ACBA-Credit Agricole Bank became the first financial institution in Armenia to provide funds for development and reconstruction of green infrastructure in different municipalities of Armenia.
Text : Karine Ghazaryan
Solutions Rather than Money
Using factoring instead of traditional loans and applying environmentally-friendly technologies, ACBA-Credit Agricole Bank provides solutions for development or reconstruction of infrastructure in municipalities of Armenia. As a result, the municipalities can produce green energy and save substantial amount of money. “Back in 2017, we had an idea of developing a unique financing mechanism which would be commercial but would also create value for the general public,” says bank’s CEO Hakob Andreasyan, “When a financial institution provides usual loans, it does not measure how much the society benefits from it. In this case we developed a different approach engaging a maximum number of beneficiaries.”
The program is based on cooperation between ACBA-Credit Agricole Bank and the Government of Armenia. At the first stage, the municipality defines the need (which may include solar water heaters for municipal buildings, energy-efficient lightning for roads, and more), it then announces a competition, and the winning company implements the construction and installment works. Strict rules are designed to regulate the competition process and ensure that the winning company offers high-quality and energy-efficient solution, as well as the most reasonable price. The entire process is monitored by governmentral Armenia Renewable Resources and Energy Efficiency Fund. The fund not only follows the competition to be held properly, but it also checks the quality and the energy efficiency of the final product. The bank also provides with free consulting on drafting necessary documentation. Only after this verification and documental approval from the municipality, ACBA-Credit Agricole Bank transfers the money to the implementing company.
Hitting $3 million
The scheme of the green infrastructure project excludes any corruption risks: along with careful monitoring, no money is provided to the municipal officials directly. But the uniqueness of the project is not limited to this the resources are granted with only 9% interest rate, and for a period of up to five years with no additional charges or service fees. This is a record-low rate: even the government bonds have interest rate of more than 10%. “We do not want to rely on charity. The banking system should offer commercial products aimed on resolving social problems,” notes Mr. Andreasyan. “The rate is designed to allow the municipality to pay back by saving resources, and to ensure the bank’s sustainable interest to implement the project.” Municipalities don’t need to have additional resources: the energy-efficient infrastructure allows saving enough money to cover the costs without much loss. “To implement a similar project on their own a municipality must put aside money for years,” CEO explains, “And it is difficult to do so when you have so much ongoing expenses. Using this opportunity can save a lot of time and money.”
The project is currently implemented only in regions of Armenia, not in Yerevan: “Working with a large and densely populated city like Yerevan would need precedents. Actually, we announced the project publicly only after we had the first successful case in Kasagh village,” Mr. Andreasyan says. In Kasagh, solar water heaters have been installed for all municipal buildings, and the streets have gotten new energy-efficient lighting. Solar panels, solar water heaters, water pumps, and LED lighting have already been installed in three other communities of Kotayk region. Many other communities have already applied for integral solutions.
ACBA-Credit Agricole Bank overall investments are predicted to comprise more than $3 million in the upcoming four months.
ACBA-Credit Agricole Bank CEO Hakob Andreasyan
Long-term Impact
It is not accidental that ACBA-Credit Agricole Bank concentrates on energy and infrastructure. Energy is one of the most challenging issues in Armenia today, but it also has great potential here. Furthermore, investing in energy is the shortest way to create positive precedents which can be then applied in other fields. On the other hand, infrastructure in general is what creates an environment in which the quality of life improves and the business grows. The municipalities of Armenia not always have the capacity to attract significant investment. The green infrastructure project empowers municipalities with competitive advantages to attract businesses thus contributing to the development of communities. If, for example, a municipality is interested in developing tourism industry, it needs private companies to establish enterprises. In this case, the green infrastructure project may fund a road construction to make the area more attractive for private investors. Simply put, this project has never been only about money: it is designed to provide sustainable solutions and contribute to the long-term development of Armenia.