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Completion Report

Project Number: 45230-001 Loan Numbers: 2922 and 2923 Technical Assistance Number: 8200 September 2018

Armenia: Women’s Entrepreneurship Support Sector Development Program

This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency unit – dram (AMD)

At Appraisal At Project Completion (30 July 2012) (31 December 2017)

AMD1.00 = $0.002455 $0.002076 $1.00 = AMD407.65 AMD481.76

ABBREVIATIONS

ADB – Asian Development Bank BDS – business development services CBA – Central Bank of Armenia DMF – design and monitoring framework EBRD – European Bank for Reconstruction and Development ESMS – environmental and social management system FIL – financial intermediation loan ICT – information and communication technology MOE – Ministry of Economy MOF – Ministry of Finance MSMEs – micro, small, and medium-sized enterprises NPLs – nonperforming loans PAM – project administration manual PBL – policy-based loan PFI – participating financial institution PMU GAF – project management unit of the German–Armenian Fund SDR – special drawing right SMEs – small and medium-sized enterprises SME DNC – Small and Medium Entrepreneurship Development National Center TA – technical assistance UCO – universal credit organization WESSDP – Women’s Entrepreneurship Support Sector Development Program

NOTES

(i) The fiscal year (FY) of the Government of Armenia and its agencies ends on 31

December. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December 2018.

(ii) In this report, “$” refers to United States dollars.

Vice-President Wencai Zhang, Operations 1 Director General Werner E. Liepach, Central and West Asia Department (CWRD) Director Tariq H. Niazi, Public Management, Financial Sector, and Trade Division,

CWRD Team leader Ruslan Kurmanbekov, Financial Sector Specialist, CWRD Team members Ketevan Chkeidze, Gender consultant

Catherine Debalucos, Associate Project Analyst, CWRD Grigor Gyurjyan, Economic Officer, CWRD

Maria Celeste Yabut, Senior Operations Assistant, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 2

A. Project Design and Formulation 2 B. Project Outputs 2 C. Project Costs and Financing 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Technical Assistance 6 H. Consultant Recruitment and Procurement 6 I. Gender Equity 6 J. Safeguards 7 K. Monitoring and Reporting 7

III. EVALUATION OF PERFORMANCE 9

A. Relevance 9 B. Effectiveness 9 C. Efficiency 10 D. Sustainability 10 E. Development Impact 11 F. Performance of the Borrower and the Executing Agency 11 G. Performance of the Asian Development Bank 12 H. Overall Assessment 12

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 12

A. Issues and Lessons 12 B. Recommendations 13

APPENDIXES

1. Design and Monitoring Framework 14

2. Status of Compliance with Loan Covenants 16

3. Status of Compliance with Project Covenants 25

4. Chronology of Main Events 33

5. Project Cost at Appraisal and Actual 35

6. Technical Assistance Completion Report 36

7. Gender Equality Results and Achievements 39

8. Financial Intermedation Loan Implementation 53

9. Policy Matrix Status 63

BASIC DATA A. Loan Identification

1. Country Armenia 2. Loan numbers and financing source 2922 (COL) 2923 (COL) 3. Project title Women’s Entrepreneurship Support

Sector Development Program 4. Borrower Armenia 5. Executing agency Ministry of Finance 6. Amount of loan 2922: SDR13.035 million ($20 million)

2923: SDR13.035 million ($20 million) 7. Project completion report number 1730 8. Financing modality Sector development program

B. Loan Data

1. Appraisal – Date started – Date completed

30 July 2012 13 August 2012

2. Loan negotiations – Date started – Date completed

14 September 2012 20 September 2012

3. Date of Board approval 25 October 2012

4. Date of loan agreement 25 January 2013

5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions

25 April 2013 19 December 2013 3

6. Project completion date – Appraisal – Actual

Not applicable

7. Loan closing date – In loan agreement – Actual – Number of extensions

2922 and 2923: 31 December 2017 2922: 17 December 2015 2923: 31 December 2017 0

8. Financial closing date – Actual

2922: 17 December 2015 2923:14 March 2018

9. Terms of loan – Interest rate

2922 1.0% per annum during grace

2923 1.0% per annum during grace

ii

– Maturity (number of years) – Grace period (number of years)

period, 1.5% per annum thereafter 24 years 8 years

period, 1.5% per annum thereafter 32 years 8 years

10. Terms of relending (PFI to Subborrower) – Interest rate Market based – Maturity (number of years) Up to 7 years

– Grace period (number of years) – Second-step borrower

11. Disbursements

a. Dates

Policy Based Loan (2922)

Initial Disbursement 19 December 2013

Final Disbursement 9 December 2015

Time Interval 24 months

Effective Date 19 December 2013

Actual Closing Date 17 December 2015


Financial Intermediation Loan (2923)

Initial Disbursement 4 February 2014

Final Disbursement 15 May 2017

Time Interval 39.3 months

Effective Date 19 December 2013

Actual Closing Date 31 December 2017


b. Amount (SDR million)

Subloan

Original Allocation

(1)

Increased during

Implementation (2)

Cancelled during

Implementation (3)

Last Revised

Allocation (4=1+2-3)

Amount Disbursed

(5)

Undisbursed Balancea

(6 = 4 – 5)

Policy-based First

tranche 6.517 0 0.000 6.517 6.517a 0 Second

tranche 6.518 0 0.000 6.518 6.518a 0 Financial

inter-mediation

13.035 0

0.926

12.109

12.109a 0

Total 26.070 0 0.926 25.144 25.144a 0 a Net of SDR34,582.55 was refunded to the Asian Development Bank by the Central Bank of Armenia.

C. Implementation Data

1. Number of subloans 1,2461

2. Sector distribution of subloans

Sector Projected Actual

Trade Not applicable 441 Production Not applicable 37

1 Outstanding number of subloans as of 31 December 2017.

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Sector Projected Actual Agriculture Not applicable 606 Manufacturing Not applicable 27 Service Not applicable 81 Construction Not applicable 1 Other Not applicable 26 Total 1,246

3. Size of subloans ($ million)

Range Number of Subloans Aggregate Amount

Up to $2,100 (AMD1 million)

465 0.574

>$2,100–$12,500 601 3.136 >$12,500–$70,000 166 4.328 Over $70,000 14 1.569 Total 1,246 9.606

4. Other breakdown of subloans (AMD million)

Female Subborrowers Projected Actual

Subborrowers

Others Not applicable 33% (405) Women At least 50% 67% (841) Total 100% (1,246)

Loan Purpose Projected Actual Amount

Investment (asset acquisition) Not applicable 1,726 Working Capital Not applicable 1,624 Mixed Not applicable 983 Others Not applicable 166 Total 4,498

Loan Maturity (up to 7 years) Projected Actual Amount

Up to 1 year Not applicable 280 >1–2 years Not applicable 464 >2–3 years Not applicable 1,002 >3–5 years Not applicable 2,103 >5 years Not applicable 649 Total 4,498

5. Subloans above free limit2

Subloan Aggregate Number Amount

D. Project Data

1. Project cost (SDR million)

Cost Appraisal Estimate Actual

Foreign exchange cost 26.070 25.145 Local currency cost 0.000 0.000 Total 26.070 25.145

2 Not applicable as the Asian Development Bank agreed to remove free limits.

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2. Financing plan (SDR million)

Cost (Policy Based) Appraisal Estimate Actual

Implementation cost Borrower financed 0.000 0.000 ADB financed 13.035 13.035 Other external financing 0.000 0.000 Total implementation cost 13.035 13.035

Cost (Financial Intermediation) Appraisal Estimate Actual

Implementation cost Borrower financed 0.000 0.000 ADB financed 13.035 12.109 Other external financing 0.000 0.000 Total implementation cost 13.035 12.109

3. Cost breakdown by project component (SDR million)

Component Appraisal Estimate Actual Policy-based First tranchea 6.517 6.517 Second trancheb 6.518 6.518 Financial intermediation 13.035 12.110

Total 26.070 25.145 a Disbursed on 19 December 2013. b Disbursed on 9 December 2015.

4. Project performance report ratings

Implementation Period Single Project Rating

13–31 December 2013 On track 1 January–31 March 2014 On track 1 April–30 June 2014 Potential problem 1 July–30 September 2014 Potential problem 1 October–31 December 2014 Potential problem 1 January–31 March 2015 Potential problem 1 April–30 June 2015 Actual problem 1 July–30 September 2015 Potential problem 1 October–31 December 2015 Potential problem 1 January–31 March 2016 Potential problem 1 April–30 June 2016 Potential problem 1 July–30 September 2016 Potential problem 1 October–31 December 2016 On track 1 January–31 March 2017 Potential problem 1 April–30 June 2017 Potential problem 1 July–30 September 2017 Actual problem 1 October–31 December 2017 Potential problem

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E. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-

Days Specialization of Membersa

Reconnaissance 4–8 July 2012 Fact finding 30 July 2012–13 August 2012 Inception mission 14–18 October 2013 7 35 a, b, d, f, i, j Special safeguard 1–5 April 2014 2 10 i, c Review mission 1 14–18 July 2014 3 15 a, b, f Country social safeguard review

28 July 2014

3

15

j, k

Mid-term review 22–25 September 2015 5 20 a, b, c, d, e Review mission 2 24–27 January 2017 2 8 b, d Project completion 29 May–1 June 2018 3 12 d, g, h,

a a = principal economist, b = private sector specialist, c = associate project officer, d = economics officer, e = director’s advisor, f = analyst, g = financial sector specialist, h = gender consultant, i = senior environment specialist, j = social development specialist, k = resettlement specialist.

I. PROJECT DESCRIPTION 1. The Asian Development Bank (ADB) approved the Women’s Entrepreneurship Support Sector Development Program (WESSDP) on 25 October 2012.1 The program had two components, a policy-based loan (PBL) and a financial intermediation loan (FIL), each amounting to SDR13 million. The PBL funded budget allocations to strengthen the business environment and the Small and Medium Entrepreneurship Development National Center (SME DNC) of Armenia, the state agency2 tasked with implementing support programs for small and medium-sized enterprises (SMEs). The FIL enabled participating financial institutions (PFIs) to provide local currency loans to MSMEs, of which at least 50% should be to women's MSMEs. The program was supported by a $600,000 technical assistance (TA) to improve the capacity of women entrepreneurs, executing agency, the SME DNC and PFIs. 2. The program aimed to enhance economic opportunities for women entrepreneurs and MSMEs in Armenia and increase their contribution to the economy. The envisaged impact of the program was women benefiting from increased economic opportunities. The expected outcome was an improved enabling environment for women entrepreneurs. There were four outputs: (i) improved institutional framework supporting women entrepreneurs and MSMEs, (ii) improved capacity of women entrepreneurs and MSMEs, (iii) improved business environment supporting MSMEs, and (iv) improved access to finance by women entrepreneurs and MSMEs.

3. The government considers MSME development as one of the key development priorities in Armenia. In 2010 MSMEs accounted for 98.5% of all registered enterprises and contributed 43% of GDP and 42.5% of employment,3 reflecting a doubling of the MSME sector’s contribution to the economy since 1999. The women’s economic potential, however, was not fully realized. While women’s educational achievements in Armenia are on par with men, women’s participation in the economy and estimated earned income was lower. In 2012, the unemployment rate among women was 35% (22% for men), while estimated earned income was $1,724 ($2,557 for men).4 The MSME sector is considered crucial for women as it is a good option for their participation in the economy beside public-sector jobs. However, in 2012, women MSMEs represented only 32% of the registered MSMEs.5 This low ratio was because women often lacked the business skills, knowledge, confidence, and access to networks and credit6 needed to start a business. WESSDP aimed to address these constraints and enable women entrepreneurs and MSMEs in Armenia to play a greater role in the economy.

1 ADB. 2012. Report and Recommendation of the President. Armenia: Women’s Entrepreneurship Support Sector

Development Program. Manila. 2 SME DNC is a state agency established in 2002. The operations of SME DNC are split into two main areas:

(i) improving of SME`s business skills and knowledge transfer via various trainings, publication of information materials, arranging of networking events (exhibitions and business forums) and (ii) financial support program, e.g., a loan guarantee scheme for start-up businesses. $2 million of the proceeds of the PBL was channeled to SME DNC as a contribution to its loan guarantee fund.

3 Hrant Mikayelyan. 2012. Entrepreneurship in Armenia. http://www.css.ethz.ch/content/dam/ethz/special-interest/gess/cis/center-for-securities-studies/pdfs/CAD-45-9-14.pdf

4 World Economic Forum. 2012 The Global Gender Gap Report 2012. http://www3.weforum.org/docs/WEF_GenderGap_Report_2012.pdf

5 Footnote 4. 6 As per the Global Gender Gap Report 2012, the index of women’s access to finance in Armenia was assessed at 1

(1 = worst case, 5 = best score). In comparison, the index for Georgia and Russia was 2; the index for Moldova and Ukraine was 3; and the index for Kazakhstan and the Kyrgyz Republic was 4.

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II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 4. The project was relevant at appraisal. It was aligned with the government’s SME development reforms with a special focus on the promotion of women’s entrepreneurship. The project was also aligned with ADB’s country operations business plan for Armenia, 2012–2013, which aimed to increase the role of women entrepreneurs and SMEs. 5. The design of the program and the specific activities within it were based on evaluation missions which assessed the (i) role played by small businesses, including women’s businesses, in driving economic growth; and (ii) constraints preventing growth in women’s entrepreneurship. This assessment helped to propose an integrated approach to address liquidity and non-liquidity barriers to the development of women’s entrepreneurship through a combination of PBL and FIL. Extensive consultations with key stakeholders—the Government of Armenia, commercial banks, microfinance institutions, development partners, and business associations, were integral to the project design.

6. At project completion, the project remained relevant. It was aligned with ADB’s country partnership strategy for Armenia, 2014–20187 and the with government program’s aim of increasing the role of SME in economic growth.8 B. Project Outputs 7. WESSDP had four outputs, three (outputs 1, 2 and 4) of which were under PBL. Output 3 on the other hand, had both PBL and FIL components. 8. Output 1: Improved institutional framework supporting women entrepreneurs and MSMEs. This output supported the commitment of the government to improve the enabling environment for women entrepreneurs and MSMEs through enhanced policy coordination. Under tranche 1, information on MSMEs has been improved by (i) defining target groups through implementation of Participatory Appraisal of Competitive Advantages exercises to assess the role of women entrepreneurs in growth sectors of the economy, and (ii) establishing an internal strategic planning committee to improve coordination and support to women entrepreneurs and MSMEs. Under tranche 2, focus was on strengthening SME DNC which required it to undertake significant reforms (Appendix 9, policy actions). These reforms which were implemented, included establishment of an internal strategic planning committee, creation of an audit committee, and development of a database of at least 10,000 MSMEs containing sex-disaggregated data.

9. The performance indicator under this output required SME DNC to implement at least two action plans linked to the national strategy for SME development by 2017. This target was achieved. As of 31 December 2017, SME DNC has been implementing four action plans: (i) start-up business support program, (ii) local development program,9 (iii) mentorship program, and (iv) annual award ceremony for women entrepreneurs. Overall, output 1 was achieved.

10. Output 2: Improved capacity of women entrepreneurs and MSMEs. This output focused on the provision of accessible trainings and business development services (BDS) inputs

7 ADB. 2014. Country Partnership Strategy: Armenia 2014–2018. Manila. 8 Republic of Armenia. 2015. Strategy for SME Development for 2016-2018. 9 Program aiming the support to the businesses operating in the provinces of the Armenia.

