YEREVAN, March 20. / ARKA /. The European Bank for Reconstruction and Development (EBRD) does not expect a strong deterioration in the Armenian banking sector because of increasing share of "bad" loans owed by small and medium businesses, head of EBRD Yerevan Office Valeriu Razlog told reporters on Wednesday.

Razlog said EBRD is monitoring the creditworthiness of small and medium businesses in Armenia, and added that lending to small and medium-sized businesses has increased during the crisis.

"Thanks to the quality and certain conservatism of Armenia’s banking sector, the active work of the Central Bank and the international institutions which supported lending in local currency, bad loans now account for 4.5-5% of the total portfolio, which is a good indicator," he added.

Mr. Razlog said also in order to boost small and medium-sized businesses Armenian authorities should work to improve the investment climate in the country, simplify the legislation, fight against corruption as well as simplify access to long-term loans in national and foreign currencies.

"The banking sector should shift from secured lending to project financing," Razlog said. Armenia’s small and medium businesses account for about 43% of the GDP. -0-