This document discusses the annual report of Farm Credit Armenia (FCA) for 2007-2011. It provides background on FCA's CEO, Armen Gabrielyan, noting his extensive experience in agricultural credit markets, including founding roles at other banks. It also summarizes FCA's goals over this period, which included ensuring financial viability, expanding outreach nationally, and becoming a market leader in rural finance in Armenia through regional branch expansion, growing membership, building reputation, and designing unique products. The document provides context on Armenia's agricultural credit market and regulatory environment for microfinance institutions.

1. FARM CREDIT ARMENIA
five years report FCa
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www.fca.am

2. A R M E N I A
C R E D I T
F A R M
Armen Gabrielyan
2 (Farm Credit Armenia UCO CC Chief Executive Officer/President)
2 0 0 7 - 2 0 1 1
Mr. Gabrielyan has extensive experience in the agricultural credit investment market.
He was among the founding staff of ACBA Agricole Bank (formerly Agricultural Cooper-
ative Bank of Armenia) that started in 1995. Serving the needs of farmers for financial
resources, Armen Gabrielyan managed and coordinated different regional branches of
R E P O R T
ACBA Bank until 2004.
In 1991 after Armenia became independent he was engaged in the land privatization
A N N U A L
process. From 1992 to 1995 Mr. Gabrielyan was the head of Yeghegnadzor regional of-
fice of the Ministry of Social Security and Migration of the Republic of Armenia.
In 2005, Armen Gabrieyan joined the Center for Agribusiness and Rural Development
(CARD) NGO as head of its loan department. He had a key role in helping lay the
groundwork in creating a financial institution based on internationally recognized coop-
erative principles and farm credit practices in Armenia.

3. Armen Gabrielyan
(Farm Credit Armenia UCO CC Chief Executive Officer/President)
Mr. Gabrielyan has extensive experience in the agricultural credit investment market.
He was among the founding staff of ACBA Agricole Bank (formerly Agricultural Cooper-
ative Bank of Armenia) that started in 1995. Serving the needs of farmers for financial
resources, Armen Gabrielyan managed and coordinated different regional branches of
ACBA Bank until 2004.
In 1991 after Armenia became independent he was engaged in the land privatization
process. From 1992 to 1995 Mr. Gabrielyan was the head of Yeghegnadzor regional of-
fice of the Ministry of Social Security and Migration of the Republic of Armenia.
In 2005, Armen Gabrieyan joined the Center for Agribusiness and Rural Development
(CARD) NGO as head of its loan department. He had a key role in helping lay the
groundwork in creating a financial institution based on internationally recognized coop-
erative principles and farm credit practices in Armenia.
A N N U A L R E P O R T 2 0 0 7 - 2 0 1 1 3

4. A R M E N I A
C R E D I T
F A R M
Armen Gabrielyan
4 (Farm Credit Armenia UCO CC Chief Executive Officer/President)
2 0 0 7 - 2 0 1 1
Mr. Gabrielyan has extensive experience in the agricultural credit investment market.
He was among the founding staff of ACBA Agricole Bank (formerly Agricultural Cooper-
ative Bank of Armenia) that started in 1995. Serving the needs of farmers for financial
resources, Armen Gabrielyan managed and coordinated different regional branches of
R E P O R T
ACBA Bank until 2004.
In 1991 after Armenia became independent he was engaged in the land privatization
A N N U A L
process. From 1992 to 1995 Mr. Gabrielyan was the head of Yeghegnadzor regional of-
fice of the Ministry of Social Security and Migration of the Republic of Armenia.
In 2005, Armen Gabrieyan joined the Center for Agribusiness and Rural Development
(CARD) NGO as head of its loan department. He had a key role in helping lay the
groundwork in creating a financial institution based on internationally recognized coop-
erative principles and farm credit practices in Armenia.

