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

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.