The website https://www.thebanker.com/ under the prestigious Financial Times has reflected on recent developments in Armenia and the role of banks, particularly Armeconombank, in these changes.
The article, ‘When banking is on the front line of change,’ presents the bank’s strategic development directions, wide international cooperation, and the introduction of new technological solutions.
Saribek Sukiasyan, Chairman of the Board of Armeconombank OJSC, speaks about supporting social transformation, the Bank’s more than 33 years of operations, and key development factors.
The English version below
When banking is on the front line of change
What is the role of a bank? To lend, to finance, to keep account? Or can it also be a force for positive change in an unstable world?
In the heart of Central Asia, between the Black Sea and the Caspian, landlocked Armenia is a country where change is palpable – and financial institutions are part of that change.
Only three decades ago, Armenia still had a centrally controlled economy and banking sector. Today, that already seems part of a distant past. Since Armenia’s independence in 1991, and particularly since the Velvet Revolution of 2018, which swept away the old-guard leadership and the remaining apparatus of state control, the Armenian economy has been growing rapidly in size and sophistication.
Yet economies like Armenia’s do not achieve transition without the creative participation of institutions, including banks. According to Saribek Sukiasyan, chairman of Armeconombank (AEB), one of the large financial institutions that have emerged re-energised from the recent period of liberalisation, the modernisation of the Armenian economy has been a period of opportunity for the bank, but also of very particular challenges.
Supporting social transformation
“The Velvet Revolution essentially liberated minds,” says Saribek Sukiasyan. “It changed lifestyles, it changed worldviews. We’re no longer constrained by oligarchic monopolies, we are free to create value. But there have been real challenges in terms of the lack of human resources, the lack of skills and knowledge, and the lack of administrative experience. I’m not involved in politics either directly or indirectly, but as a bank we still have a role in addressing those challenges.”
That role has included taking a lead in funding businesses that have the potential to transform society as well as the economy, with lending programmes explicitly designed to address issues such as gender balance in the economy, digitalisation, green financing and broad financial literacy. Female participation in the economy is a particular focus. Although Armenia has a high rate of general female literacy, and the female labour-force participation rate is higher than the world average, a lower ratio of women own property, have bank accounts, own a business or hold a managerial position.
Both government and private-sector institutions are working to address these imbalances on a case-by-case basis. For example, Armeconombank recently funded a start-up provider of internet services run by a female entrepreneur, despite the business being very small with only a few dozen customers at the time. However, with additional funding the business grew rapidly within a few years and now covers a much wider area and has around 40,000 customers.
Investing in the future
The Armenian government sees such targeted development lending by private banks as an important part of the drive to modernise the economy and it supports banks with loan subsidies in key areas. In one recent case the bank – partnering with its Women in Business programme and the government’s programme for production of non-traditional, high-value crops – lent at a subsidised rate to a small agricultural producer. This enabled investment in new cultivation technology, allowing the farmer to become a certified organic producer and market produce to countries beyond Armenia, including the EU.
The bank has also been working with international institutions, including the European Bank for Reconstruction and Development and the Asian Development Bank. This involves lending to small and medium-sized businesses and supports traditional industries as well as the financing of green projects and adoption of new technologies aimed at mitigating critical environmental issues.
External support has helped the bank build up its website resources with materials on effective business management, motivational stories about female entrepreneurs who have been funded by the bank and advice on increasing financial literacy with templates and online tools for business evaluation and planning.
Software-based solutions have also helped improve lending procedures. The admission, processing and approval of loan applications is now faster and more efficient, saving time for loan officers, attracting more customers and enabling better data analysis.
Prioritising values
This year, Armeconombank celebrates 33 years of independent existence. According to Saribek Sukiasyan, one reason it has remained both independent and flourishing is that it does not always put pure business interests ahead of the interests of Armenian society as a whole.
“We prioritise relationships over profits,” he says. “It’s time for peace and solidarity. There are sometimes huge business opportunities thrown up by situations such as the war in Ukraine, but we choose not to take them if they conflict with our responsibilities – such as our responsibility to our international partners, our shareholders and our customers. We want to contribute to the development of our country. That comes first.”