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to contribute to enterprise creation and development, and enhanced market access for women entrepreneurs and MSMEs. Policy actions thus, focused on development of partnerships with trainers on business development services, and start-up campaigns to promote entrepreneurship. These trainings were further supplemented with a mentorship network for women entrepreneurs, and provision of awards. An annual awards program has been launched by the MOE wherein awards are presented to women entrepreneurs and MSMEs. 11. Output 2 target indicators required (i) increase in the number of women entrepreneurs and MSMEs trained and received BDS from SME DNC from 2,174 in 2011 to 3,500 in 2017, and (ii) 30% of the women trained by SME DNC present business plan to a financial institution. The first target indicator was achieved. As of 31 December 2017, SME DNC trained 10,943 entrepreneurs, of which 4,200 (38%) were women. The second target indicator could not be assessed since SME DNC was not able to gather this data. Thus, output 2 was only partially achieved. 12. Output 4: Improved business environment supporting MSMEs. To optimize MSMEs’ including women entrepreneurs’ contribution to economic growth, an improved business environment was needed. The program supported this goal of the government through the implementation of the following policy actions: (i) reducing the cost of registering businesses through the elimination of the AMD17,000 business registration fee; (ii) simplifying procedures for paying patent fees; (iii) simplifying tax reporting requirements for MSMEs; (iv) providing tax counseling services to MSMEs through the Accounting Center; (v) establishing a virtual one-stop shop to provide businesses with efficient access to information, products, and services; (vi) establishing a working group between SME DNC and Armenian Development Agency to promote MSME development; and (vii) launching a platform for paying taxes via point-of-sale terminals and through the official website of the State Revenue Committee. 13. Output 4 performance indicators were (i) Armenia improves its ranking in the World Bank’s Doing Business rating from 55 in 2012 to 50 in 2017 and (ii) Armenia improves its ranking in paying taxes index in the World Bank Doing Business from 153rd in 2012 to at least the average level of Eastern Europe and Central and West Asia. The first performance indicator was achieved. Armenia’s Doing Business ranking improved from to 47th in 2017.10 The second indicator could not be assessed since data for the region of Eastern Europe and Central and West Asia is no longer included in the World Bank Doing Business. Nonetheless, from 2012 to 2017, Armenia’s ranking in paying tax index significantly improved from 153rd in 2012 to 78th in 2017. With this notable progress, output for is considered achieved. 14. Output 3: Improved access to finance by women entrepreneurs and MSMEs. The PBL component of output 3 required the adoption of a revised loan guarantee scheme. Under this revised scheme, 300 MSMEs, including start-ups, were given guarantees with aggregate value of $2.60 million. Of the 300 guaranteed MSMES, 151 were to women entrepreneurs with total value of $1.30 million. 15. Output 3’s performance indicator targeted issuance of at least 2,600 new loans by end of 2017, of which at least 50% should be to women. This output was achieved. By 31 December 2017, PFIs have issued 2,780 new MSME loans, of which 2,040 (73%) were disbursed to women entrepreneurs.

10 World Bank. 2018. Doing Business 2018: Equal Opportunity for All. Comparing Business Regulation for Domestic

Firms in 190 Economies. Washington, DC. http://www.doingbusiness.org/~/media/WBG/DoingBusiness/ Documents/Annual-Reports/English/DB18-Report.pdf

http://www.doingbusiness.org/~/media/WBG/DoingBusiness/%20Documents/


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16. Linkages between PBL and FIL. The FIL and the PBL complemented each other well and in combination they contributed to the outcome of the program—i.e., an improved environment for women entrepreneurs in Armenia. The PBL component was essential to create an enabling environment for women entrepreneurs’ growth, and this was done by undertaking key reforms to strengthen SME DNC’s corporate governance and coordinating functions. As a result, SME DNC developed several programs and action plans for MSMEs and women entrepreneurs. The PBL also improved the readiness of the women MSMEs by providing necessary training and BDS support. It likewise made it easier to start up a business with the reduction of cost of doing business for MSMEs. The FIL component was key to providing the liquidity needed to deliver financing to women entrepreneurs in this improved enabling environment. The PFIs utilized ADB loan proceeds to make more than 2,600 loans to women MSMEs, thereby stimulating growth in the MSME sector. This growth may further continue given the start-up business campaigns and recognitions to successful MSMEs, including women entrepreneurs. C. Project Costs and Financing 17. The program consisted of a PBL of SDR13 million, disbursed in two equal tranches, and a FIL of SDR13 million. The PBL was fully disbursed, while only SDR12.09 million (93%) of the FIL was disbursed. There were no unforeseen program costs or cost overruns. The project also included a TA grant of $600,000. There were no cost overruns under the TA, although the 3% allocated for contingencies were unutilized. D. Disbursements 18. Both the FIL and the PBL were declared effective on 19 December 2013. The first and second tranches were disbursed on 19 December 2013 and 17 December 2015, respectively. The FIL began disbursing in February 2014 until the project closing date on 31 December 2017. Of the FIL amount, only 93% or $12.09 million was utilized due to the followings factors:

i. The program was initially implemented with pre-approved fund allocation to PFIs. In February 2014, an initial advance of $8.01 million was disbursed to Central Bank of Armenia (CBA) but by 19 November 2015, only $5.34 million has been liquidated. Some of the PFIs were unable to utilize their allocations pending full compliance ADB’s environmental safeguards and reallocation of funds to better-performing PFIs was not possible. To address this issue and to also encourage competition among PFIs, a minor change memo was approved in January 2016 removing the pre-approved allocation, with funds becoming available on a first come first served basis. To avoid loan concentration a cap of 40% for banks and 30% for UCOs, based on the total FIL component, was agreed with CBA.

ii. Most of the PFIs did not have an acceptable environmental and social management system (ESMS) in place and some of them considered this requirement burdensome relative to the small loan size expected from ADB. To address this issue, ESMS became applicable only to PFIs providing category B subloans. All the PFIs provided only C category subloans.

iii. Most of the PFIs found the requirement of a reasonable assurance audit11 for the utilization of loans proceeds and financial covenants costly in relation to the size of the loan to be received under the program. Also, this reasonable assurance audit is new for most of the PFIs, since their previous partnerships with other

11 ADB. 2015. Project Financial Reporting and Auditing. Manila.

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international lenders accepted reports with zero assurance, i.e. agreed-upon procedures. This issue was eventually resolved with most PFIs complying with ADB’s audit requirement.12 ACBA-Credit Agricole Bank (one of the PFIs) however, was not able to comply.13 ACBA withdrew from the program and in July 2017, repaid the whole amount that was lent to it.

iv. In 2014–2015 Armenia experienced a 35.6% reduction in remittances (remittances averaged 16% of GDP in 2007-2017) and 16% devaluation of the Armenian dram.14 These economic shocks negatively impacted sub-borrowers` capacity to promptly service their debt. Subsequently, two PFIs reported covenant breaches on the ratio of non-performing loans (NPLs), resulting in the deferment of disbursements. These two PFIs nonetheless, eventually were able to reduce their NPLs to regain their eligibility status under the program.

19. PBL and FIL disbursements were conducted in accordance with ADB’s Loan Disbursement Handbook (2012, as amended from time to time). E. Project Schedule 20. The project was approved on 25 October 2012. The loan agreements for the PBL and the FIL were signed on 25 January 2013. The loans became effective on 19 December 2013, while the original schedule for loan effectiveness was 25 April 2013. The delay in loan effectiveness was due to the PFIs’ lengthy approval process involving legal documents. The PBL was closed on 31 December 2015. The FIL was closed as scheduled on 31 December 2017. No extension on FIL was requested despite the availability of SDR0.91 million because of low probability of utilization. F. Implementation Arrangements 21. The Ministry of Finance was the borrower and the PBL’s executing agency. The MOE, through the SME DNC, was the implementing agency of the PBL component. The CBA through the project management unit of the German–Armenian Fund, and the PFIs were implementing agencies of the FIL component. Under the FIL, seven project agreements were signed with local banks and microfinance institutions. However, ArmeconomBank and ACBA-Credit Agricole Bank withdrew from the program.15 Thus, at the time of project completion, the FIL was being implemented through five PFIs. Each PFI established a project management unit for monitoring and reporting FIL proceeds. A project administration manual was prepared, detailing arrangements for procurement, disbursement, accounting, auditing, and monitoring and evaluation.

12 Some PFIs were granted temporary waivers for non-submission of such reports. Subsequently, Grant Thornton

Armenia agreed to conduct reasonable assurance audit. However, as per CBA regulations, financial institutions under CBA supervision must change external auditor every three years.

13 The external auditor chosen by this bank agreed to issue reasonable assurance opinion in exchange for a significant increase in fees. Hiring Grant Thornton Armenia was not possible because of the CBA`s rules on the change of external auditor every three years. (ACBA -Credit Agricole Bank had already previously used Grant Thornton in the past.).

14 ADB. 2017. Responding to External Shocks Hitting the Economy of Armenia. Consultant’s report. Manila. (TA 8936-REG).

15 Right after signing the project agreement, ArmeconomBank refused to participate in the program because of the ESMS requirement. Thus, no disbursement was made to this bank.

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G. Technical Assistance 22. WESSDP was supported by a capacity building TA with a budget of $600,000 from ADB’s Technical Assistance Special Fund (TASF–IV). The TA was implemented in 2013–2015 and its timing was well coordinated with the program. The TA’s specific outputs were (i) increasing the capacity of the SME DNC, the project management unit of the German–Armenian Fund, and the PFIs to support women entrepreneurs; and (ii) raising the awareness and technical capabilities of existing or potential women entrepreneurs and business support organizations. The TA was rated successful with all anticipated outputs delivered (Appendix 6). The performance of the consultants was rated excellent. H. Consultant Recruitment and Procurement

23. The TA implementing team was composed of four international and seven national experts engaged for 8.4 person-months and 77.4 person-months, respectively. Selection of the consultants was conducted in accordance with ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). I. Gender Equity 24. The project was categorized gender equity as a theme. It was designed to directly address gender disparities through economic empowerment and human capacity development. The program aimed to increase economic opportunities for women and to improve the enabling environment for women entrepreneurs. The project contributed directly to narrowing the gap in gender inequality by (i) increasing the number of women-registered businesses; (ii) improving the institutional framework supporting women entrepreneurs and MSMEs; (ii) strengthening the capacity of women entrepreneurs and MSMEs and; (iv) improving access to finance for MSME and women entrepreneurs. The program defined as “women SME” any SME that met at least one of three criteria: (i) at least 50% of the enterprise ownership belongs to women, (ii) at least 60% of senior managers are women, or (iii) at least 50% of the registered employees of the enterprise are women. 25. A Gender Action Plan (GAP) was developed for the project. The project’s policy matrix identified specific gender targets that facilitated overall implementation of the gender approach. At an institutional level, implementation of the technical assistance was also an effective strategy for building the capacity of government agencies. It resulted in the adoption of the SME Development National Strategy, which focused on the promotion of women’s entrepreneurship. Adoption of this strategy was an important step for it gave the government a new agenda. Subsequently, the number of programs investing in women’s entrepreneurship increased with ADB’s program being one of the first. 26. To improve the capacity of women entrepreneurs, the program set a number of targets for the SME DNC: (i) provide outreach for women start-ups and carry out at least five public awareness campaigns supporting women entrepreneurship; (ii) increase women’s participation in trainings to 40%; (iii) design and implement a pilot for women’s mentorship program with at least 30 mentors; (iv) increase outreach, tailored training, and BDS for women entrepreneurs; and (v) carry out two surveys on women’s entrepreneurship. All these targets were achieved. 27. In terms of outcomes, the program created an enabling environment for women entrepreneurs through (i) policy reform and inclusion of women’s entrepreneurship in the

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government’s agenda, (ii) capacity building support, (iii) supporting start-ups, and (iv) expanding existing MSMEs through improved access to finance. 28. The Gender Equality Assessment and Gender Action Plan Matrix are in Appendix 7. J. Safeguards 29. The PBL did not trigger safeguard actions and was categorized C for environment, involuntary resettlement, and indigenous peoples. The FIL was categorized as financial intermediation for environment and financial intermediation-C with respect to involuntary resettlement and indigenous people. Subprojects categorized A for environment and indigenous peoples or having involuntary resettlement impacts were not eligible for financing under the program. Activities included in ADB’s Prohibited Investment Activities List were excluded.16 30. ADB agreed to amend its standard requirement for PFIs to have acceptable ESMSs in place to improve FIL utilization rates (para. 18 ii). CBA through the PMU GAF submitted ESMS reports annually. The ADB safeguards team also prepares annual reports, and these reflected zero issues related to environmental and social risks. K. Monitoring and Reporting 31. There were no issues with the PBL and no major changes were made in the PBL agreement.17 PBL’s implementing agency, MOE through the SME DNC, complied with all covenants. 32. The FIL had minor amendments to the project agreements to address issues during implementation such as:

(i) Original project agreements required ADB to review and approve the first 5 subloans. As this requirement was delaying the PFI’s disbursement, it was removed;

(ii) Deterioration of the PFIs’ financial condition (para. 18 iv) required increased monitoring. Hence, frequency of reporting from PFIs was changed from annual to quarterly.

(iii) The original covenant on asset quality (ratio of nonperforming loans {NPLs} to total loans of not greater than 6%) was replaced with the ratio of net NPLs to regulatory capital of not more than 25%. This provided better estimate on the impact of the growth of NPLs on the PFI’s sustainability.

(iv) The methodology for calculating NPLs and the capital adequacy ratio was amended to mirror CBA rules to ease the reporting for PFIs.

(v) To facilitate disbursements, the requirement for free limit was removed 33. As of 31 December 2017, all five PFIs have complied with the ADB financial covenants (Appendix 8). 34. As to audit reports, the initial project agreements signed between ADB and PFIs, did not specifically require the submission to ADB of a reasonable assurance audit report for the project,

16 ADB. 2009. Safeguard Policy Statement. Manila. 17 In 2016, a minor amendment was made to the loan agreement related to Armenia’s formal graduation from the list

of countries with access to ADF resources.

8

loan proceeds, and covenants. Back then (2014–2015), the audited project financial statements (APFS) submitted by PMU-GAF was initially accepted. In 2016, the project agreements with PFIs were amended to require the submission of said audit reports. This amendment resulted in the withdrawal from the program by ACBA and also caused some delay in submission. For the year 2016, all five PFIs have submitted the required audit reports. For 2017, two of the five PFIs are still in the process of complying with this requirement. 35. ADB has developed a set of selection criteria for eligible MSME loans for PFIs to finance (Table 1). All the financed SME subprojects and sub-borrowers complied with ADB’s selection criteria. The subprojects were also compliant with ADB’s environmental and social safeguard policies.

Table 1: Status of PFIs’ Compliance with ADB Selection Criteria for MSME loans

Criteria for Subloans Disbursed Ineco Bank

CARD Kamurj Farm Credit

Ararat Bank

Subloans have repayment term of not more than 7 years and cover up to 80% of the subproject costs

Y Y Y Y Y

Subloans issued by banks do not exceed $250,000 limit and have a free limit of $150,000

Y N/A N/A N/A Y

Subloans issued by universal credit organizations do not exceed $50,000 limit

N/A Y Y Y N/A

Share of loans to qualified enterprises with a minimum 50% women ownership of not less than 50% of total number of PFI’s subloans portfolio

Y Y Y Y Y

Share of loans to qualified enterprises with a minimum 60% women in senior management positions of not less than 50% of total number of PFI’s subloans portfolio

Y Y Y Y Y

Share of loans to qualified enterprises with a minimum 50% registered women employees of not less than 50% of total number of PFI’s subloans portfolio

Y Y Y Y Y

Aggregate value of subloans issued to single qualified enterprise does not exceed $250,000 equivalent

Y Y Y Y Y

ADB = Asian Development Bank, MSME = micro, small, and medium-sized enterprises, N/A = not applicable, PFI = participating financial institution.

