From apricots to wine, traditional animal rearing to innovative greenhouses, the future is promising for agriculture in Armenia. Financial institutions like AraratBank see this potential and support the agricultural sector with the right solutions. We talked to Arsen Sargsyan, Head of the Agrofinance Division at AraratBank to learn more.
Text : Nazareth Seferian Photo : AraratBank
Most Armenians who have relatives abroad have experienced this—your family members come to visit Armenia, try a salad, and say, “Tomatoes taste so much better here than back home!” Armenia produces a range of agricultural products that are usually very good in terms of quality and taste, but there is a paradox. Despite the long tradition of agriculture among Armenians and the strategic importance of this sector for the country, many rural communities continue to face economic challenges.
“The problem stems from the fact that Armenian villagers continue to use traditional agricultural methods, and there is also a low level of financial literacy and business skills. Farmers grow crops that have a higher production cost than similar imported products.” says Arsen Sargsyan, the Head of the Agrofinance Division at AraratBank. As an important player in the Armenian financial sector, AraratBank sees itself as a key stakeholder in the development of agriculture in the country and the success of farmers.
Arsen Sargsyan, the Head of the Agrofinance Division at AraratBank
The Bank has a whole portfolio of credit offers for physical persons, legal entities, and individual entrepreneurs. Most importantly, they understand the specific needs of farmers and the challenges they face. This is why everyone who approaches AraratBank for an agriculture-related loan gets advice as part of the process and, in many cases, the payment timetable is developed in a way that accounts for the seasonality in villagers’ incomes.
“We also know that many villagers have problems with collateral. So we have an option for them, called Easygoing, which allows them to borrow up to 10 million AMD with just a guarantor. If they want more, they can get up to 60 million AMD, with the collateral estimated at up to 100% of its sale price. This also accounts for how difficult it is to estimate real estate values in the villages,” Sargsyan clarifies.
AraratBank recognizes the importance of working face-to-face with villagers and giving them the right advice, which is why they have credit experts in almost all regions of Armenia. The Bank is also actively involved in the loan subsidization program launched by the Armenian Government. Whether supporting fruit-drying businesses in Armavir, milk processing in Lori, or wine in Aragatsotn, AraratBank ensures that villagers have the right options to expand their enterprises and reach a new level of success.
“The advice our credit experts provide is key. For example, a villager might come to the Bank and say that he has a 500-square-meter greenhouse and is seeking financing to expand it to 1000 square meters. Our credit expert will look at the customer’s history, talk with him in detail, and visit their premises. The relevant information in this case ranges from the experience of that villager to the market conditions for the crops they are raising as well as specific issues related to the region in which this work is being done. As a result, AraratBank may advise the farmer to expand up to 800 square meters instead of 1000 or, on the contrary, to expand directly to 1500 square meters. The idea is to optimize the investment from the point of view of both the customer and the Bank, so that the agricultural business achieves the highest level of success,” explains Sargsyan.
The Bank’s credit experts have received training both from local and international specialists. They are not just experts in finance; they have the necessary agricultural knowledge to best support the farmers that seek the Bank’s solutions.
This combined knowledge is critical because not all villagers can provide the financial documents that are usually needed to analyze the viability of a credit application. “How would you assess a farmer’s proposal if you visit and see an empty greenhouse, because the season has not yet started? Well, our experts ask the right questions and cross-check the answers with their other data regarding the region,” says Sargsyan.
But the Bank is not just financing the farmers’ current approach to agriculture, it is actively taking them to the next level. Working with AraratBank comes with a big emphasis on modernization. And this is a constant journey for both the Bank and the customer, as new solutions keep developing. For example, over the years, the old system of irrigation has been phased out and now some farmers across Armenia use drip irrigation, which is both more environmentally friendly and financially efficient.
In this regard, AraratBank experts are a storehouse of knowledge and experience, because they work with a range of farmers across the same region. So if one AraratBank customer had good success with a particular new technological solution or innovative approach, the credit expert who managed that case can also transfer this knowledge to other customers of the Bank without divulging client confidentiality. For example, when a villager approaches AraratBank with a loan request in order to buy protective membranes to enclose their greenhouses, the credit experts are quick to propose higher quality solutions that have worked with other clients. They know from their own experience that these will last several years, rather than a more affordable option that will need to be replaced much more frequently.
But there is still a lot of work to be done when it comes to raising the level of financial literacy and agricultural know-how in Armenia’s villages. “I recommend making participation in a training program a mandatory requirement for farmers wishing to benefit from the Armenian Government’s subsidy program,” says Sargsyan. He also added that the Bank’s credit specialists visit each client at least once a year to monitor their progress, and more advice is shared during this process.
Through several international partnerships, AraratBank also ensures that the agricultural portfolio is inclusive and sustainable. “Under the NASIRA program, implemented through the partnership established in 2021 between the Bank and the Dutch entrepreneurial development bank FMO, the Bank has provided SME and agricultural loans. It should be noted that one of the key lending requirements under the program was that at least 50% of the loan portfolio should be allocated to women and young borrowers. We are pleased to note that the Bank successfully achieved this target,” Sargsyan clarifies. “In 2024, agreements were signed with the EBRD aimed at developing green investments in business and agriculture.” What makes these investments distinctive is that each green investment—whether in the form of a loan or leasing—allows businesses to benefit from a cashback of up to 35% of the investment amount, while simultaneously acquiring equipment, machinery, and vehicles that meet European standards, or making other energy-efficient investments in line with the program.
AraratBank is committed to increasing the financial literacy of the Armenian market, thus reducing the risk in their own customer portfolio while ensuring more success for the businesses that use its credit solutions. And they have a whole range of approaches to doing this, from podcasts on the topic, to camps for children where financial literacy is also discussed. In the end, it is all about reaching a win-win solution.
“The whole financial sector must stand with our villagers. We must support them in transitioning from traditional methods to more modern approaches to agriculture. This will help raise the standard of living in our regions,
which will directly improve the economy of our country and help uplift our people across Armenia,” Sargsyan concludes.