Case Study - Ameriabank

Case Study

Financial Institutions
Finance for the youth creates opportunities for all

Squeezed in the middle

Armenia is a small land-locked country in the Caucasus. It is a rather isolated country given its troubled relationships with two of its main neighbours Azerbaijan and Turkey. In practice this  means that 80% of its border is closed. Fortunately, the relationships with its other neighbours are good and the country is supported by its particularly large diaspora. The country, about ¾ of the Netherlands in surface, has approximately 3 million inhabitants (plus appr. 7 million living abroad). Most of them live in the capital Yerevan or in one of the other much smaller cities. The population is young, but many are unemployed and live under the poverty line. Youth unemployment in Armenia is even the highest in the region with ~39% unemployment under age of 25 versus 18% general unemployment in the country. While the private sector mainly consists of micro, small and medium sized enterprises (MSME), making up about 98% of total registered enterprises, these contribute only for ~33% of employment. Lack of access to finance hinders further growth of these businesses and thus the potential for increased employment and the route out of poverty.

Innovation speaks to a new generation

When Ameriabank started on a new path in 2008, by changing its name and strategy, it chose a path to service its customers in a way which suited its customers best. By doing so it recognized that creating digital access to financial services was a great way of achieving just that. Its strategy spoke to a new type of customer hardly serviced by the financial sector at the time; a much younger customer, below 35. Yet it is the largest portion of the population.

So when Ameriabank first took a loan specifically for on-lending to SME and retail customers aged below 35, it was the first bank in the country to really build a strategy focused on this segment of the market. The loans may be used for educational purposes, first time mortgage loans, business start-ups and generally for SME businesses owned by young entrepreneurs. In other words, generally supporting the development of young people by providing access to finance both through traditional channels (branch offices) as well as digital channels (mobile phones, television). Besides unlocking a new segment of the market, it also means that Ameriabank can reach beyond the capital Yerevan, which is already well served by banks while households and businesses in other parts of Armenia have significantly less access to financial services or none at all.

Coincidentally, the bank itself has become a reflection of the Armenian population and employs now almost 700 staff, out of which 2/3 is younger than 35 years and over half is female.

The FMO Loan

Ameriabank has been a client of FMO since 2009 and has since then applied for and received several loans. Various funds we advise for are currently participating in a number of loans to Ameriabank.

In a broader perspective

Despite periods of autonomy, over the centuries Armenia came under the sway of various empires varying from Roman to Arab and Ottoman, until it most recently regained autonomy in 1991 by leaving the USSR. The relationship with Russia has remained strong and is still of great importance to the economy of Armenia through trade, remittances and Russian ownership of infrastructure. On the other hand, a border conflict with Azerbaijan and its ally Turkey negatively affect the economic possibilities for the country to develop.

Notwithstanding this barrier the economy continues to grow and even outperformed expectations during 2017. The unemployment rate is slowly dropping and wages are on average rising. This is a trend expected to continue in the years to come and it may be assumed that the increased access to finance for the young population of Armenia  – which is no longer an exclusive strategy of Ameriabank - is helping them to slowly come out of poverty and decrease its dependency on previous generations. This means that the inequality between generations within the country is slowly decreasing; a new generation is rising.
  Access to finance for disadvantaged groups such as the youth below 35 is one of the means through which Sustainable Development Goal 10 is supported. Goal 10 addresses creating equal opportunities for all irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status which means the empowerment through inclusion in a.o. economic possibilities.