36. As of the end of December 2017, 41% of the outstanding loans were disbursed to SMEs in the trade sector, 18% to SMEs in the service sector, 12% to SMEs in the manufacturing sector, 11% to SMEs in the agriculture sector, and 5% to SMEs in the construction sector. The rest of the loans were disbursed to SMEs operating in other sectors. Benefiting from access to long-term funding provided under the FIL, 41% of the loans had a tenor of 5 years and above, 32% of the loans had a tenor of 3–4 years; 21% of loans had a tenor of 1–2 years, and 6% had a tenor of less than 1 year. 69% of the loans were disbursed in Yerevan as most of the MSMEs meeting

9

ADB selection criteria operate there.18 By loan size, 22% of subloans supported microbusinesses, 46% of loans were disbursed to small businesses, and 32% went to medium-size businesses.19 In terms of reaching new clients, 42% of loans were issued to new clients, while 58% went to repeat clients. Loans to women entrepreneurs represented 65% of gross loans. No start-ups were financed.

III. EVALUATION OF PERFORMANCE A. Relevance 37. The project is rated relevant. Support of women entrepreneurship has been and still is one of the top government priorities and is closely aligned with ADB’s priorities in the country. Policy actions under the PBL aimed at (i) improving the business environment for MSMEs, and (ii) enhancing business skills and financial literacy among women remained relevant throughout the project. The design and monitoring framework (DMF) and corresponding status is detailed in Appendix 1. 38. The FIL’s goal of improved access to finance in local currency by women entrepreneurs and MSMEs was relevant at the project launch but became less relevant at the project completion. The CBA and banks advised the PCR mission team that, unlike at project launch, sufficient medium-term liquidity was currently available in the Armenian market.20 As per CBA, in 2014–2017, the financial sector experienced rapid growth rates and banking sector loans reached 45.8% of gross domestic product as of the end of 2017 (33.6% as of the end of 2011). CBA considered these levels sufficient for the current economic environment. CBA then suggested that focus be on improving the weak institutional capacity of MSMEs (such as poor financial reporting systems, weak governance, and low productivity), which is the main constraint for the sustainable growth of the Armenian financial system. CBA was concerned that rapid loan book growth and excessive onlending to the underdeveloped MSME sector could lead to loan portfolio quality deterioration. 39. The program design is rated relevant in addressing liquidity and non-liquidity barriers to SME sector development through a combination of the PBL and the FIL. Design of the PBL was well-tailored to achieve the envisaged results. FIL design was also satisfactory, as evidenced by achievement of the relevant DMF output indicators. Although there were challenges during implementation (para 18), ADB was flexible when needed, but also exercised control as appropriate (e.g. freeze in disbursements to PFIs with breached financial covenants). B. Effectiveness

40. The project is rated effective based on the assessment of outcome and outputs achieved and the program’s success in addressing gender disparities. Achievement of the DMF outcome was supposed to be measured by an increase in new businesses registered by women, from 3% in 2010 to 20% by the end of 2017. However, as the collection of such data was discontinued, an alternative source of information—the Global Gender Gap Report published by the World

18 In rural areas, there were few women entrepreneurs with officially registered business in agriculture (most common

economic activity in rural areas). 19 As defined by Law on State Support to Small and Medium Enterprise. 20 This is explained by liquidity inflow following the CBA’s 2015 regulation on six-fold statutory capital increase, from

AMD5 billion to AMD30 billion (starting 01 January 2017).

10

Economic Forum)—was used.21 This report collects data on (i) the percentage of firms with female participation in ownership and (ii) the percentage of firms with female top management. From 2013 to 2017, the number of firms whose ownership includes women grew from 32% to 34% and the number of firms with female top managers increased from 14% to 24%. These growth trends reflect the improvement in the enabling environment for women entrepreneurs. Based on the above-mentioned positive trends and strong assurances received from MOE and SME DNC, the ADB team considers the outcome achieved. 41. Measurement of the outputs was linked to the SME DNC’s internal reports, the PFIs’ reports, and the World Bank’s Doing Business rankings. The data for these reports are readily available and are collected on a regular basis. Most of the outputs were achieved (paras. 7–14). 42. Gender-wise, this program was highly instrumental in addressing gender inequalities through human capital development and economic empowerment (paras. 24–28). C. Efficiency 43. The program is rated less than efficient. Assessment was based on the efficiency of the implementation process. Disbursements under FIL were slow. It took four years to disburse $17.5 million of the approved $18.8 million. The reasons for the FIL’s slow utilization are discussed in para. 18. D. Sustainability 44. The program is rated likely sustainable. Policy reforms implemented under the PBL contributed to a better business environment for MSMEs as evidenced by the improvement in Armenia’s Doing Business ranking, from 55th in 2012 (as of 1 June 2011) to 47th in 2018 (as of 1 June 2017). The Government of Armenia has also demonstrated strong commitment to continue reforms. 45. The PFIs also reported a changed outlook towards women entrepreneurs. The PFIs have continued issuing loans to women entrepreneurs even after program closure. In the first quarter of 2018, the five PFIs issued 760 loans to women entrepreneurs with an aggregate principal amount of AMD2.3 billion. Following the launch of the WESSDP, the EBRD launched its “Women in Business” program22 in 2015 and two PFIs, AraratBank and InecoBank, joined the EBRD program. Thus, ADB’s program is currently complemented by the EBRD program, which pursues the same goal of promoting women entrepreneurship in the country. All five PFIs are currently in good financial condition and operate on a sustainable basis. 46. Reforms implemented in the SME DNC (para. 9) improved the quality of corporate governance and enhanced its operational procedures, contributing to greater sustainability of the SME DNC’s operations.

21 World Economic Forum. 2017. The Global Gender Gap Report 2017. http://www3.weforum.org/docs/

WEF_GGGR_2017.pdf. 22 Similar with ADB, EBRD implements its program via PFIs and targets women entrepreneurship. The difference is

that EBRD program does not imply policy actions and it is processed without sovereign guarantee.

http://www3.weforum.org/docs/%20WEF_GGGR_2017.pdf

http://www3.weforum.org/docs/%20WEF_GGGR_2017.pdf

11

E. Development Impact 47. The program’s rating is satisfactory. From 2013–2017, the MSME sector in Armenia demonstrated positive dynamics23 and the role of women in the country`s economic development strengthened:

(i) MSMEs’ business turnover grew from AMD1.5 trillion to AMD1.8 trillion and the sector’s contribution to gross domestic product grew from 32.0% to 34.4%.24

(ii) Tax paid by SMEs increased from AMD237 billion to AMD 393.8 billion. (iii) At the same time, the number of employees of SMEs has declined from 370,269

to 246,702. In 2017, MSMEs provided 30.3% of total employment (compared to 32.6% in 2014). These figures might be explained by the wide spread of informal employment to avoid paying social security contributions.

(iv) Armenia has made considerable progress in improving its business environment as shown by its 47th ranking in the 2018 (as of 1 June 2017) Doing Business rating (versus its 55th ranking as of 1 June 2011).

(v) The unemployment rate among women decreased from 35.0% in 2011 to 17.8% by the end of 2016. Thus, the DMF impact target indicator of 25% (to be achieved by 2020) has already been achieved.

(vi) The gender gap in labor force participation decreased from 20.0% in 2011 to 18.0% in 2016. Thus, performance is on track with the DMF impact target indicator of 15% (to be achieved by 2020).

48. The WESSDP, with policy reforms executed under the PBL and 2,780 MSME loans issued under the FIL, contributed to these results. Also important was the strong demonstration effect of the program—it was the first intervention targeting women entrepreneurship in the country, and other multilateral development banks (e.g. EBRD) initiated similar projects following ADB’s lead. 49. The impact on gender is highly satisfactory. Overall, the program’s gender and development approach has been successful. The program provided women economic opportunities on a strategic level and met their practical needs in skills development (particularly for start-up businesses) and accessing finance for existing women MSMEs. Nevertheless, the program might have achieved greater results if ADB had provided PFIs with support for development and marketing of women-tailored financial products. Future programs should include a focus on the shift of women entrepreneurs towards higher value-added activities (e.g., involvement in knowledge-intensive businesses).

F. Performance of the Borrower and the Executing Agency 50. The performance of the executing agencies (MOE and CBA) and the borrower under the PBL and the FIL was satisfactory. MOE demonstrated high level of ownership of the reform

23 Data for 2017 are taken from EBRD. 2018. SMEs in Armenia`s Economy, 2017. http://www.bso.am/wp-

content/uploads/2018/06/SMEs-in-Armenias-economy-2017.pdf while data for 2014–2016 are taken from Ministry of Economy. http://mineconomy.am/en/449.

24 As per DMF Impact Indicator, MSME contribution to GDP was expected to increase from 43% in 2011 to 47% in 2020. Armenian economy and its SME sector were hit hard in 2014 by external macroeconomic shocks (for more details, see the ADB publication ‘Responding to external shocks hitting the economy of Armenia’ available at https://www.adb.org/sites/default/files/project-documents/49045/49045-001-dpta-en_6.pdf). As a result, the MSME sector’s contribution to GDP dropped to 32% in 2014. Starting in 2015, the MSME sector began to revive, and in 2017 its contribution to GDP reached 34.4%, which is a positive development compared to the 2014 drop.

12

process and established effective coordination between various state agencies (tax office, SME DNC, Armenian Development Agency, Accounting Center, Ministry of Justice) to ensure execution of policy actions envisaged in the PBL. CBA, on the other hand, effectively supervised the implementation of FIL and has submitted reports as required and as needed by ADB. Also, both MOE and CBA complied with the all loan covenants throughout the project implementation (Appendixes 2 and 3). One area that they could improve on is on the re-collection of sex-disaggregated statistics on MSME sector development at the national level. This is already being addressed as MOE plans to start collecting gender-disaggregated statistics on SMEs in 2019 with support from Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). G. Performance of the Asian Development Bank 51. The performance of ADB during project implementation is rated satisfactory. ADB promptly supported an important government initiative on women entrepreneurship development at appraisal, provided regular inputs, feedback, and made the necessary amendments to better implement the program. ADB’s flexibility and coordination enabled issues to be resolved (paras 18 and 32), which resulted in the delivery of outputs as envisaged by the program. H. Overall Assessment 52. Overall, the project is rated successful because of its relevance, effectiveness, and likelihood of sustained implementation.

Overall Ratings

Criteria Rating

Relevance Relevant Effectiveness Effective Efficiency Less than efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of ADB Satisfactory ADB = Asian Development Bank. Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons 53. The following issues and lessons were identified during the program implementation:

(i) Although the Armenian government prioritizes development of women entrepreneurship, nationwide data disaggregated by sex are still not collected (para. 40). While data for micro assessments at the level of implementing agencies are available, data for measuring the macroeconomic impact of the program are not collected.

(ii) ADB’s standard audit requirements for public sector transactions, which were applicable in this intervention (para. 18), appeared to be burdensome for small-sized loans and hence one preselected PFI with access to other liquidity sources (with less strict requirements) withdrew from the project. For succeeding FIL projects involving lending to MSMEs, the introduction of simpler levels of reporting

13

and audit requirements for loans below $10 million is recommended while loans above $10 million should be subject to standard requirements.

(iii) The program’s success was due to its ability to address the entire range of obstacles for women entrepreneurship (demand and supply-side related) through combination of the PBL and FIL.

B. Recommendations 54. Given the government’s strong commitment to developing SMEs, ADB should continue to support the development of MSMEs in Armenia. However, given the sufficient liquidity currently available in the Armenian financial market (para. 38), ADB’s succeeding MSME support interventions should support a shift towards higher value - added economy with a focus on the promotion of new knowledge and advanced practices. For example, efforts could focus on supporting export promotion (to seize trade opportunities triggered by Armenia joining the Eurasian Economic Union) or promoting green finance (such as environmentally sustainable agriculture). Introduction of new loan products under ADB programs (e.g. women-tailored MSME loans) should be supported by piggy-backed TA as often PFIs lack required expertise (para 49). 55. Future monitoring. To ensure sustainability of the ADB program, regular monitoring is recommended until full repayment by PFIs. 56. Covenants. The existing set of covenants in loan agreements (for the PBL and the FIL) and subsidiary loan agreements is adequate to monitor implementation of the project and hence it should be maintained in the current version. 57. Further action or follow-up. None. 58. Timing of the program performance evaluation report. It is recommended that ADB’s Independent Evaluation Department prepares a program performance evaluation report after two years of completion of the program (when the project agreements for most of PFIs matures). This will result in a more precise and comprehensive assessment of the long-term impact and sustainability of the ADB program.

14 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets

and Indicators Actual Status

Impact Women benefit from increased economic opportunities

MSMEs contribution to gross domestic product increases from 43.0% in 2011 to 47.0% in 2020 (sex-disaggregated data has zero baseline) Unemployment for women decreases from 35% in 2011 to 25% in 2020 Gender gap in labor force participation decreases from 20% in 2011 to 15% in 2020

Not yet due. As of end 2017 MSME contribution to GDP stood at 34.4%.a Not yet due. As of end 2016, unemployment rate among women stood at 17.8%.b Not yet due. As of end 2016, labor force participation was at 18%.c

Outcome Improved enabling environment for women entrepreneurs

By 2017, percentage of new businesses registered by women entrepreneurs reaches 20% from the 2010 level of 3%

On track. Statistical data are not available. Alternative reference was made to the Global Gender Gap Report (World Economic Forum), which collects data on (i) percentage of firms with female participation in ownership and (ii) percentage of firms with female top management. From 2013–2017,d the share of firms whose ownership include women increased from 32% to 34%. Also, the share of firms with female top managers increased from 14% to 24%.

Output 1. Improved institutional framework supports women entrepreneurs and MSMEs 2. Improved capacity of women entrepreneurs and MSMEs

MOE implements at least two action plans linked to the national strategy for small and medium entrepreneurship development targeted at women entrepreneurs and MSMEs by 2017 Women entrepreneurs and MSMEs that receive training and business development services BDS from SME DNC increases from 2,174 in 2011 to 3,500 in 2017 30% of women trained by SME DNC sponsored programs present a business plan to a financial institution within 1 year of graduation

Achieved. MOE through SME DNC is currently involved in implementation of the following four action plans under the umbrella of national SME development strategy: (i) Start-up business support program, (ii) Local economic development, (iii) mentorship program, and (iv) annual award ceremony for women entrepreneurs. Achieved. From program launch to year-end 2017, SME DNC trained 10,943 entrepreneurs, of which 4,200 were women businessmen (38.3% of total number of trainees). Unclear. SME DNC does not have data on the performance of all women entrepreneurs trained by SME DNC.