5. Armen Gabrielyan
(Farm Credit Armenia UCO CC Chief Executive Officer/President)
Mr. Gabrielyan has extensive experience in the agricultural credit investment market.
He was among the founding staff of ACBA Agricole Bank (formerly Agricultural Cooper-
ative Bank of Armenia) that started in 1995. Serving the needs of farmers for financial
resources, Armen Gabrielyan managed and coordinated different regional branches of
ACBA Bank until 2004.
In 1991 after Armenia became independent he was engaged in the land privatization
process. From 1992 to 1995 Mr. Gabrielyan was the head of Yeghegnadzor regional of-
fice of the Ministry of Social Security and Migration of the Republic of Armenia.
In 2005, Armen Gabrieyan joined the Center for Agribusiness and Rural Development
(CARD) NGO as head of its loan department. He had a key role in helping lay the
groundwork in creating a financial institution based on internationally recognized coop-
erative principles and farm credit practices in Armenia.
A N N U A L R E P O R T 2 0 0 7 - 2 0 1 1 5

6. A R M E N I A
C R E D I T
F A R M
Armen Gabrielyan
6 (Farm Credit Armenia UCO CC Chief Executive Officer/President)
2 0 0 7 - 2 0 1 1
Mr. Gabrielyan has extensive experience in the agricultural credit investment market.
He was among the founding staff of ACBA Agricole Bank (formerly Agricultural Cooper-
ative Bank of Armenia) that started in 1995. Serving the needs of farmers for financial
resources, Armen Gabrielyan managed and coordinated different regional branches of
R E P O R T
ACBA Bank until 2004.
In 1991 after Armenia became independent he was engaged in the land privatization
A N N U A L
process. From 1992 to 1995 Mr. Gabrielyan was the head of Yeghegnadzor regional of-
fice of the Ministry of Social Security and Migration of the Republic of Armenia.
In 2005, Armen Gabrieyan joined the Center for Agribusiness and Rural Development
(CARD) NGO as head of its loan department. He had a key role in helping lay the
groundwork in creating a financial institution based on internationally recognized coop-
erative principles and farm credit practices in Armenia.

7. Armen Gabrielyan
(Farm Credit Armenia UCO CC Chief Executive Officer/President)
Mr. Gabrielyan has extensive experience in the agricultural credit investment market.
He was among the founding staff of ACBA Agricole Bank (formerly Agricultural Cooper-
ative Bank of Armenia) that started in 1995. Serving the needs of farmers for financial
resources, Armen Gabrielyan managed and coordinated different regional branches of
ACBA Bank until 2004.
In 1991 after Armenia became independent he was engaged in the land privatization
process. From 1992 to 1995 Mr. Gabrielyan was the head of Yeghegnadzor regional of-
fice of the Ministry of Social Security and Migration of the Republic of Armenia.
In 2005, Armen Gabrieyan joined the Center for Agribusiness and Rural Development
(CARD) NGO as head of its loan department. He had a key role in helping lay the
groundwork in creating a financial institution based on internationally recognized coop-
erative principles and farm credit practices in Armenia.
A N N U A L R E P O R T 2 0 0 7 - 2 0 1 1 7

