Paper

Market Assessment for Microenterprise Services in the Republic of Armenia: A Task Order Report under the SEGIR Financial Services IQC

Improving microloan outreach in Armenia
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This paper analyzes the nature of microfinance demand in Armenia, evaluates the performance of key MFIs and outlines niche growth areas. The objectives of the market assessment are to:

  • Analyze the market for microfinance services;
  • Identify opportunities to support the microenterprise sector so as to channelize US Agency for International Development (USAID)/Armenia resources in an effective and efficient manner.

The paper reports the following findings about microcredit demand and supply:

  • Only about one-third of the potential microloan value demanded is being satisfied;
  • The average loan size of current supply is less than that demanded;
  • Most of the loans are given to women;
  • The three MFIs analyzed, MDF, FINCA, and AREGAK/UMCOR have achieved substantial success in their loan portfolio outreach;
  • Institutional transformation is needed to move them from project-based, donor-funded programs to self-reliant organizations;
  • USDA's credit activities in Armenia distort the market for loans to agriculture-related producers and are not sustainable.

The paper concludes with the following recommendations:

  • Short-term capacity building of MFIs;
  • Short-term and medium-term support to the Armenia microcredit forum and the creation of an enabling environment for MFIs;
  • Medium-term support to develop a private credit bureau and business advisory services for microenterprises.

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