Armenia to benefit from secured transactions reform

On April 03, 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 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.

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