8. CHAPTER 2: MARKET OVERVIEW
MFI Industry
Microfinance for years has demonstrated potential to assist the poor on a
sustainable basis. Thanks to their scale of operations and cost efficiency
MFIs have efficiently specialized in offering sustainable financial products
to poor. There is an international trend towards MFIs becoming profit ori-
ented, regulated, audited, evaluated and rated, full-scale financial interme-
diaries, which has reformed microfinance from donor-reliant charity to a
separate asset class of financial markets.
A R M E N I A
Agricultural and related credit market still is a seller market, interest rates
and lending terms are much less favorable for customers in rural locations.
This phenomenon reflects banks’ high concentration in the urbanized loca-
tions – they tend to lend to urban inhabitants and corporate customers, and
C R E D I T
UCOs’ week standing in terms of capitalization, access to funding, espe-
cially in local currency, as well as access human resource. In a compara-
tively small market this creates huge regional disparities of economic
F A R M
development, economic and social exclusion with all their negative conse-
quences. FCA is committed to deliver demanded, affordable and reasonably
priced loan products to rural inhabitants of Armenia, thus alleviating this
8
disparity and contributing to sustainable development of the country.
2 0 0 7 - 2 0 1 1
Regulatory Framework of Microfinance in Armenia
Microfinance services in Armenia are offered by commercial banks and so-
called “universal credit organizations” – non-bank financial institutions
R E P O R T
(NBFI), which do not have rights to take deposits. The Law of the Republic
of Armenia on Credit Organizations adopted in May of 2002, provides the
framework for regulation and supervision of all NBFIs that carry out lending
A N N U A L
activities. Since that time a number of NGOs and other institutions who
were involved in micro financing registered as Universal Credit Organiza-
tions and are supervised by the sole financial regulator of Armenia – the
Central Bank of the Republic of Armenia. Official text of The Law of the Re-
public of Armenia on Credit Organizations is available on the web site of
the CB (www.cba.am). The main regulatory requirements from the CB are
minimum capital normative, and maximum exposure to one borrower, …
These requirements are set by the Regulation 14 … , which is available on
the web site of the CB (www.cba.am). The Central bank also regulates li-
censing, reporting, communications, consumer rights, establishing
branches and representative offices, bankruptcy and other issues of UCOs’
activities.
In 2008, the Union of Credit Organizations has been established, its mis-
sion is to represent interests of the forming industry of credit organizations,
initiate and draft legal acts in the field, establish communications with dif-
ferent international microfinance institutions, funds and similar organiza-
tions, organize discussions, trainings and seminars. FCA is an active

9. member of the Union from the day of its establishment. Among the other
prominent stakeholders of the agri
cultural credit market segment are:
Committee on agriculture of the National Assembly,
Ministry of Agriculture,
Agricultural committee of the Public Council under the President of the
Republic of Armenia,
Agricultural value chain development council at the Ministry of Economy,
Lending facilities: German-Armenian Fund (GAF, www.gaf.am), Rural Fi-
nance Facility (RFF, www.rff.am), Millennium Challenges Corporation
(MCC) Credit Component of the Water to Market program,
US Department of agriculture office in Armenia
NGOs, associations, Regional agricultural support centers (extension),
etc.
FCA works actively with all of mentioned stakeholders to generate systemic
effects of development work done at different levels.
A N N U A L R E P O R T 2 0 0 7 - 2 0 1 1 9

10. CHAPTER 5: GOALS AND STRATEGY
(for 2010-2014)
This strategic business plan is our main vehicle to explicitly demonstrate our long-
term view on the goals, strategies, basic assumptions, scenarios and indicators that
we have envisioned for the period of 2011-2015. The plan is regularly updated, de-
pending on the dynamism of the business environment and realization of the set
indicators. Strategic business plan should be approved by the Board of Directors
and effectively communicated to all organizational levels, which should then elab-
orate their specific action plans and share those with the management team. To
track the performance of all entities, teams and individuals, FCA will design KPI and
reporting (MIS, loan report, financials) systems. At least once in a year management
A R M E N I A
team should organize a strategic planning retreat to reassess the targets, business
solutions and reshape the strategies if necessary. Below are listed the main goals
and strategies that FCA will go for in the period of 2011-2015.
C R E D I T
Goal 1: Insure sustained viability.
Strategies:
F A R M
a) Secure broad access to the most attractive sources of debt and capital. Attracting
debt capital from national lending facilities has played key role in our growth in 2009
and 2010, and we will increase involvement in these facilities further. Growth of our
10
capital base as a major element of self-reliance will happen through member equity
participation and attraction of new equity investments. On the current phase of de-
2 0 0 7 - 2 0 1 1
velopment, characterized as aggressive growth, member equity growth is not sig-
nificant source of capitalization, so the second option of attracting investments from
international funds is the priority to solve this task.
b) Raise and develop human capital at the best internationally known standards
R E P O R T
(building autonomy, masterity, and common purpose). Investment in human capital
is the basis for our long-term success, and we will continue paying close attention
to improving qualification, training and motivation of our staff through following prin-
A N N U A L
ciples of self-learning organization, change management, and by building compet-
itive employee compensation packages.
c) Ensure profitability by applying effective pricing and costing. We will maximize
our profit margin through effective cost (interest and non-interest) management
keeping loan pricing at market levels. Our plan of regional expansion through es-
tablishing branch network, besides reaching other goals, will contribute to the cost-
effectiveness of the operations.
d) Implement risk management framework to enable effective neutralization of risks
during the rapid growth of credit portfolio. As the loan portfolio and balance sheet
grow more sophisticated risk management techniques will be needed. We will use
our best expertise as well as outsource best practices from our international part-
ners.
Goal 2: Increase outreach of services to national level.
Strategies:
a) Secure closeness to customers through establishing regional branch network to
serve them, monitor and control the situation. FC operates in rural Armenia and re-

