Exclusive interview of Aregak UCO Executive Director Mariam Yesayan with ARKA News Agency

ARKA – Does Aregak intend to extend low-interest loans to agricultural businesses, in view of the fact that this sector is among Armenian government’s priorities?

Yesayan – We launched campaign “In the Run-up to Agricultural Season” in April. This campaign that will last until the end of May implies lower annual interest rates (4%) on all types of loans. Our lending is expected to reach its peak now, and we want to help our clients by offering affordable loans to them.

ARKA – What can you say about post-crisis 2010?

Yesayan – I think it was a favorable year for our organization. We managed to put our plans into practice. We pay our attention to agriculture and provide 70% of our lending to this sector. A bad weather struck hard at agriculture in 2010, and the adverse effect from unfavorable weather is visible also now. But risks were lessened by diversification of our clients’ activities. Our risk management model is very suitable for such a small country like Armenia. Dependence on only one type of business activity increases risks for both our clients and our organization. Besides, although we refrain from financing startups, we still lend money to those new businesses that give room to entrepreneurs for expanding scope of their activities. This can be explained by the fact that we don’t extend long-term loans. The longest term is 14 months. We noticed an interesting tendency in the client’s psychology – a few years ago they tried to borrow much money for the longest terms, while now nothing like that is seen. This shows that potential clients are convinced of availability of loans.

ARKA – What are Aregak UCO’s strategic priorities for 2011?

Yesayan – We will continue using the same model also this year. It means we’ll keep our focus on the agriculture sector, where we have stable clients. Now Aregak has about 30,000 active clients, of which 70% are constant customers. We view this as evidence of our organization and our clients’ successfulness. Batch products remain our top priority. Their share in the total portfolio is 83%. We already work in 670 communities. Remarkable is that we have terminated our activity in none of them. Both facts show high effectiveness of our activity. The share of individual loans in our portfolio is expected to grow as well.

ARKA – How seriously has decline in agriculture affected solvency of small and mid-size businesses in provinces and availability of micro financial services?

Yesayan – The thing is that when lending is small, decline is not so sensible. Median size of our loan is AMD 350,000. That’s why our decline was not so observable. As a whole, last year’s adverse developments were felt differently in various business areas. I can say that those areas specializing in gardening faced more difficulties. First of all, Aragatsotn province was stricken hard. Remarkable is also that our great attention to diversification of business resulted in increase of our median loan by 17%. This shows that it is possible to distribute funds reasonably to ensure growth even amid decline in the agricultural sector.

ARKA – Did you have serious problems concerning repayment of loans?

Yesayan – This is inevitable. Delays in repayment are always happening, but I can say that the share of risky loans in our portfolio slightly exceeded 2% last year. This is considered acceptable for agriculture-oriented organization in a force-majeure situation. This indicator was due to the fact that our clients’ businesses were concentrated in one particular area. We extend loans only in the national currency. This gives us advantages and assures little risk in our loan portfolio.

ARKA – What were Aregak’s financial indicators in 2010?

Yesayan – We built up our capital by 30% to AMD 6.6 billion and ranked first among credit organizations for this indicator. Our shareholder provided a part of lending as capital, and thanks to that our capital grew. Growth was also ensured by undistributed profits. Aregak’s net profit grew 48% to AMD 1.36 billion in 2010. Our organization extended 33,000 loans totaling AMD 14 billion that year.

ARKA – What indicators do you expect this year?

Yesayan – We intend to make considerable investments this year. In particular, we are going to move to own office in one of central streets of Yerevan in April. We have already launched substantial modernization of IT system. Our active portfolio is expected to reach AMD 9.5 billion later this year thanks to a ten-percent growth. We view it a significant growth, taking into account that we extend short-term loans. We expect the same indicators also this year.

ARKA – Do you intend to offer new products at credit market?

Yesayan – For the time being no. We have certain plans, but I will refrain from reveling them.-0-