of an important local bank in financing the real economy. This will benefit the economy in general, but will also foster growth in the banking sector.

Facilitating micro and small enterprises “access to finance will support the development of a vibrant segment of the Armenian economy, which serves as the country’s engine for growth.

Mher Grigorian, Inecobank’s CEO, said that he welcomed the loan from EBRD as not only would it ensure that Inecobank could provide much needed finance to growing businesses, but it also emphasises the EBRD’s confidence in Inecobank.

The Armenian economy has been growing strongly in recent years. GDP grew by 14% in real terms in 2005, exceeding the 1989 output level for the first time. In its recently published Transition Report the EBRD forecasts another strong performance in 2006 with an estimated growth rate of 8.5%.