At today’s Government session, the executive made changes and additions to one of the previous decisions to use alternative financial instruments in the economy and to stimulate the development of capital markets.
According to the substantiation, at present there are almost no alternative business financing instruments in Armenia, such as private equity funds and the institution of listing on the stock exchange.
The main source of business financing is a bank loan, which has both pros and cons. Businesses are often unable to finance expansion projects or working capital through banks for a number of reasons, including lack of collateral assets, unpredictability of expected cash flows, high interest rates, etc.
The EU-Armenia SME Fund managed by Amber Capital Company, which started operating in January 2020, is an alternative source of funding in Armenia. According to Deputy Minister of Economy Avag Avanesyan, currently about $31 million has been attracted by the fund. According to the Deputy Minister, the Dutch entrepreneurial development bank (FMO) is ready to invest $7 million in the fund, provided that the amount of the fund after its investment by July 20 will be at least $45 million.
The investment of at least $7 million expected by the Government of the Republic of Armenia will enable the involvement of FMO, which will create a multiplier effect on the economy of the Republic of Armenia, as well as the involvement of other investors in the fund, which in turn will lead to additional funds. Accordingly, the Armenian Government plans to contribute $3 million, and the remaining $4 million (equivalent in AMD) will be invested by the State Interest Fund of Armenia.
