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Armenians unhappy about high interest rate in country

14 November 2019 [12:00] - TODAY.AZ

By Azernews


By Abdul Kerimkhanov

High interest rate in banks is the source of dissatisfaction among the Armenian public.

Recently, former Canadian-Armenian businessman Ashot Davtyan, who has returned to Armenia, complained about high-interest rates in local banks, which, in his opinion, seriously hinders the development of business in Armenia and does not facilitate the arrival of new investors.

The problem of high-interest rates of credit resources is relevant for many Armenian businessmen, regardless of whether they run a large enterprise or a small business. Entrepreneurs believe that the main problem is connected with the banking system since there is no reason to rely on normal financing through local banks.

Andranik Grigoryan, Head of Financial System Stability and Development Department of Armenia’s Central Bank disagrees that interest rates are high, saying that "Taking into account all the risks and factors in the economy, including the financial system, and in relation to borrowers in the country, there is currently a tendency to lower interest rates on loans. Therefore, I do not agree with the statement that we have expensive loans.”

Grigoryan said that those who have a high degree of transparency both in terms of income and business performance can count on low rates.

"There are quite a few customers who complain about high rates, not to mention that they do not have the degree of transparency that allows the bank to make a final decision based on complete information. For banks, this situation means additional risks, which in turn leads to additional price," Grigoryan explained.

In June 2018, Armenian Prime Minister Nikol Pashinyan, answering citizens' questions, said that the key reason for the high-interest rates on loans in Armenia is the limited funds. He called the problem of high rates one of the serious problems of the country's economy, noting that the government should work to resolve this issue.

"There is a shortage of financial resources in the country. We must set a goal to increase the inflow of financial resources to Armenia, and the best way to do this is to attract investments. Therefore, we must solve the problem in accordance with this logic," Pashinyan stated.

In April 2018, according to Armenia’s Central Bank, the average rate on dram loans issued by local banks for up to a year was 12.34 percent, while the average rate on mortgage loans in drams issued to individuals was 11.4 percent.

More than a year after that, during a press conference in Vanadzor in mid-September 2019, Pashinyan briefed about work done in this direction, saying this time that credit rates in Armenia had decreased. As was noted, in January-July 2019, compared with the same period in 2018, the average weighted rate on mortgages decreased by 0.2 percentage points, agricultural loans and the rate on consumer loans became cheaper by 0.7 and 0.3 pp respectively.

It is unlikely to be called a serious achievement, given that in previous years, interest rates on loans in Armenia fell by about 4-5 percent. So the government led by Pashinyan has nothing to brag about.

As for the lack of transparency in the financial activities of clients, Grigoryan notes that many clients have problems in this direction, and lowering interest rates on loans is possible only in conditions that are understandable to banks. That is, additional risks for banks lead to an additional price for credit resources.

For over a year, the entire economic bloc of the government has been tirelessly reporting the withdrawal of businesses from the informal sector, that included the removal of tens of thousands of previously unregistered jobs. This process is almost at an accelerated pace. However, local banks are still in denial and are pointing to the insufficient degree of transparency of potential customers as a reason for high interest rates.

URL: http://www.today.az/news/regions/188267.html

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