ARMENIA TO BENEFIT FROM SECURED TRANSACTIONS REFORM
15:46 03/04/2015 ” ECONOMY
On April 3, the USAID Finance for Economic Development (FED) project
in partnership with the Ministry of Justice of Armenia, the World
Bank, the Central Bank of Armenia, and the Unions of Banks and Credit
Organizations of Armenia, held a conference on secured transaction
reform and on the implementation of a unified movable collateral
electronic registry in Armenia, the press service of the U.S. Embassy
in Armenia reports.
The main goal of the event was to increase public awareness of the
reform and facilitate a dialogue between relevant stakeholders.
Following the opening remarks, experts of the USAID FED program, the
World Bank, the Ministry of Justice, and the Central Bank presented
the concept of secured transactions and movable collateral registries,
the international practice, the importance of this reform in Armenia,
and related legislation.
Access to finance is a major impediment to the growth of micro, small
and medium enterprises (MSMEs), especially in the rural areas of
Armenia. One of the main reasons is that there is a serious mismatch
between the assets financial institutions accept as a collateral, and
the assets owned by the enterprises. As a result, MSMEs that have no
real property are often denied in credit or cannot afford to borrow
due to the high cost of funds.
USAID through its Finance for Economic Development project has played
a key role in developing legislation for a comprehensive secured
transactions platform.
Prior to this policy reform, the predominant forms of collateral in
Armenia had been land and buildings. As a result of these legislative
changes MSMEs and individuals will be able to pledge vehicles,
inventory, crops, equipment, and other forms of moveable collateral
to secure loans. This legislation package was adopted by the Armenian
Parliament in December 2014 and signed by the President of Armenia
on December 30, 2014. It provides the legal framework for a movable
collateral registry, expands the definition of movable collateral and
secured transactions, and establishes a more efficient enforcement
process in case of default. It also gives financial institutions the
confidence that they can acquire the asset in case of default. This
legislation will come into force on October 1, 2015 and is anticipated
to expand the number of MSMEs eligible and actually receiving loans.
The USAID Finance for Economic Development Program is designed to
broaden and deepen financial intermediation and improve financial
services for micro, small and medium enterprises in Armenia. The
project also supports the development of the financial sector through
improved laws and regulations, as well as promotes innovation in the
sector and development of relevant infrastructure.