Appendix 1 15

Design Summary Performance Targets

and Indicators Actual Status 3. Improved access to finance by women entrepreneurs and MSMEs 4. Improved business environment supports MSMEs

At least 2,600 new loans under the program from PFIs to MSMEs, of which at least 50% should be to women entrepreneurs and MSMEs, by 2017 World Bank Doing Business ranking improves from rank 55 in 2012 to 50 in 2017 Tax Payment improves from a ranking of 153 in 2012 to at least the average Eastern Europe and Central and West Asia ranking, as measured by the paying taxes index in World Bank Doing Business by 2017

On a cumulative basis, by end 2017, PFIs have disbursed 2,780 loans, of which 2,040 (73%) were to women. Achieved. In 2017 Armenia ranked 38 in Doing Business.e Unclear. World Bank stopped publishing ranking on the region of Eastern Europe and Central and West Asia. From 2012 to 2017, Armenia improved its ranking in paying tax index from 153rd in 2012 to 78th in 2017

a EBRD. 2018. SMEs in Armenia`s Economy, 2017. http://www.bso.am/wp-content/uploads/2018/06/SMEs-in-Armenias-economy-2017.pdf

b National Statistical Service of the Republic of Armenia. http://www.armstat.am/file/article/armenia_2017_4.pdf c World Bank. 2016. Armenia Country Gender Assessment: Poverty and Equity Global Practice.

http://documents.worldbank.org/curated/en/250481491242159715/pdf/113990-WP-P157626-PUBLIC-Armenia-Gender-Assessment-2016.pdf

d Global Gender Gap Report started publishing such data in 2013, no such data for previous periods. e World Bank. 2017. Doing Business 2017: Equal Opportunity for All. Comparing Business Regulation for Domestic

Firms in 190 Economies. Washington, DC. http://www.doingbusiness.org/~/media/WBG/DoingBusiness/ Documents/Annual-Reports/English/DB17-Report.pdf

f World Bank. 2018. Doing Business 2018: Reforming to Create Jobs. Regional Profile: Europe and Central Asia (ECA). http://www.doingbusiness.org/reports/~/media/WBG/DoingBusiness/Documents/Profiles/Regional/ DB2018/ECA.pdf



http://www.doingbusiness.org/reports/~/media/WBG/DoingBusiness/Documents/Profiles/Regional/%20DB2018/ECA.pdf

http://www.doingbusiness.org/reports/~/media/WBG/DoingBusiness/Documents/Profiles/Regional/%20DB2018/ECA.pdf

16 Appendix 2

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Loan 2922-ARM (PBL): Women’s Entrepreneurship Support Sector Development Program

Status of Compliance as of 31 December 2017

Covenant

Reference in Loan Agreement

Status of Compliance

Article IV. Particular Covenants

In the carrying out the program, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 4 to this loan agreement.

Section 4.01 (a) In compliance

The Borrower shall maintain, or cause to be maintained, records and documents adequate to identify the Eligible Items financed out of the proceeds of the Loan and to record the progress of the Program.


The Borrower shall enable ADB's representatives to inspect any relevant records and documents referred to in paragraph (a) of this Section.

Section 4.02 (b) In compliance

As part of the reports and information referred to in Section 6.05 of the Loan Regulations, the Borrower shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning the implementation of the Program, including the accomplishment of the targets and carrying out of the actions set out in the Policy Letter.


Without limiting the generality of the foregoing or Section 6.05 of the Loan Regulations, the Borrower shall furnish, or cause to be furnished, to ADB quarterly reports on the carrying out of the Program and on the accomplishment of the targets and carrying out of the actions set out in the Policy Letter.


MOF shall be the Program Executing Agency. MOE shall be the Implementing Agency.

Schedule 4, Section 1 In compliance

The Borrower shall ensure that all policy actions adopted under the Program, as set forth in the Policy Letter and the Policy Matrix, continue to be in effect for the duration of the Program.


The Borrower shall keep ADB informed of policy discussions with other multilateral and bilateral aid agencies that may have


Appendix 2 17

Covenant

Reference in Loan Agreement


implications for the implementation of the Program and shall provide ADB with an opportunity to comment on any resulting policy proposals. The Borrower shall take into account ADB’s views before finalizing and implementing any such proposal.

The Borrower shall ensure that the Counterpart Funds are used to finance the implementation of certain programs and activities consistent with the objectives of the Program.


The Borrower shall: (a) comply with ADB's Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Program; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.


The Borrower shall: (a) comply with ADB's Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Program; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.


ADB = Asian Development Bank, MOE = Ministry of Economy, MOF = Ministry of Finance.

18 Appendix 2

Loan 2923-ARM (FIL): Women’s Entrepreneurship Support Sector Development Program

Status of Compliance as of 31 December 2017

Covenant Reference in Loan

Agreement Status of

Compliance

Article IV. Particular Covenants

The Borrower shall cause the PFIs to carry out the Project with due diligence and efficiency and in conformity with sound applicable technical, financial, business and development practices.


In the carrying out of the Project, the Borrower shall perform, or cause to be performed, all the obligations set forth in Schedule 3 to this Loan Agreement.


The Borrower shall (i) maintain separate accounts and records for the Project; (ii) prepare annual financial statements for the Project in accordance with accounting principles acceptable to ADB; (iii) have such financial statements audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to ADB; (iv) as part of each such audit, have the auditors prepare a report (which includes the auditors’ opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for the imprest account and statement of expenditures) and a management letter (which sets out the deficiencies in the internal control of the Project that were identified in the course of the audit, if any); and (v) furnish to ADB, no later than 6 months after the end of each related fiscal year, copies of such audited financial statements, audit report and management letter, all in the English language, and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request.

Section 4.02 (a) Partially in compliance. 2016 AFS, APFS, Management letter were submitted to ADB and found acceptable. These reports for 2017 is not yet provided (expected within August 2018).

ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 14 days of ADB’s confirmation of their acceptability by posting them on ADB’s website.

Section 4.02 (b) Prior to 2017, other than ACBA, all PFI’s audit reports have been posted. For the 2017 APFS, these are still being

Appendix 2 19


Agreement Status of

Compliance

reviewed and will be posted accordingly within the 14-day deadline.

The Borrower shall enable ADB, upon ADB's request, to discuss the financial statements for the Project and the Borrower's financial affairs where they relate to the Project with the auditors appointed pursuant to subsection (a)(iii) herein above and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB. This is provided that such discussions shall be conducted only in the presence of an authorized officer of the Borrower, unless the Borrower shall otherwise agree.

Section 4.02 (c) In compliance

In addition to the reports and information set forth in Section 6.05 of the Loan Regulations, the Borrower shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning (a) the Qualified Enterprises, the Qualified Subprojects and the Subloans; and (b) the administration, operations and financial condition of the PFIs.

Section 4.03 In compliance

The Borrower shall enable ADB's representatives to inspect any Qualified Enterprise, any Qualified Subproject, the Goods and Works, and any relevant records and documents maintained by the PFIs.


The Borrower shall promptly take all action, including the provision of funds and other resources, which shall be necessary on its part to enable the PFIs to perform its obligations under the Project Agreements, and shall not take or permit any action which would interfere with the performance of such obligations.


The Borrower shall exercise its rights under the Subsidiary Loan Agreements in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan.


No rights or obligations under the Subsidiary Loan Agreement shall be assigned, amended, abrogated or waived without the prior concurrence of ADB.


20 Appendix 2


Agreement Status of

Compliance

The Borrower and the PFIs shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any subsequent change to the PAM shall become effective only after approval of such change by the Borrower, the PFIs and ADB. In the event of any discrepancy between the PAM and this Loan Agreement or any Project Agreement, the provisions of this Loan Agreement or the Project Agreement shall prevail.

Schedule 3, section 1 In compliance

Notwithstanding any other provision of this Loan Agreement, no withdrawal shall be made from the Loan Account for any PFI until such time as the PFI has:

(a) established an ESMS to the satisfaction of ADB; and

(b) appointed designated staff that are trained in implementing the ESMS

for screening prospective subprojects.


The Borrower shall cause the PFIs to ensure that each Qualified Enterprise is a micro-, small- or medium-sized enterprise as defined by applicable laws and regulations of the Guarantor and registered in the Guarantor.


The Borrower shall cause PFIs to ensure that Qualified Subprojects are activities that:

(a) comply with the environmental and social safeguard criteria set out in

(b) paragraphs 8 to 10 of this Schedule; and (c) are not included in the list of prohibited

investment activities provided in Appendix 5 of the SPS.


The Borrower shall cause the PFIs to ensure that:

(a) each Subloan has a repayment term not exceeding 7 years, a market-based interest rate and covers 80 percent of the subproject costs;

(b) for Subloans from PFIs that are banks: (i) each such Subloan does not exceed $250,000 equivalent and has a free limit of $150,000 equivalent; (ii) each such Subloan loan that exceeds the free limit of $150,000 equivalent is subject to prior approval by ADB; and (iii) the first 5 such Subloans (regardless of the amount) are subject to prior approval by ADB; and


Appendix 2 21


Agreement Status of

Compliance

(c) for Subloans from PFIs that are universal credit organizations:

i. each such Subloan does not exceed $50,000 equivalent; and ii. the first 5 such Subloans (regardless of the amount) are subject to prior approval by ADB.

The Borrower shall cause the PFIs to ensure that:

(a) a minimum of 50 percent of the aggregate number of all Subloans from each PFI is for: i. Qualified Enterprises with a minimum of 50 percent women ownership; or ii. Qualified Enterprises with a minimum of 60 percent women in their senior management; or iii. Qualified Enterprises with a minimum of 50 percent registered women employees;

(b) the aggregate value of all Subloans to a Qualified Enterprise does not exceed $250,000 equivalent; and

(c) applications for Subloans may be made by any eligible Qualified Enterprise, including those owned, controlled or managed by ethnic minorities.


The Borrower shall cause the PFIs to ensure that before any proposed subproject is approved to be a Qualified Subproject for financing:

(a) the PFIs have appointed designated staff for project implementation particularly for financial management and reporting, and monitoring and evaluation;

(b) the ESMS is used to screen and categorize the significance of potential environmental, indigenous peoples or involuntary resettlement impacts associated with such subproject; and

(c) an IEE and an EMP are prepared for proposed subprojects as required pursuant to the ESMS.


The Borrower shall cause the PFIs to ensure that each proposed subproject does not involve any: (a) involuntary resettlement impacts within the meaning of the SPS; (b) environmental or


22 Appendix 2


Agreement Status of

Compliance

indigenous peoples impacts which can be categorized as Category A, in each case within the meaning of the SPS; or (c) any activity referred to in paragraph 4(b) of this Schedule.

Without limiting paragraph 8(a) of this Schedule, the Borrower shall cause the PFIs to ensure that in respect of any proposed subproject that involves the acquisition or transfer of any interest in land, such acquisition or transfer is between willing parties and not under eminent domain.


The Borrower shall cause the PFIs to ensure that the preparation, design, construction, implementation, operation and decommissioning of each Qualified Subproject comply with (a) all applicable laws and regulations of the Guarantor relating to environment, health, and safety; (b) the ESMS; and (c) all measures, and requirements set forth in the respective IEE and EMP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.


The Borrower shall cause the PFIs to ensure that (a) necessary budgetary and human resources are made available to fully implement the ESMS; and (b) each Qualified Enterprise makes available necessary budget and human resources to fully implement EMPs as required.


The Borrower shall cause the PFIs to do the following:

(a) submit quarterly Safeguards Monitoring Reports to the Borrower for compilation and timely submission by the Borrower to ADB;

(b) if any unanticipated environmental and/or social risks and impacts arise during Qualified Subproject implementation promptly inform the Borrower and ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; and

(c) report to the Borrower and ADB any actual or potential breach of compliance with the measures and requirements set forth in the ESMS and any EMP or IPP promptly after becoming aware of the breach.


Appendix 2 23


Agreement Status of

Compliance

The Borrower shall ensure that: (a) the gender action plan is implemented in accordance with its terms; (b) adequate resources are allocated for the implementation of the plan; and (c) key gender outcome and output targets are monitored regularly and achieved.


The Borrower shall cause the PFIs to ensure that the core labor standards and applicable laws and regulations of the Guarantor, including workplace occupational safety norms, are complied with during Project implementation.


The Borrower shall cause the PFIs to ensure that they meet the prudential requirements of the Borrower throughout the Project implementation period. Specifically:

(a) each PFI that is a bank shall maintain: iv. a ratio of total capital to risk-weighted assets of not less than 12%; v. a ratio of high liquid assets to total assets of not less than 15%; vi. a ratio of the total non-performing loans to total loans of not greater than 6%; and vii. a ratio of maximum exposure to all related parties to total capital of not greater than 20%.

(b) each PFI that is a universal credit organization shall maintain (and provide semi-annual reports to the Borrower): viii. a ratio of total capital to risk-

weighted assets of not less than 6%;

ix. a ratio of the total non-performing loans to total loans of not greater than 6%; and

x. a ratio of maximum exposure to all related parties to total capital of not greater than 20%.

Schedule 3, section 15 Complied with.

The Borrower and PFIs shall (a) comply with ADB’s Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Project; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.


24 Appendix 2


Agreement Status of

Compliance

The Borrower shall cause the PFIs to ensure that all contracts in relation to the Project include provisions specifying the right of ADB to audit and examine the records and accounts of the contractors, suppliers, consultants, and other service providers as they relate to the Project.


The Borrower shall cause the PFIs to: (a) comply with applicable laws and

regulations of the Guarantor on combating money laundering and financing of terrorism and ensure that Loan proceeds are not used, directly or indirectly, in money laundering or financing of terrorism;

(b) formulate and implement internal control procedures, including customer due diligence procedures, to prevent violation of subparagraph (a) hereinabove; and

(c) promptly inform the Borrower and ADB if there is any violation or potential violation of subparagraph (a) hereinabove. In the event that ADB informs a PFI of its concern that there has been such an alleged violation, the PFI shall: (i) cooperate in good faith with ADB and its representatives so that ADB can determine whether such a violation has occurred; (ii) respond promptly and in reasonable detail to any query from ADB; and (iii) furnish documentary support for such response upon ADB’s request.


ADB = Asian Development, AFS = audited financial statements, APFS = audited project financial statements, EMP = environmental management plan, ESMS = Environmental and Social Management System, IEE = initial environmental examination ,PAM = project administration manual, PFIs =participating financial institutions

Appendix 3 25

STATUS OF COMPLIANCE WITH PROJECT COVENANTS

Project agreement signed with PFIs under Women’s Entrepreneurship Support Sector Development Program Status of Compliance as of 31 December 2017

Covenant

Reference in Loan

Agreement


Araratbank Card

AgroCredit Farm Credit Kamurj Inecobank

Article III. Particular Covenants

PFI shall carry out the Project with due diligence and efficiency and in conformity with sound applicable technical, financial, business and development practices.

Section 3.01 (a)

Complied Complied Complied Complied Complied

In the carrying out of the Project and in the conduct of its business, PFI shall perform all the obligations set forth in the Loan Agreement.

Section 3.01 (b)


PFI shall not make a Subloan to any Qualified Enterprise unless such Qualified Enterprise has at its disposal or has made appropriate arrangements to obtain as and when required, all local currency funds, including adequate working capital, and other resources which are required by such Qualified Enterprise for the carrying out of its Qualified Subproject in respect of which the Subloan is to be made.

Section 3.02 Complied Complied Complied Complied Complied

PFI shall maintain accounts and records adequate to record the progress of the Project and of each Qualified Subproject (including the cost thereof) and to reflect, in accordance with consistently

Section 3.03 Complied Complied Complied Complied Complied

26 Appendix 3

Covenant

Reference in Loan

Agreement


Araratbank Card


maintained sound accounting principles, the operations and financial condition of PFI.

ADB and PFI shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

Section 3.04 (a)


PFI shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, or the accomplishment of the purposes of the Loan.

