25057 - Armeconombank II

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Summary of Proposed Investment

Project Number

25057

Company Name

ARMENIAN ECONOMY DEVELOPMENT BANK

Date SPI Disclosed

Jul 26, 2006

Country

Armenia

Industry

Financial Markets

Projected Board Date

Aug 31, 2006

Status

Completed

Sector

Commercial Banking - General

Department

Global Industry, Financial Markets

Environmental Category

FI-2 - Limited

Previous Events

Approved : Dec 20, 2006
Signed : Feb 1, 2007
Invested : Mar 29, 2007

Project Description

The project comprises a senior loan of up to $2 million to Armeconombank with a maturity of 8 years. The loans would be split into two $1 million loans to be used for on-lending to the Armenian small and medium enterprises (SME) and for financing of residential mortgage loans to Armenian individuals.

Armeconombank is one of the largest private banks in Armenia with 41 branches across the country and 600 employees. Today, the Bank focuses primarily on serving local corporates, mainly SMEs, and has a growing retail banking program. The Bank is also active in providing correspondent banking services to other local financial institutions. Armeconombank has been IFC’s client since 2004.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	2.0
Equity

Development Impact

The project will have strong development impacts, specifically:

- to encourage growth of the currently under-developed banking sector in Armenia,
- to support the development of the SME sector in Armenia, and
- to provide access to residential mortgage finance for Armenian individuals.

Currently, the SME and mortgage lending segments in Armenia are under-served because of:

- limited availability of long-term finding for financial institutions, and
- lack of real-time databases to assess creditworthiness of potential borrowers due to large shadow economy in Armenia.

Current lending environment favors short-term trade finance needs and collateral-based approach. Building on the existing successful relationship with Armeconombank, IFC believes that the Bank will be able to continue profitable lending to the SME sector and individuals in Armenia.

Through this project IFC will help the Bank to:

- increase its funding base and thus, increase the share of non-subsidized commercial borrowing;
- further increase its visibility in the international and local capital markets, and therefore, strengthen reputation of the Bank for future commercial borrowings;
- lengthen maturity of its funding base to promote long-term lending business of the Bank; and possibly
- combine term funding with provision of focused TA on best-practice mortgage origination.

This is a Category FI type 2 project according to IFC''s environmental and social review procedure. The Bank will be required to maintain an environmental management system satisfactory to IFC, to ensure that lending under this project complies with applicable host country requirements and IFC''s Exclusion Lists, policies, and guidelines. Any investment by Armeconombank in a Category A project will require the prior approval of IFC. The Bank has already designated two key staff, who will have responsibility for environmental affairs, and one of them has attended IFC''s environmental workshop. The Bank will continue submitting Annual Environmental Performance Reports to IFC.

Contacts

For Inquiries About the Project, Contact

Mr. Hayk Mkrtchyan, Deputy CEO
Armeconombank
23/1 Amiryan Street, Yerevan 375002
Republic of Armenia
Telephone: 374-10-53-89-11
Fax: 374-10-53-89-04
Email: mkrtchyanh@aeb.am
Website: http://www.arminco.com

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This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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