FINCA Universal Credit Organization is the biggest creditor among Armenian microfinance organizations.

The organization started operating in Armenia in 1999 as a foundation, and in 2006 the central bank registered it as FINCA Universal Credit Organization CJSC and licensed its activity. The company is a subsidiary of American organization FINCA International Incorporated, which has subsidiaries in 21 countries.

FINCA is among top three subsidiaries of FINCA International Incorporated in client-serving and portfolio quality categories, and is the leader among Armenia’s microfinance credit organizations.

FINCA came 17^th of the world’s 100 microfinance organizations in MIX MARKET magazine’s ranking in 2008 for its indicators showing effectiveness of organization of microfinancing.

Following indicators secured FINCA Universal Credit Organization’s leadership: the number of the company’s clients rose to 42,000 by late September 2011 from 35,000 in the same month a year earlier and its loan portfolio grew from AMD 7.4 billion to AMD 10.8 billion. Besides, the organization profit for nine months of this year amounted to AMD 440 million after tax payment against 240 million earned at the same period a year earlier. Both the number of the credit organization’s clients and its loan portfolio have grown five times for five years.

FINCA UCО Director General Yervand Barseghyan about FINCA’s activity in Armenia, strategic objectives and plans

- FINCA’s mission is to provide financial services to low-income entrepreneurs. Profit is not among our top-priority goals. We view adequate profitability as an instrument necessary for further expansion of programs. I find it necessary to stress that the organization’s income and profit don’t go to some individual investors. Our goal is to provide services to as many clients as possible.

It is also important that FINCA doesn’t extend consumer loans – it lends money only to one member of a family and only for implementation of business projects. It means that our organization has lent money to 42,000 families (7% of the number of the country’s families). And this is a significant figure.

- As I know, FINCA has offices in all the provinces of Armenia.

- Yes. It’s truth. We have 20 offices in all the provinces of Armenia – five local offices and 15 branches, two of which are in Yerevan, and the rest are in provinces. As you can see, the majority of the offices are located in provinces, including border areas, where low-income entrepreneurs and ordinary people live – they are in need of money.

-What are FINCA’s top-priority objectives at this stage of development?

- Objective N1 is to provide high-quality services to clients to cater for their financial needs. I should say that we work in three directions to improve quality of our services. One of these directions is expansion of the network of branches. We open branches in provinces to make our services available to certain groups of clients, especially to those people living in remote and border areas. For this purpose we moved our branch in Ijevan to a new, better equipped building this year. We also opened a new office in Goris and transformed our resident offices in Vedi and Stepanavan into full-function branches. We also intend to open branches in the village of Myasnikyan, Armavir province, and in Aparan as well as another office in Yerevan. Artashat’s office will be moved to a new building this year. FINCA invests a great deal in this. For the next year we are planning to transform all our representative offices into full-function branches and open new ones in Yerevan and in provinces to increase the number of our branches to 27. Now our company has 450 employees. Their number will grow to 500 later this year and to 625 the next year.

- FINCA is one of the best microfinance organizations in the world on profitability, operational spending, effectiveness and transparency indicators and on portfolio size. Of what there indicators are made up?

- I will present figures. Over one day overdue loans make up 0.4% of the total portfolio, and those borrowers who are at least 30 days behind on payments on debt constitute 0.2%. Very important is that this result has been reached not by restructuring debts - FINCA has no restructured loans in its portfolio. This result has been reached by a right marketing, analysis and control over the portfolio’s quality. Besides, this is the result of right lending technologies, which give no room for such a situation when a client’s debt exceeds his solvency. It means FINCA pursues the policy of socially responsible lending. And third factor is a high-quality infrastructure in Armenia, particularly high-quality information from the Credit Bureau about clients’ credit records. The country’s legislative system and control from the central bank are very important as well. All these factors create a favorable environment for working successfully.

- You spoke about three directions of FINCA’s activity. One of them is expansion of the organization’s branch network. And what are the other two?

- The second direction consists of two interrelated components: improvement of services by improving professional knowledge and improvement of the personnel’s skills necessary for serving clients. We have launched a pilot project for that. This project implies assessment of quality of the services being provided now, training of the personnel and assessment of the progress reached by the end of the training. About AMD 25 million will be spent this year for upgrading the personnel’s client-serving skills and about AMD 20 million for improving specialists’ professional knowledge. Under this project, seminars and trainings will be conducted, and a few senior managers will be trained at ABA Stonier Graduate School of Banking, one of the U.S. leading banking schools.

Third direction is enhancement of work effectiveness aimed at expenses. As a result, interest rates on loans will go down. We downed interest rates every month, beginning from June. It means our product’s cost grew lower as well. For example, interest rate on agricultural loans was driven 6-10 percent down, interest on group loans 8% down and that on individual loans 2% down. We are working to introduce new methods of lending analysis to tailor our loans to specifics of our clients’ activities and needs of their businesses. We are also working out new products, which are planned to be offered to our clients the next year.

- What kinds of crediting FINCA offers now?

- FINCA offers two essential kinds of crediting – individual and group crediting, which is divided into group agricultural and other kinds of lending. FINCA lends money to all the areas of entrepreneurship – industry, trade, agriculture and services. Loans are extended to entrepreneurs or companies or to groups of entrepreneurs on the ground of mutual securities. The new product, about which I’ve said, is individual agricultural loan. The thing is that some farmers feel comfortable when they work in a team and take group loans bearing collective responsibility and assuming commitments toward each other, while others prefer to take individual loans relying only on own resources.

Sizes of group loans range from AMD 10,000 to AMD 1.5 million. They are extended for up to 18 months.

Individual loans are extended either in drams or in U.S. dollars for up to 42 months. Minimum size of a loan is set at amount equal to $700 and maximum at $35,000. Sizes of individual agricultural loans are not set so far. We are thinking over the matter now.

- It seems FINCA pays special attention to agriculture.

- It is truth. The fact that about 20,000 of the total number of clients (about half) are recipients of agricultural loans proves this. Remarkable is that many of the remaining 20,000 are residents of rural areas though they use these loan for opening and running other businesses – a small shop, a bakery or a workshop.

- What is attractiveness of FINCA-extended loans?

- First of all, availability makes these loans attractive. We extend loans which are not secured by residential and not residential premises. Second, we apply simple analysis methods requiring no complicated financial indicators from borrowers. The third attractiveness factor is simplified paperwork. And finally, quick consideration of applications attracts clients. In short, we try to tailor the lending process to clients’ requirements.

-You said that FINCA extends loans which are not secured by immovable property. Then what must a borrower put in pledge to borrow money?

- Fore example, borrowers can pledge their working tools, raw materials of which they make products and at last final products. You should agree that this is a symbolic, formal pledge, which can’t satisfy banks. Although banks’ loan interests relatively lower than ours, low-income segment of the population appeal to us for help, since they can borrow money from us far easier. Our relatively high interest rates are due to high burden costs in serving small loans.

I also want to say that we are proud of our personnel, who managed to create a cohesive team united round common goals. But our greatest wealth is our clients, who, thanks to our financial support and their intensive efforts have managed to establish and develop their maybe not so large but independent businesses and earn enough to ensure decent living standards to their families.

FINCA’s personnel will continue efforts to provide high-quality services to clients to cater for their needs. -0-