Section 3.04 (b)


ADB and PFI shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, PFI and the Loan.

Section 3.04 (c)


PFI shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Project; (iii) the Qualified Enterprises, the Qualified Subprojects and the Subloans; (iv) the administration, operations and financial condition of the PFI; and (v) any other matters relating to the purposes of the Loan.

Section 3.05 (a)


Without limiting the generality of the foregoing, PFI shall furnish to ADB periodic reports on the execution of the

Section 3.05 (b)


Appendix 3 27

Covenant

Reference in Loan

Agreement


Araratbank Card


Project and on the operation and management of the PFI. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made, and problems encountered during the period under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following period.

PFI shall furnish to ADB quarterly certificates confirming compliance with the financial covenants set out in paragraph 15 of Schedule 3 to the Loan Agreement. Each quarterly certificate shall be in the form and shall set out the details, required by PAM.

Section 3.05 (c)


Promptly after the Loan Closing Date, but in any event not later than 3 months after the said closing date or such later date as ADB may agree for this purpose, PFI shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the utilization of the Loan, the execution of the Qualified Subprojects, their costs, the performance by PFI of its obligations under this Project Agreement and the

Section 3.05 (d)


28 Appendix 3

Covenant

Reference in Loan

Agreement


Araratbank Card


accomplishment of the purposes of the Loan.

PFI shalla (i) maintain separate accounts and records for the Project; (ii) prepare annual statements of utilization of funds for the Project in accordance with accounting principles acceptable to ADB; (iii) have such statements audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with auditing standards acceptable to ADB; (iv) as part of each such audit, have the auditors prepare a report, which includes the auditors’ opinion(s) on the statements and the use of the Loan proceeds, and a management letter (which sets out the deficiencies in the internal control of the Project that were identified in the course of the audit, if any); and (v) furnish to ADB, no later than 6 months after the close of the fiscal year to which they relate, copies of such audited statements, audit report and management letter, all in the English language, and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request.

Section 3.06 (a)

Complied for 2016 and 2017



Complied for 2016. For 2017, has submitted AFS, but has yet to submit APFS and management letter

The bank joined the program in 2017. For 2017, has submitted AFS, but has yet to submit APFS and management letter

Appendix 3 29

Covenant

Reference in Loan

Agreement


Araratbank Card


ADB shall disclose the annual audited statements of utilization of funds for the Project and the opinion of the auditors on the statements within 14 days of the date of ADB’s confirmation of their acceptability by posting them on ADB’s website.

Section 3.06 (b)

Prior to 2017, other than ACBA, all PFI’s audit reports have been posted. For the 2017 APFS, all accepted APFSs will be posted accordingly within the 14-day deadline.

In addition to the annual audited statements of utilization of funds referred to in subsection (a) hereinabove, PFI shall (i) provide its annual financial statements prepared in accordance with financial reporting standards acceptable to ADB; (ii) have its financial statements audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with auditing standards acceptable to ADB; (iii) as part of each such audit, have the auditors prepare the auditors’ opinion(s) on the financial statements and compliance with the financial covenants of the Loan Agreement; and (iv) furnish to ADB, no later than 1 month after approval by the relevant authority, copies of such audited financial statements and auditors’ opinion(s), all in the English language, and such other information concerning these documents and the audit thereof

Section 3.06 (c)


30 Appendix 3

Covenant

Reference in Loan

Agreement


Araratbank Card


as ADB shall from time to time reasonably request.

PFI shall enable ADB, upon ADB's request, to discuss the statements of utilization of funds for the Project and the financial statements of PFI and its financial affairs where they relate to the Project with the auditors appointed by PFI pursuant to subsections (a)(iii) and (c)(ii) herein above and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB. This is provided that such discussions shall be conducted only in the presence of an authorized officer of PFI, unless PFI shall otherwise agree.

Section 3.06 (d)


PFI shall enable ADB's representatives to inspect any Qualified Enterprise, any Qualified Subproject, the Goods and Works, and any relevant records and documents.

Section 3.07


PFI shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business.

Section 3.08 (a)


Appendix 3 31

Covenant

Reference in Loan

Agreement


Araratbank Card


PFI shall at all times conduct its business in accordance with sound applicable technical, financial, and business practices, and under the supervision of competent and experienced management and personnel.

Section 3.08 (b)


Except as ADB may otherwise agree, PFI shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

Section 3.08 (c)


Except as ADB may otherwise agree, PFI shall not take, or cause to be taken, any action which would have the effect of amending, abrogating, assigning or waiving any provision of, or any right or obligation of PFI under, the Subsidiary Loan Agreement.

Section 3.09


Except as ADB may otherwise agree, PFI shall duly perform all its obligation under the Subsidiary Loan Agreement and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Subsidiary Loan Agreement.

Section 3.10


32 Appendix 3

Covenant

Reference in Loan

Agreement


Araratbank Card


PFI shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of its constitutional documents, which, if implemented, could adversely affect the carrying out of the Project. PFI shall afford ADB an adequate opportunity to comment on such proposal prior to taking any affirmative action thereon.

Section 3.11


ADB=Asian Development Bank, APFS = Audited Project Financial Statements, PFI =participating financial institution. a ADB cancelled requirement for PFIs to submit APFS, report on funds utilization and compliance with ADB covenants for 2014-2015.

Appendix 4 33

CHRONOLOGY OF MAIN EVENTS

Date Event

30 July–13 August 2012 Fact Finding Mission 14–20 September 2012 Loan Negotiation 25 October 2012 ADB Board Approval 25 January 2013 Project agreement (PA) between ADB and four

PFIs (ACBA, Araratbank, Armeconombank and CARD) was signed.

14–18 October 2013 Inception Mission 19 December 2013 Actual Loan Effectiveness (3 extensions were

requested) 19 December 2013 (PBL, 1st tranche) 1st Disbursement 04 February 2014 (FIL) 2nd Disbursement 1-5 April 2014 Mission – Special safeguard 14-18 July 2014 1st Review mission 9 July 2014 Amended the loan agreement between ADB and

CBA for the following: 1. each subloan shall cover 80% of subproject

cost, and 2. separation of PFIs into two groups in relation

to the category of the subprojects to be financed. The first group was to finance subprojects that are Category B for environment and Category C for indigenous peoples and involuntary settlement, while the second group was to finance only Category C.

28 July 2014 Mission – Country social safeguard 20 August 2014 Amended the PAs between ADB and three PFIs

(ACBA, Araratbank and CARD) to incorporate the amendments made in the loan agreement in July 2014.

03 September 2014 PA between ADB and Farm Credit was signed. 08 September 2014 PA between ADB and Kamurj was signed. 22–25 September 2015 Midterm Review 09 December 2015 (PBL, 2nd tranche) 3rd Disbursement 17 December 2015 Loan 2922 (PBL) Loan closing date 23 February 2016 Amended the loan agreement between ADB and

CBA to i. revise allocations to the PFIs, and ii. increase the subloan’s free limit and ceiling

amount March to April 2016 Amended project agreements between ADB and

five PFIs (ACBA, Araratbank, CARD, Farm Credit, and Kamurj) to i. revise the financial audit requirements, and ii. increase the subloan’s free limit and ceiling

amount 06 July 2016 (FIL) 4th Disbursement

34 Appendix 4

Date Event January 2017 Amended loan agreements between ADB and CBA

and ADB and the Republic of Armenia, to modify the interest rate applicable to each ADF loan.

24–27 January 2017 2nd Review mission May 2017 Amended loan agreement between ADB and CBA

to effect certain financial and reporting covenants. Subsequently, PAs between ADB and the five PFIs (ACBA, Ararat, CARD, Farm credit, and Kamurj) were revised to incorporate said amendment.

15 May 2017 5th Disbursement June 2017 Completion report of TA 8200 was approved 14 June 2017 PA between ADB and Inecobank was signed. 31 December 2017 Loan 2923 (FIL) Loan closing date 14 March 2018 Loan 2923 (FIL) Financial closing date 29 May–01 June 2018 PCR Mission

ADB = Asian Development Bank, ADF = Asian Development Fund, CBA = Central Bank of Armenia, FIL = financial intermediary loan, PBL = policy-based loan, PFIs = participating financial institutions.

Appendix 5 35

PROJECT COST AT APPRAISAL AND ACTUAL (SDR Million)

Appraisal Estimate Actual

Item Foreign

Exchange Local

Currency Total Cost

Foreign Exchange

Local Currency

Total Cost

A. Policy-Based Loan 1. First tranche 6.517 0.00 6.517 6.517 0.00 6.517 2. Second tranche 6.518 0.00 6.518 6.518 0.00 6.518 Subtotal (A) 13.035 0.00 13.035 13.035 0.00 13.035 B. Financial Intermediation Loan

1. Farm Credit Armenia (UCO)

13.035

13.035

3.637 0.00 3.637 2. Araratbank 2.085 2.085 3. ACBA 2.016 0.00 2.016 4. CARD AgroCredit (UCO) 0.00 1.920 1.920 5. Kamurj (UCO) 1.249 1.249 6. Inecobank 1.201 1.201 Subtotal (B) 13.035 0.00 13.035 12.109 0.00 12.109 Total (A+B) 26.070 0.00 26.070 25.144 0.00 25.144

36 Appendix 6

TECHNICAL ASSISTANCE COMPLETION REPORT

TA Number, Country, and Name: Amount Approved: $600,000.00

TA 8200-ARM: Capacity Building for Women’s Entrepreneurship Support

Revised Amount: $600,000.00

Executing Agency: Ministry of Finance

Source of Funding: TASF-IV

Amount Undisbursed: $18,562.29

Amount Utilized: $581,437.71

TA Approval Date:

TA Signing Date:

Fielding of First Consultants:

TA Completion Date Original: 31 December 2015

Actual: 31 December 2016

25 October 2012 29 November 2012 1 March 2013 Account Closing Date Original: 31 December 2015

Actual: 29 March 2017

Description On October 2012, Asian Development Bank (ADB) approved the Women’s Entrepreneurship Support Sector Development Program (WESSDP)a which included (i) a $20 million policy-based loan linked to policy reforms and budget expenditures to strengthen the business environment and the Small and Medium Entrepreneurship Development National Center (SME DNC) of Armenia in its support for women’s micro, small and medium-sized enterprises (MSME) and (ii) a $20 million financial intermediation loan to fund MSME loans of participating financial institutions (PFI), of which at least 50% should be for women's MSMEs. The capacity development technical assistance (TA) supported the delivery of the program’s outputs: (i) improved institutional framework supports women entrepreneurs and MSMEs, (ii) improved capacity of women entrepreneurs and MSMEs, (iii) improved access to finance by women entrepreneurs and MSMEs, and (iv) improved business environment supports MSMEs. Expected Impact, Outcome, and Outputs The overall program’s intended impact was to help women benefit from increased economic opportunities in Armenia. The expected outcome was an improved enabling environment for women entrepreneurs in Armenia. The TA’s specific outputs focused on (i) increasing the capacity of the SME DNC, the project management unit of the German–Armenian Fund (PMU GAF) and the PFIs to support women entrepreneurs, and (ii) raising the awareness and technical capabilities of existing or potential women entrepreneurs and business support organizations working with women. The design was highly relevant given the strong buy-in from the Armenian Government to support women entrepreneurship development and that the components of the TA were directly aligned to the barriers identified during project processing. The TA design focused on building the capacity both of the service providers (financial and non-financial support) and of the women entrepreneurs, and it was well timed with the implementation of policy reforms and the complementary credit line. Delivery of Inputs and Conduct of Activities The TA became effective on 29 November 2012 and the consulting firm was mobilized in March 2013. The original TA envisaged 4 international consultants and 7 national consultants for a total of 9.5 person-months and 64 person-months respectively. The final TA inputs were 8.4 person-months and 77.4 person-months of international and national consultants respectively. The TA completion date was extended from 31 December 2015 to 31 December 2016 to allow completion of new activities that were added to the scope of the TA as described in the outputs section. The overall performance of the consulting firm and its consultants is rated satisfactory.b Their inputs were effective in achieving the TA objectives and went beyond the original activities showing a high degree of initiative and flexibility. The inputs, however, focused mostly in working with women’s MSMEs, SME DNC and other business support organizations, and were less successful in building links with the PFIs to broaden the TA impact, as described in the lessons section. The TA is assessed as efficient in the use of inputs to produce the outputs listed in the following section. SME DNC´s performance (executing agency of the TA) was considered highly satisfactory. SME DNC´s team was highly committed to the TA and provided new ideas and all required in-kind support (including funding TV and radio air space). ADB´s performance was highly satisfactory, with active involvement with the consultants and client, responsive to client´s requests and frequent review missions combined with missions for the two loans under the program. Evaluation of Outputs and Achievement of Outcome The two TA outputs were fully achieved, and the TA was instrumental in facilitating the implementation of the policy actions required for the second tranche of the program loan. Under the first output, the following activities were completed: (i) collection of MSME sex-disaggregated data related to SME DNC clients (development of a new database of around 10,000 entries); (ii) review of the Strategy for Women’s Entrepreneurship Promotionc and development of annual operation plans; (iii) designed and implemented new business support programs for women

Appendix 6 37

entrepreneurs, including value-chain assessments and pilot activities in the agriculture and tourism sectors and trainings on ICT literacy and usage, and financial literacy for women; (iv) reviewed the effectiveness of SME DNC loan guarantee scheme, provided recommendations to improve its coverage and impact; (v) strengthened SME DNC’s credit risk management system, including development and testing of new risk scoring methodologies; (vi) trained SME DNC staff and business development services providers catering women entrepreneurs, and carried out need-assessments and awareness raising events, and (vii) carried out awareness training with PFIs and PMU GAF staff on women’s MSMEs constraints in accessing finance and organized events with SME DNC and other organizations supporting women entrepreneurs. Under the second output, the following activities were completed: (i) implemented information awareness campaigns on the potential and opportunities of women entrepreneurship and sponsored annual Best Woman Entrepreneurs awards; (ii) designed and implemented a mentorship scheme for women entrepreneurs and implemented the new support programs designed under output 1; (iii) increased the capacity of business development providers through training of trainers; and (iv) delivered 20 start-up training programs with formal training sessions and individual coaching activities, in which 51% of the participants were women entrepreneurs. All relevant reports are disclosed on ADB´s website.d The above activities had been completed by the end of 2015. The TA completion date was extended by 12 months to (i) pilot an international women-mentoring program provided by the Cherie Blair Foundation for Women and (ii) conduct additional activities to strengthen the link between the women entrepreneurs’ capacity building initiatives and the funding provided by the PFIs under the credit line of the program. Overall the TA outcome was achieved. The TA activities contributed to improving the environment for women entrepreneurs in Armenia. The TA is rated as highly effective. Though there is no available gender disaggregated data on the number of new women businesses registered (DMF indicator, using the Business Registry) Armenia has improved in other proxy indicators (female participation in firms’ ownership increased from 11.5% in 2005 to 25.3% in 2013 and the percentage of firms with female top managers increased from 13.5% in 2009 to 19.1% in 2013).e Armenia also now tops the ranking of Eastern European countries in its support to women entrepreneurs. f The TA also helped achieve the policy actions required for the disbursement of the second tranche (see Progress Report on Tranche Release) and deliver two of the outputs of the overall program Design and Monitoring Framework. Under output 1 of the program (“Improved institutional framework supports women entrepreneurs and MSMEs”), the TA assisted the Ministry of Economy define action plans linked to the national strategy for SME development targeted at women entrepreneurs and MSMEs. Under Output 2 (“Improved capacity of women entrepreneurs and MSMEs”): (i) the target of 3,500 women to receive training and business development services from SME DNC was achieved by the end of 2016 (4,584); and (ii) 51% of the participants in SME DNC start up programs were women and presented a business plan to a financial institution and 54% of them obtained funding (above the 30% target in the DMF). Overall Assessment and Rating The TA is rated as successful. The TA exceeded its objectives and activities and is likely to be sustainable as the policy and operational changes triggered with the TA support are all being implemented. The Armenian government is now recognized for the attention it gives to support women entrepreneurship and some of the initiatives supported by the TA (e.g. annual need assessment survey to ensure quality of services provided, and new mentoring and coaching schemes) have been recognized by the OECD as good examples to be replicated in other countries in the region.g Additionally several Armenian business support organizations are now using the tools and methodologies piloted by SME DNC with the support of the TA. The TA largely supported the policy-based loan in achieving the policy conditions necessary for the release of the loan’s second tranche. Major Lessons Mentorship schemes and networking activities are important tools to address issues of lack of confidence and lack of access to professional networks. They could also help address negative societal attitudes. These were all identified as specific barriers for women entrepreneurs in Armenia. The mentorship scheme between female entrepreneurs was highly valued both by women starting new businesses and those looking to grow their business. Regular needs-assessment surveys are important tools to understand critical constraints and ensure that the content and the format of the services provided by business support organizations match those needs. Though the overall objective of the TA was achieved, the link with the credit line component of the program could have been stronger, despite PFIs’ participation in awareness raising campaigns and business plan contests. This was because most of the TA activities focused on start-ups, which are not traditional clients of banks. The TA could have included an additional component to focus more specifically in supporting PFIs’ outreach to women. In any case, the overall program results show that when financial institutions are incentivized to reach to women customers and