11. gional presence will allow us to significantly cut transportation costs, as well as be
better recognized, improve lending procedures and risk management (branch ex-
pansion plan is available in Appendix 4). Branch expansion strategy should take
into consideration market potential of the specific region, and have clear break-even
vision of the specific branch as well.
b) Provide for rapid membership growth. Expansion of membership is vital for any
cooperative financial institution. It will make Armenian rural community stronger and
provide better access to financial resources. To support continuous customer base
development efforts FCA has established Rural Cooperative Support Foundation,
which will run educational and communicational activities for Armenian farmers, do
networking and analytical work for all stakeholders to promote cooperative model
and solve misinterpretations of this vehicle. One of direct results of RCSF’s activities
is expected to be cutting the costs of member attraction to FCA, but the general im-
pact will be much more significant changes in rural Armenia, where more coopera-
tion between people will occur to solve their everyday problems.
Goal 3: Be market leader in rural finance in Armenia.
Strategies:
a) Build excellent brand and reputation by following the principles of responsible
lending, launching sound international partnerships, and industry level initiatives
with UCO’s union and other prominent stakeholders targeted at market develop-
ment. Besides accomplishing all these activities they should be effectively commu-
nicated to the public to build wide awareness about FCA.
b) Design highly demanded unique (niche) products, which will be difficult to copy
in terms of cost and technology. We should continuously track the market develop-
ments to highlight changes in the demand for financial products and build the best
partnerships and solutions to match those changes.
A N N U A L R E P O R T 2 0 0 7 - 2 0 1 1 11

12. üβ ²ÎîÆìܺðÆ ²ÖÆ ¸ÆܲØÆÎ²Ü ºì
²è²æÆβ äȲÜܺðÀ
Microfinance for years has demonstrated potential to assist the poor on a
sustainable basis. Thanks to their scale of operations and cost efficiency
MFIs have efficiently specialized in offering sustainable financial products
to poor. There is an international trend towards MFIs becoming profit ori-
ented, regulated, audited, evaluated and rated, full-scale financial interme-
diaries, which has reformed microfinance from donor-reliant charity to a
separate asset class of financial markets.
A R M E N I A
Agricultural and related credit market still is a seller market, interest rates
and lending terms are much less favorable for customers in rural locations.
This phenomenon reflects banks’ high concentration in the urbanized loca-
C R E D I T
tions – they tend to lend to urban inhabitants and corporate customers, and
UCOs’ week standing in terms of capitalization, access to funding, espe-
cially in local currency, as well as access human resource. In a compara-
F A R M
tively small market this creates huge regional disparities of economic
development, economic and social exclusion with all their negative conse-
quences. FCA is committed to deliver demanded, affordable and reasonably
12 priced loan products to rural inhabitants of Armenia, thus alleviating this
disparity and contributing to sustainable development of the country.
2 0 0 7 - 2 0 1 1
R E P O R T
A N N U A L