38 Appendix 6

understand the financial needs and behaviors of women, they realize the potential of this niche market for cross selling other financial services. This increases the sustainability of the intervention. Reaching out to women requires dedicating resources to financial literacy. Survey results showed that women have less financial knowledge than men and are less confident in their financial skills. Specific support programs at key decision moments for women achieve better performance and results. Recommendations and Follow-Up Actions Although the Armenian Government prioritizes women entrepreneurship development and has specified quantitative targets, collecting data disaggregated by gender remains a challenge. Additional efforts are needed to collect and analyze data on businesses created and growth trends, contribution to GDP and employment in order to show achievements and fully understand the characteristics and trends of women entrepreneurs. The TA assisted establishing a database of SME DNC clients, but that is only a sub segment of all women businesses. Future MSME support interventions could expand the target group and address the needs of more established growth-oriented women SMEs. For example, efforts could focus on supporting export promotion, to seize the larger trade opportunities triggered by Armenian access to the Eurasian Economic Union or supporting innovation adoption in products and processes.

a ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of Armenia for the Women’s Entrepreneurship Support Sector Development Program. Manila

b Two consultants were rated Excellent. c Part of the SME State Support Strategy. d The reports are available in Asian Development Bank. Armenia: Women's Entrepreneurship Support Sector

Development Program. https://www.adb.org/projects/45230-001/main#project-documents. e World Bank. Enterprise Surveys. Data is the latest available and previous data point. f OECD. 2016. SME policy index: Eastern Partner Countries. g Note f.

Prepared by: Inmaculada Martinez Designation and Division: Senior Private Sector Development Specialist, CWPF

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

https://www.adb.org/projects/45230-001/main#project-documents

Appendix 7 39

GENDER EQUALITY RESULTS AND ACHIEVEMENTS

A. Gender Issues and Gender Action Plan 1. The Women’s Entrepreneurship Support Sector Development Program was aimed to enhance economic opportunities of women entrepreneurs and MSMEs in Armenia and increase their contributions to the economy of the country. The project was implemented in 2013–2017. The project consisted of a policy-based loan and a financial intermediary loan and was supported by a capacity building TA. In order to maximize the impact on women’s economic and human capital development, the project Gender and Development (GAD) strategy was developed and the project was categorized as Gender Equity as a Theme. It set explicit and effective gender targets for women’s advancement and economic empowerment. In 2012, the project design was highly relevant for the needs of women entrepreneurs and government priorities for advancement of SMEs in Armenia. The program focused on the following areas: (i) Improving institutional framework to support women entrepreneurs and MSMEs, (ii) Improving capacity of women entrepreneurs, and (iii) Improving access to finance by women entrepreneurs and MSMEs. 2. The key indicators were included in the design and monitoring framework (DMF). Gender Action Plan (GAP) was also designed for the project and it included the following areas of activities:

(i) Development and adoption the of national strategy for small and medium entrepreneurship (SME) development, including Women’s Entrepreneurship promotion;

(ii) Carrying out surveys to understand the needs of women entrepreneurs; (iii) Implementation of action plans linked to the National Strategy of Small and

Medium Entrepreneurship Development targeting women entrepreneurs and MSMEs;

(iv) SME DNC to implement action plan for developing women entrepreneurs in identified sectors;

(v) Establishment of inter-agency coordination working group on women’s entrepreneurship;

(vi) SME DNC improves women presence through appointment of women to Board of Trustees;

(vii) Increasing capacity of SME DNC through trainings and creation of a new data-base;

(viii) Planning and carrying out effective outreach campaigns to women; (ix) Implementation of start-up trainings and tailoring of existing training and business

development services for women entrepreneurs and MSMEs; (x) Design and piloting mentorship program; (xi) Improving availability of loan guarantee scheme to women entrepreneurs and

MSMEs; (xii) Provision of access to finance to women through PFIs; (xiii) Consolidation of single sex-disaggregated database on micro, small medium-sized

and large enterprises in Armenia.

3. Details of these activities and concrete targets are reported below in narrative assessment as well as in the GAP matrix.

40 Appendix 7

B. Gender Equality Results 4. Key gender indicators have been identified at the DMF project impact, outcome and output levels. On the impact level of the WESSDP, women in Armenia have benefited from increased economic opportunities: the unemployment rate for women decreased from 35% in 2011 to 17.8% in 2016 and gender gap in labor force participation decreased from 20% in 2011 to 18% by 2016 in Armenia.1

5. On the output level, the WESSDP supported (i) improved institutional framework that promotes women entrepreneurs and MSMEs through developing national policy and undertaking relevant actions; (ii) improved capacity of women entrepreneurs through provision of trainings and business development services (at least 30% of participants are women)—in 2013–2016, SME DNC trained 399 participants, including 204 women (51%) , on how to start a business; and (iii) improved access to finance by women entrepreneurs and MSMEs—by end 2017, PFIs have disbursed 2,780 loans (above target of 2,600 new loans) out of which 2,040 were to women entrepreneurs. C. GAP Achievements

6. WESSDP GAP includes 17 actions and 22 targets. Out of the 17 actions, 16 were fully implemented (94%) and one action was partly implemented. Out of the 22 targets, 20 were fully achieved (91%) and two were partly achieved. All the numerical targets (100%) of the GAP were achieved. 7. The WESSDP targeted national policy reform to enhance and promote women entrepreneurship as well as to provide access to finance for women in Armenia. In addition, the project had an effective outreach to women and provided skills development and support to start-ups through business trainings and mentorship for women. Overall, the project performed well and had positive impacts on the lives of women, both rural and urban. 8. Developing and adopting a gender sensitive SME development national strategy was an effective policy action to promote women’s entrepreneurship in the country. Although women have great potential in SME sector development in Armenia, their potential was not considered until the launch of the project. Under WESSDP, the government of Armenia started making concrete steps for the promotion of women’s entrepreneurship at a policy level and put women’s entrepreneurship on the government agenda. There was openness at the government level to adopt gender sensitive SME policy and give business development opportunities to women entrepreneurs. Until now, the policy is in place and it is positively assessed by different stakeholders. 9. An important action taken by Ministry of Economy (MOE) was the recognition of the specific needs of women entrepreneurs. For this purpose, two assessments have been carried out through SME DNC on the needs for Business Services among Women Entrepreneurs (each targeting more than 700 women) during the program implementation. The survey included identification of the (i) main obstacles in doing business, (ii) problems in provision of business development services (BDS), (iii) most important BDS services, (iv) business dynamics in the past year and prospects for the next 12 months, (v) need for financing, (vi) findings from focus group

1 World Economic Forum. 2017. The Global Gender Gap Report 2017.

http://www3.weforum.org/docs/WEF_GGGR_2017.pdf

Appendix 7 41

discussions, and (vii) conclusions and recommendations. The survey established a basis for effectively targeting women entrepreneurs in future operations of the SME DNC. The analysis of one of these large-scale surveys shows that two-thirds of the women respondents identified high taxes as one of the main obstacles for their businesses along with poor access to finance and high cost for the utilities combined with their poor quality. Almost the same issues were revealed when analyzing obstacles for start-ups. Compared to 2013 data, the number of respondents considering information support services important increased from 16.5% to 29.7%. Regarding the most needed services, the most requested were consulting and advice, training, and information support (45.7%, 44.6%, and 43.0%, respectively). More than 50% of the respondents confirmed the need for business development services and their readiness to pay for the services. As for the business dynamics, 26.3% of the total of 689 respondents reported the growth of their business compared to the previous year, 25.1% reported a decrease, and 37.7% said “no changes”. Trade sector reported more negative dynamics than service and production sectors. As for the problems with the access to finance, 69.7% of all responses considers high interest rates as the main problem, followed by short loan maturity terms and high collateral requirements. In addition to that, societal prejudices towards women entrepreneurs and lack of confidence among women, especially at startups level, were mentioned. Moreover, as analysis shows, men have more opportunities for starting business and for informal networking, which is not a case with women entrepreneurs. Women lack venues for networking, especially in the rural regions of the country. The results of the surveys were discussed at the workshop in Yerevan with participation of all key stakeholders including ADB. In addition, a gender sensitive value chain analysis had been also introduced (4 value chains). SME DNC staff underwent trainings and improved women presence through appointment of (i) woman member in its Board of Trustees and (ii) establishing of the coordination group on women entrepreneurship. SME DNC also developed its own strategy with focus on women entrepreneurship and women have become a priority beneficiary group for the agency. To support implementation of the national strategy MOE implemented the following actions: introduced annual award ceremony to women entrepreneurs to recognize role of women in the country`s economic development, support networking among women entrepreneurs, encourage other women and give them positive examples of doing business. 10. Outreach campaign to women entrepreneurs had been an effective strategy. SME DNC has regional branches in the rural areas of Armenia where all interested citizens can receive information on starting and developing businesses, as well as on available services and resources. SME DNC conducted 7 targeted public awareness campaigns since 2014. In total, 189 women participated in the campaigns which mostly focused on outreach to women in the areas outside the major city, Yerevan. This activity had positive impact on improved access to different services by women entrepreneurs and their more active participation in further planned activities. 11. Capacity building for women-led start-ups has been a successful approach as well. During 2013-2016, SME DNC has conducted 20 start-up trainings on different issues to provide basic knowledge to women on how to start business and how to access resources. Out of the 399 participants, 51% were women. In 2013-2016 179 newly registered start-ups were opened, out of which 79 (44%) were opened by women. Starting a business is great challenge for women in Armenia due to lack of skills and confidence among women, therefore, trainings and business development services had been particularly relevant to women. All women-led start-up businesses presented business plans for financing to financial institutions and 54% of them obtained funding (above the 30% target). The number of women receiving business development services also increased from 2,175 to 4,200 during the project implementation (above target). 122 start-ups received financial support in the form of guarantees for total AMD 458,558,818. 58 of

42 Appendix 7

them (47.5% of the total number of the start-ups, which received guarantees) were led by women (47.5%) and they received loan guarantees for total AMD 207,000,885 (45%). 12. Targeting women through PFIs was another effective strategy. PFIs targeted women by providing them loans. By end 2017, PFIs issued 2,780 loans, of which 2,040 loans were issued to women entrepreneurs. As advised by PFIs, outreaching to women was not an issue as most of the women entrepreneurs financed ran existing business at the time of submitting of loan applications. The sectors in which women were active included: (i) services, like beauty salon, repair and tailoring, catering, design center, educational services, etc. (ii) trade like food, household items, clothing, resale of cosmetics, hygienic products, etc. and (iii) agriculture like cattle-breeding, cultivation of vegetable and crops, food processing, etc. 13. Implementation of the mentorship program initiated under the program continues and it has positive impact on women. The program covered 32 participants, all of them were women from different regions of Armenia. The program promoted (i) direct one-on-one learning and coaching and (ii) networking among women entrepreneurs. The mentorship gave chance to women to re-examine operation for their businesses, overcome some of the obstacles and find ways how to deal with business related issues. This approach triggered expansion of the mentorship program by SME DNC and 15 women mentees were selected to work with international program of the Charie Blair Foundation to boost their confidence and facilitate their personal and business advancement further.

Box 1: Stories of Women entrepreneurs, beneficiaries of the WESSDP

Zepyur Movsisyan, 61 years old, Darakert, Masis Zepyur runs a small greenhouse in village Darakert, Masis. She used to be an accountant for many years, afterwards she was a housewife, with no paid job. Several years ago, she decided to start agribusiness by growing and selling tomatoes. She started growing tomatoes at the small plot of land around the house. However, it was seasonal business and she decided to organize greenhouse. She applied to CARD UCO, microfinance institution (one of the PFIs under WESSDP) for a loan and she received a small loan to develop and operate 300-meter greenhouse where she grows tomatoes. Previous experience in accounting helped her in running the business. Her family members were supporting her in running the business. She wakes up early at 6-7 am and starts working and looking after the tomatoes. By noon she is done with her job. Having the greenhouse and land plot next to the house enables her to combine business and household duties, as largely expected from women in Armenia. She purchased the materials necessary for the greenhouse and expects increase in harvest. The neighbors were surprised by her success in agriculture after spending many years as accountant and as housewife. Zepyur finds her involvement in agriculture as very satisfying and she has future plans to expand the business.

Alvard Gevorgyan, 61 years old, Yerevan Alvard used to work for a cake factory for many years. A few years ago, in 2009, she decided to start her own business and to start producing cakes and other bakery products. Her family supported herein her endeavor. She applied to InecoBank (one of the PFIs under the WESSDP) for a loan to increase the production. The loan was of significant amount and helped her to purchase the building, create new products and increase the production. Since she has invested in the building, now she feels more confident and is considering launching other types of products.

Appendix 7 43

She understands her business very well as she had been involved in producing of each type of the product. At the moment, the factory “Hamovik” produces about 48 types of sweet bakeries and majority of employees are women. She sells bakeries produced through the stores and supermarkets throughout Armenia. Her family member had always supported her. As Alvard mentions, business has brought her confidence, financial independence as well respect from others. She attends various events and would like to see more women in business as well as more opportunities to interact and exchange ideas with other women entrepreneurs.

D. Strategic Gender Benefits 14. Through implementation of GAP activities by SME DNC, women start-ups were able to increase their knowledge, receive guidance on how to operate a business. They were also given opportunities for networking and exchange of ideas and learning positive examples of other women in business. Other strategic benefits for women brought by program are:

(i) The program contributed to the policy development at a national level. For instance, the government recognized the needs and potential of women and developed set of activities for the promotion of women entrepreneurship;

(ii) WESSDP was the first project in Armenia focusing on women’s entrepreneurship development and it defined strategic approaches of the government and PFIs. For SME DNC, working with women beneficiaries became one of the key strategic areas. Armenian banks also recognized women as important target group and became encouraged and motivated to develop bank products for women clients;

(iii) Appointing woman in the SME DNC Board of Trustees has contributed to strengthened woman’s voice in decision-making processes;

(iv) Program offered trainings and access to finance to women and thus helped them to start new businesses or develop existing ones. Now, they feel themselves more respected and could talk on behalf of their businesses and make their needs vocal; and

(v) Women beneficiaries of the program mentioned that their motivation had increased, and they were more encouraged to get involved in business s and expand their businesses further. Besides, now they have more respect as businesswomen and act as a role models for other women. All this had positive influence on their confidence and status in the local communities.

Box 2: Stories of Women entrepreneurs trained under ADB-funded programs

Azniv Saryan, 59 years old, Lori, Odzun Azniv was participant of the start-up training carried out by SME DNC. When she participated in the training, she was just starting her business, guesthouse in one of the regions of Armenia. Through the regional branch of the SME DNC in Kristine, she learned about training opportunities. She applied for trainings and participated in the course covering topics as marketing, tourism, hoteling, management, etc. She found the training very helpful for her business development as it gave her new skills and ideas on how to work more flexibly and effectively. She applied for a small credit for development of her hotel business. The trainings gave her not only knowledge but also confidence and encouragement to be active in her family, business and community.

44 Appendix 7

E. Sustainability 15. Under the program, the government of Armenia adopted policy on advancement of women’s entrepreneurship. The government stays committed to focus on women entrepreneurship and is open for further cooperation on this issue with development partners. 16. Working with women became one of the main approaches of the SME DNC, which effectively works in the regions of Armenia where potential for development of small businesses is significant. 17. Through participation in trainings, women have gained knowledge and confidence in running business and learned how to effectively apply obtained skills and knowledge in daily business activities. The program provided not only knowledge but also a way of entering new markets and development of new products.

18. As financial institutions were incentivized to reach women customers and understand the financial needs and behavior of women, they realized the potential of this niche market for cross selling other financial services. This increases the sustainability of the intervention as PFIs continue issuing loans to women entrepreneurs even after the program closure. For instance, in Q1 2018 PFIs on aggregate disbursed 760 loans to women entrepreneurs for total AMD2.3 billion.

Box 3: PFIs

The program engaged five PFIs to provide access to finance for women entrepreneurs. For PFIs, attracting women entrepreneurs had not been difficult and there is strong demand on the loans from women. PFIs used various ways to reach women, like, organizing awareness seminars and outreaching the existing clients. Most of the PFIs targeting women entrepreneurs reported on no problems in reaching women entrepreneurs, only one PFI mentioned that outreach to women was an issue. This particular PFI focuses on agriculture loans and had difficulty in finding women with existing officially registered business in agriculture (women are mostly informally involved in agribusiness). All PFIs collect sex-disaggregated data and track performance of women sub-borrowers on a regular basis. As per PFIs women are more reliable borrowers (women perform better in terms of loan repayments) and It is profitable for PFIs to target women entrepreneurs. As per PFIs, the WESSDP had been a unique program and it triggered other development partners to develop similar programs and work with PFIs in the same area. Currently, some PFIs are involved in implementation of similar programs by other development partners that also target women entrepreneurship through developing women-tailored products, developing IT platforms and capacity building. All PFIs mentioned that participation in the WESSDP had been a good experience for them and they would like to continue working with ADB in future.

F. Lessons Learned and Recommendations

19. GAP activities were implemented without delays, however, better coordination between PFIs and SME DNC would have improved results further. All planned GAP activities were implemented on time and project sex-disaggregated data was maintained. The main challenge was the establishment of consolidated nation-wide sex-disaggregated database on SMEs due to the long methodological disputes between MOE and Statistics Office of Armenia. 20. The lessons learned from WESSDP implementation and recommendations for the succeeding programs are:

Appendix 7 45

(i) Succeeding programs should target ‘quality’ growth of women entrepreneurship (e.g. shift from traditional sectors to knowledge intensive sectors). In this regard, it is important to combine credit lines and extensive technical assistance for women-led SMEs in accessing know-how, nonfinancial business development services, and networking opportunities;

(ii) Under WESSDP, PFIs financed mainly existing businesses. For succeeding programs, access to finance for start -up businesses should be prioritized;

(iii) Current selection criteria of women-owned or women -registered business for financing does not guarantee that a woman would be a real beneficiary. For succeeding programs, it is necessary to revise criteria for selection of eligible sub-projects;

(iv) Addressing lack of support services for women (e.g. child daycare services) may enable women to find additional time for business activities, especially in the rural areas;

(v) Better systematic coordination between government agencies, businesses and development partners is important for joint intervention for promoting of women entrepreneurship;

(vi) promoting success stories of women entrepreneurs and creating networking platform for women entrepreneurs has positive impact on advancement of women’s entrepreneurship; and

(vii) For succeeding programs, it is necessary to incorporate practices from the programs of other development partners, that proved to be effective in promotion of women entrepreneurship.

46 Appendix 7

G. Gender Action Plan Matrix: Implementation and Achievements

Activities Performance Indicators/

Targets Responsibility Status upon completion

Output 1: Improved institutional framework supports women entrepreneurs and MSMEs

A1 MOE implements national strategy for small and medium entrepreneurship development, including Women’s Entrepreneurship promotion

T1 Adopted State Strategy MOE A1 Implemented: MOE elaborated and approved National Strategy including Women’s Entrepreneurship T1 Achieved: Women Entrepreneurship Development Strategy was prepared by an international expert; submitted to MOE by SME DNC in 2014; it was adopted on 1 October 2015 by the MOE. The strategy has 7 strategic objectives and one of them is promotion of women’s entrepreneurship. Paragraph 59 of this strategy describes how the strategy activities will be implemented through annual small and medium enterprises support programs during 2016-2018, as well as through government’s annual action plans.

A2 MOE implements action plans linked to the National Strategy of Small and Medium Entrepreneurship Development targeted at women entrepreneurs and MSMEs

T2 At least 2 action plans MOE A2 Implemented: Action plans were implemented for promoting women’s entrepreneurship T2 Achieved: MOE implements various action plans linked to the State SME Support Annual program where women’s entrepreneurship is targeted. This included mentorship program and annual award ceremony to encourage women entrepreneurship.

A3 SME DNC assesses the role of women entrepreneurs in growth sectors

T3 2 PACA reports SME DNC A3 Implemented: SME DNC assessed the role of women in certain sectors T3 Achieved: The role of women entrepreneurs in the growth sectors was assessed by SME DNC through Participatory Appraisal of Competitive Advantages (PACA) approach. The results of PACA reports were integrated into development of value chain. Five reports have been submitted to ADB, of which four included sections on women.

Appendix 7 47



A4 SME DNC implement action plan for developing women entrepreneurs in identified sectors

T4 Action plan implemented

SME DNC A4 Implemented: SME DNC implemented action plan for developing women’s entrepreneurship T4 Achieved: As a result of the Gender Sensitive Value Chain Analysis, an action plan was developed to support to women’s enterprises in the value chain. The action plan included seven activities that have been implemented throughout 2016. The action plan identified some of the new areas, e.g. tourism which is the growing business. SME DNC has provided support under the action plan to bed and breakfast (B&B) owners. The action plan also included ICT trainings for women entrepreneurs and organizing 4 networking events and study tours.

A5 SME DNC undertakes annual survey of women entrepreneurs and identifies problems to be addressed and lessons learned

T5 At least 700 women entrepreneurs surveyed

SME DNC A5 Implemented: SME DNC carried out two surveys in 2013 and in 2014 and identified needs of women entrepreneurs and problems to be addressed. T5 Achieved: 2 surveys have been carried out on the needs assessment for Business Development Services among Women Entrepreneurs. In total, 1487 respondents participated in the surveys - 743 respondents in 2013 and 744 respondents in 2014. The survey included identification of (i) the main obstacles to doing business, (ii) problems in provision of business development services (BDS), (iii) most important BDS services, (iv) business dynamics in the past year and prospects for the next 12 months, (v) need for financing, (vi) findings from focus discussions, and (vii) conclusions and recommendations.

48 Appendix 7



The results were discussed at a workshop in Yerevan where key stakeholders (including ADB) participated.

A6 MOE implements interagency coordination working group on women’s entrepreneurship promotion

T6 Minutes from meetings of the working group and workplan

MOE A6 Implemented: MOE brought together interagency coordination working group on women entrepreneurship promotion (since March 2014) T6 Achieved: The interagency coordination working group on women’s entrepreneurship held its first meeting in 2014. Attendees included representatives from the Armenian Development Agency (ADA) and SME DNC (MOE). Three meetings had been held since December 2014. The SME DNC and ADA approved joint time-bound action plan on 2 July 2014. This coordination has been sustained.

A7 SME DNC improves women presence through appointment of women to Board of Trustees

T7 At least 50% of new SME DNC Board of Trustees will be women

SME DNC A7 Implemented: SME DNC appointed woman member to its Board of Trustees. T7 Achieved: The SME DNC appointed new female member, Diana Gaziyan, to its board of trustees in 2014. This appointment met the requirement that at least 50% of the newly appointed members of the board of trustees should be women.

A8 SME DNC and PFI staff trained on gender awareness

T8 Schedule of trainings T9 List of participants (at least 40 participants)

SME DNC A8 Implemented: Trainings were held for SME DNC and PFIs in 2014 T8 Achieved: SME DNC staff was trained. Awareness training with PFIs and PMU GAF staff on women’s MSMEs constraints in accessing finance was also carried out. T9 Partly Achieved: Trainings were conducted, they were mentioned in various reports, however no details on the number of participants were provided.

Appendix 7 49



A9 SME DNC establishes a sector specific data-base with sex-disaggregated data

T10 System provides sex-disaggregated information including the number of registered businesses, number of employees, sector, region

SME DNC A9 Implemented: Data-base with sex-disaggregated data established in SME DNC T10 Achieved: The data-base includes 10, 039 MSMEs (40% of them are women SMEs). The indicators of the data-base include: (i) name of enterprise, (ii) organizational legal type, (iii) name of director, (iv) gender of entrepreneur, (v) sector, (vi) description of activity, (vii) region, city or village, and (viii) address.

Output 2. Improved capacity of women entrepreneurs and MSMEs

A10 SME DNC implements public awareness campaigns supporting women entrepreneurship

T11 Documented evidence of at least 5 campaigns

SME DNC A10 Implemented: Since 2013 SME DNC conducts public awareness campaigns targeting women entrepreneurs on a regular basis. T11 Achieved: Starting 2013 SME DNC on a regular basis conducts public awareness campaigns to promote women entrepreneurship: two campaigns in 2013, 2 campaigns in 2014, 5 public awareness campaigns in 2015. All campaigns had been visited by 189 women participants. Results of the meetings are documented by SME DNC. The objective of the awareness campaigns was to increase women entrepreneurs’ awareness on the services offered by SME DNC as well as on other projects offered by nongovernment organizations and international organizations. Most notable awareness workshops were the workshops with participation of representatives of local banks and service providers Such events were reported as very effective. In addition, SME DNC conducted 25 start-up campaigns in 2013, with 490 participants (32% are women) and 26 start-up campaigns in 2014 with 457 participants (37% are women).

50 Appendix 7



A11 SME DNC provides BDS and training by facilitating at least 8 start-up campaigns of which at least 40% of the participants are women

T12 Schedule of trainings T13 At least 40% of trainees are women

SME DNC A11 Implemented: SME DNC provided more than 8 start-up campaigns and trainings T12 Achieved: Start-up trainings were scheduled and held in 2013, 2014 and 2015 in all regions of Armenia T13 Achieved: In 2013-2015 SME DNC has conducted 20 start-up trainings. Out of the 399 participants, 51% were women.

A12 SME DNC increases outreach and tailored training and business development services for women entrepreneurs and MSMEs

T14 Schedule of at least 20 BDS trainings T15 At least 50% of participants are women T16 Number of women entrepreneurs and MSMEs that receive BDS from the SME DNC annually increased from 2174 to 3500

SME DNC A12 Implemented: SME DNC increased outreach to women entrepreneurs and tailored business development services to the needs of women. Improvements were also introduced to the website of the SME DNC which provides information and links to different resources; T14 Achieved: The BDS trainings were implemented as per schedule in 2013 and 2014. In total, 39 BDS training were conducted. T15 Achieved: Documented evidence provided for 39 training sessions. 51% of the participants were women. T16 Achieved: By end 2017, the number of women that received BDS reached 4,200.

A13 SME DNC designs and pilot a mentorship network for women entrepreneurs

T17 Evaluation report of mentorship networks design and pilot (a total of at least 30 mentors in 10 marzes)

SME DNC A13 Implemented: SME DNC designed and implemented mentorship program for women entrepreneurs. T17 Achieved: In 2014 SME DNC piloted mentorship program. The program was conducted in 2 phases covering all regions/marzes of Armenia with overall 32 participants, 100% women. An international expert was engaged to design mentorship network for women entrepreneurs.

Appendix 7 51



Monitoring has been performed by SME DNC, which also prepared evaluation reports. As per reports, Armenian mentors were engaged to support and coach women entrepreneurs. Each phase of the program lasted for 6 months. It largely promoted direct one-to-one learning and coaching as well as networking among women entrepreneurs. The experience of the mentorship program strongly encouraged mentees and had positive impact on their self-esteem. The mentorship gave chance to women to overcome some of the obstacles, find ways how to deal with business related issues and cooperate in a trustful manner. Moreover, 15 women were selected form mentees to work with mentors at international level.

Output 3. Improved access to finance by women entrepreneurs and MSMEs

A14 SME DNC issues gender responsive loan guarantees under new schemes

T18 Sex-disaggregated loan guarantee application and approvals; T19 At least 30% are women entrepreneurs and MSMEs

SME DNC A14 Implemented: The loan guarantee schemes were tailored to support women-led start-ups. T18-T19 Achieved: Loan guarantee applications were disaggregated by sex. 47.5% of the businesses supported by loan guarantees were women MSMEs.

A15 SME DNC improves availability of loan guarantee to women entrepreneurs and MSMEs

T20 At least 50% of loan guarantees and or other financial products are women entrepreneurs and MSMEs

SME DNC A15 Implemented: SME DNC improved its guarantee system to improve its availability to women entrepreneurs. T20Achieved: 300 loan guarantees were issued, of which 151 were granted to women entrepreneurs. The total loan guarantees amounted to AMD1.1 billion ($2.6 million), of which at least AMD579 million ($1.3 million) was issued to women entrepreneurs

A16 PFIs improve availability of loans to women entrepreneurs and MSMEs

T21 At least 2,600 new loans under the program from PFIs to MSMEs of

PFIs A16 Implemented: PFIS successfully targeted women entrepreneurs in their lending programs. In total, 5 PFIs participated in the program.

52 Appendix 7



which at least 50% should be women entrepreneurs and MSME

T21 Achieved: The overall number of loans provided to final beneficiaries is 2,780 out of which 2,040 were loans to women businessmen (73 of total number of loans, which is above 50% threshold)

Output 4. Improved business environment supports MSMEs

A17 MOE consolidates existing data-base into one sex-disaggregated database on micro, small medium-sized and large enterprises in Armenia

T22 Consolidated data base sex-disaggregated

MOE A17 Partly implemented: MOE is still carrying out work for developing a consolidated data-base., The process is still on-going; some of the information is in place and the full-fledged data-base should be available in Q3 2018. T22 Party achieved: Consolidation of data-base on enterprises is not yet finished. The work is carried out by MOE together with the National Statistics Service of Armenia.

Appendix 8 53

FINANCIAL INTERMEDATION LOAN IMPLEMENTATION

A. Lending Policies: Participating Financial Institutions

1. The financial intermediation loan (FIL) is currently implemented via five participating financial institution (PFIs), which were selected on the basis of their satisfactory financial standing, their commitment to support women entrepreneurs, and their prudent lending policies. At project completion, PFIs’ lending policies have not changed. B. Characteristics of Subloans

2. The Central Bank of Armenia (CBA) channeled the ADB funding to five PFIs for onlending to micro, small, and medium enterprises (MSMEs) in accordance with the criteria in Table A8.1. All PFIs followed these criteria throughout the project.

Table A8.1: Status of Compliance by Participating Financial Institutions with ADB Selection Criteria for MSME loans

Criteria for subloans disbursed Ineco Bank CARD Kamurj

Farm Credit

Ararat Bank

Subloans have repayment term of not more than 7 years and cover 80% of the subproject costs

Y Y Y Y Y

Subloan size issued by banks do not exceed USD250,000 limit and have a free limit of USD 150,000

Y N/A N/A N/A Y

Subloan size issued by universal credit organizations do not exceed USD 50,000 limit

N/A Y Y Y N/A

Share of loans to qualified enterprises with a minimum 50% women ownership of not less than 50% of total number of PFI’s subloans portfolio

Y Y Y Y Y

Share of loans to qualified enterprises with a minimum 60% women in senior management positions of not less than 50% of total number of PFI’s subloans portfolio

Y Y Y Y Y

Share of loans to qualified enterprises with a minimum 50% registered women employees of not less than 50% of total number of PFI’s subloans portfolio)

Y Y Y Y Y

Aggregate value of subloans issued to single qualified enterprise does not exceed USD250,000 equivalent

Y Y Y Y Y

Source: PMU GAF reports

3. As of end December 2017, 41% of the outstanding loans were disbursed to trade sector. Loans to service, manufacturing, agriculture and construction sectors accounted for 18%, 12%, 11% and 5% respectively. All the rest went to loans with mixed use. Benefiting from access to long -term funding, 41% of the loans had tenor of 5 years and above; 32% of the loans had tenors of 3–4 years; 21% of loans had a tenor of 1–2 years and 6% had a tenor of less than 1 year. 69% of the loans were disbursed in Yerevan as most of the MSMEs meeting ADB selection criteria operate in Yerevan. By loan size, 22% of subloans supported microbusinesses, 46% of loans

54 Appendix 8

were disbursed to small businesses and 32% went to medium-size businesses. In terms of reaching new clients, only 42% of loans were issued to new clients, while 58% went to repeat clients. Gender-wise, loans to women entrepreneurs represented 65% of gross loans. No start-ups were financed. C. Implementation and Internal Operations of Subprojects under FIL

4. FIL utilization was slow and by its closing date, 31 December 2017, utilization was only 93%. Its less than full utilization is due to the following factors:

(i) At the project inception ADB used pre-approved fund allocations to the selected PFIs. This approach hindered the healthy competition among PFIs and resulted in slow disbursement speed. Hence in January 2016 ADB abolished this practice and moved to a first-come first-served basis to promote competition among PFIs and speed up on-lending rates.

(ii) At the project launch most of PFIs did not have an acceptable Environmental and Social Management System (ESMS) in place and some of them considered this requirement excessively burdensome relative to the small loan size expected from ADB. After several discussions with ADB safeguards team, this requirement was amended so that if the PFI was not going to provide B category subloans, it might not have the ESMS in place. All the PFIs decided to provide only C category subloans. Until the solution was found, there were no disbursements made.

(iii) After one year from the FIL start, another obstacle linked to the ADB requirements for external audit reports delayed disbursements. Besides to the standard audited financial statements and management letter, PFIs were also required to submit reports from an external auditor on (i) the use of ADB loan proceeds and (ii) PFI’s compliance with financial covenants. As per ADB requirements, audit opinion on two additional reports should be based on reasonable assurance opinion as per ISAE 3000 standards while most of Armenian audit firms were not ready to issue reasonable assurances as required by ADB. Until solution to this issue were found,1 the Program disbursement was frozen for nearly a year. One of the PFIs chose to withdraw from the program for this reason and, in July 2017, repaid the whole amount that was lent to it. This PFI never submitted an audited statement of utilization of funds for the amount that was lent to it under the FIL.

(iv) Deteriorating macroeconomic environment resulted in breach of financial covenants by two PFIs. As a result, there were no disbursements to these PFIs until they came in compliance with ADB covenants again.

D. Organization and Operations of PFIs

1. Organization, Management, and Staffing 5. By project completion, the FIL was implemented through five PFIs. Table A8.2 provides information on the ownership structure of the PFIs:

1 Some PFIs were granted temporary waivers for non-submission of such reports. Later, Grant Thornton-Armenia

agreed to issue such reports under ISAE3000 standards and most of PFIs shifted to this audit company.

Appendix 8 55

Table A8.2: Assessment of the Ownership and Management Capacity of the Participating Financial Institutions

Ineco Bank

CARD Kamurj Farm Credit Ararat Bank

Ownership structure

Closed joint stock company. The bank’s major shareholders are: Mr. Avetis Baloyan (30%); Mr. Karen Safarayn (25.92%); EBRD (22.7%),

Closed joint stock company, Fully owned by Center for Agribusiness and Rural Development Foundation, USA.

Closed joint stock company. Fully owned by Microenterprise Development Charitable Fund.

Universal credit organization commercial cooperative. It is owned by members of cooperative.

Open Joint Stock Company. The bank’s major shareholders are: Flash Limited (74.18%)2; EBRD (25%).

Quality of the management

Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory

Source: PFIs` audited financial statements

E. PFIs Financial Statement and Ratios

6. Based on the 2017 audited financial statements and program completion report of CBA-GAF, the overall financial condition of the five remaining PFIs of the program remained satisfactory. Liquidity, portfolio quality, and capital adequacy ratios, on a general note, are within acceptable levels, with all five PFIs compliant with CBA’s prudential ratios. 7. All five PFIs are likewise compliant with ADB covenants (Table A8.3).

Table A8.3: Performance Indicators of Participating Financial Institutions as of 31

December 2017

Particulars

AFS 2017 in AMD Millions

Ararat Bank

Ineco Bank

Kamurj UCO

Farm Credit UCO

CARD UCO

Auditor Grant

Thornton KPMG KPMG

Grant Thornton

Grant Thornton

Auditor's Opinion Unqualified Unqualified Unqualified Unqualified Unqualified

Key Indicators

Total Assets 212,470 277,842 14,334 10,964 7,242

Gross Loan Portfolio 121,200 178,287 13,532 10,358 6,526

NPL (extracted from CBA’s PCR/AFS) 3,151 10,893 854 383 882

Loan Loss Reserves 2,033 5,221 979 241 193

Liquid Assets 36,258 49,776 1,588 317 21

Deposits 95,812 140,774 n/a n/a n/a

Borrowings 66,844 83,784 7,893 9,423 6,142

Equity 35,155 48,243 6,269 1,353 995

Regulatory Capital 32,868 39,630 5,845 No data No data

Net Income Before Tax 2,622 8,944 474 6 37

Net Income After Tax 2,004 7,025 362 14 42

USD/AMD 483.32 483.32 483.32 483.32 483.32

Ratios

Net Income Margin 13.57% 29.46% 16.55% 0.44% 3.83%

Cost-to-Income Ratio 69.36% 62.39% 60.89% 99.22% 106.34%

Return on Average Assets 1.11% 2.73% 2.54% 0.14% 0.59%

Return on Average Equity 5.87% 15.32% 5.95% 1.07% 4.30%

2 Barsegh Beglaryan, an Armenian businessman, controls Ararat via ownership of Flash Limited.

56 Appendix 8

Particulars

AFS 2017 in AMD Millions

Ararat Bank

Ineco Bank

Kamurj UCO

Farm Credit UCO

CARD UCO

Liquid Ratio (Liquid Assets/Deposits) 37.84% 35.36% n/a n/a n/a

Capital Adequacy Ratio 15.43% 14.80% 14.80% 14.80% 14.80%

NPL Ratio (from CBA's PCR) 2.60% 6.11% 6.31% 3.70% 13.51%

Net NPL Ratio 0.94% 3.28% -0.99% 1.41% 10.88%

Covenanted Ratios with ADB

Compliance with CBA prudential ratios yes yes yes yes yes

Loans to related parties at 20% maximum

10.55% 1.33% 0.90% 13.90% 4.88%

Minimum 12% (banks) and 6% (UCO) CAR

15.43% 14.55% 51.10% 14.70% 15.06%

Net NPL to Regulatory Capital <25% 3.40% 14.31% -2.13% 1.80% 20.5%

AMD = Armenian Dram, CAR = Capital Adequacy Ratio, CBA = Central Bank of Armenia, NPL = non-performing loans, USD = US dollar. Notes: 1. Compliance with CBA’s prudential ratios were based on CBA’s program completion report (PCR).

2. Farm Credit, CARD, and Ararat Bank’s indicators for the financial covenants were taken from the audit report on compliance with financial covenants. Kamurj and Inecobank has yet to submit project specific audit reports. Indicators specified were based on CBA’s PCR.


Table A8.4: FIL outstanding subloan portfolio characteristics as of 31 December 2017

(aggregate data for all 5 PFIs) Number % Amount (AMD) %

Economic sector

Trade 441 35% 2,223,771,917 49%

Production 37 3% 217,421,856 5%

Agriculture 606 49% 1,099,260,591 24%

Manufacturing 27 2% 92,020,157 2%

Service 81 7% 281,936,845 6%

Construction 1 0% 654,785 0%

Other 26 2% 582,822,199 13%

Total 1,246 100% 4,497,888,349 100%

Purpose of Loan

Fixed assets acquisition (Investment) 438 35% 1,726,042,330 38%

Working Capital 514 41% 1,623,581,829 36%

Mixed 282 23% 982,513,597 22%

Other 12 1% 165,750,593 4%

Total 1,246 100% 4,497,888,349 100%

Collateral

Collateralized loans 305 785,095,731

Immovable collateral 435 35% 3,234,450,216 72%

Movable collateral 42 3% 151,879,747 3%

Other guarantees 766 61% 1,109,516,473 25%

Unsecured loan 3 0% 2,041,912 0%

Total 1,246 100% 4,497,888,349 100%

Loan Maturity (month)

<3 1 0% 10,000,000 0%

[3-6[ 3 0% 156,360,000 3%

[6-12[ 14 1% 113,195,889 3%

[12-24[ 281 23% 464,352,765 10%

[24-36[ 566 45% 1,001,917,253 22%

[36-48[ 202 16% 1,036,139,896 23%

[48-60[ 103 8% 1,066,835,696 24%

>60 76 6% 649,086,851 14%

Total 1,246 100% 4,497,888,349 100%

Appendix 8 57

Number % Amount (AMD) % Loan type

New loan 804 65% 2,627,725,558 58%

Repeat loan 442 35% 1,870,162,791 42%

Total 1,246 100% 4,497,888,349 100%

Region

Aragatsotn 116 9% 160,420,388 4%

Ararat 250 20% 731,604,957 16%

Armavir 305 24% 984,889,605 22%

Gegharkuniq 70 6% 295,844,104 7%

Yerevan 175 14% 1,484,879,775 33%

Lori 18 1% 110,006,887 2%

Kotayq 59 5% 151,859,291 3%

Shirak 52 4% 95,108,533 2%

Syuniq 119 10% 260,727,182 6%

Vayots Dzor 43 3% 116,827,132 3%

Tavoush 39 3% 105,720,497 2%

Other 0 0% 0 0%

Total 1,246 100% 4,497,888,350 100%


Table A8.5: Farm Credit UCO outstanding subloans portfolio as of 31 December 2017

Number % Amount (AMD) %

Economic sector

Trade 150 27% 660,768,292 43%

Production 24 4% 70,827,975 5%

Agriculture 308 56% 481,249,844 31%

Manufacturing 0% 0%

Service 42 8% 183,874,253 12%

Construction 0%

Other 27 5% 145,144,405 9%

Total 551 100% 1,541,864,769 100%

Purpose of Loan

Fixed assets acquisition (Investment) 178 32% 615,630,993 40%

Working Capital 241 44% 451,726,531 29%

Mixed 132 24% 474,507,245 31%

Other

Total 551 100% 1,541,864,769 100%

Collateral

Collateralized loans

Immovable collateral 194 35% 1,125,615,416 73

Movable collateral 39 7% 69,587,811 5

Other guarantees 315 57% 344,619,630 22

Unsecured loan 3 1% 2,041,912 0

Total 551 100% 1,541,864,769 100%


<3

[3-6[

[6-12[ 2 0% 4,747,118 0%

[12-24[ 59 11% 53,641,278 3%

[24-36[ 298 54% 442,915,974 29%

[36-48[ 109 20% 365,159,463 24%

[48-60[ 30 5% 207,724,874 13%

>60 53 10% 467,676,062 30%

Total 551 100% 1,541,864,769 100%

Loan type

New loan 169 31% 340,905,464 22%

Repeat loan 382 69% 1,200,959,305 78%

Total 551 100% 1,541,864,769 100%

58 Appendix 8


Region

Aragatsotn 29 5% 54,706,869 4%

Ararat 165 30% 457,513,312 30%

Armavir 249 45% 697,776,285 45%

Gegharkuniq 0% 0%

Yerevan 12 2% 81,083,147 5%

Lori 0% 0%

Kotayq 24 4% 61,043,393 4%

Shirak 0% 0%

Syuniq 37 7% 97,723,960 6%

Vayots Dzor 35 6% 92,017,804 6%

Tavoush

Other

Total 551 100% 1,541,864,769 100%


Table A8.6: Kamurj UCO outstanding subloans portfolio as of 31 December 2017


Economic sector

Trade 154 46% 359,390,550 47%

Production 0 0% 0 0%

Agriculture 85 38% 226,044,464 34%

Manufacturing 25 7% 58,139,223 8%

Service 23 8% 53,083,559 10%

Construction 1 1% 654,785 1%

Other 0% 0%

Total 288 100% 697,312,581 100%

Purpose of Loan


Working Capital 130 53% 237,538,633 42%

Mixed 0 0% 0 0%

Other 0 0% 0 0%

Total 288 100% 697,312,581 100%

Collateral


Immovable collateral 23 5% 252,992,625 17%

Movable collateral 0 0% 0 0%

Other guarantees 265 95% 444,319,956 83%

Unsecured loan 0 0% 0 0%

Total 288 100% 697,312,581 100%


<3 0 0% 0 0%

[3-6[ 0 0% 0 0%

[6-12[ 2 0% 5,726,280 0%

[12-24[ 128 53% 231,812,353 42%

[24-36[ 140 43% 237,445,342 48%

[36-48[ 7 1% 35,134,867 1%

[48-60[ 3 0% 104,620,201 1%

>60 8 2% 82,573,538 8%

Total 288 100% 697,312,581 100%

Loan type

New loan 288 100% 697,312,581 100%

Repeat loan

Total 288 100% 697,312,581 100%

Region

Aragatsotn 8 5% 12,553,604 4%

Ararat 2 2% 2,878,772 2%

Armavir 12 7% 26,399,519 8%

Appendix 8 59


Gegharkuniq 38 8% 201,125,243 8%

Yerevan 56 17% 118,203,305 20%

Lori 9 6% 18,111,820 4%

Kotayq 17 5% 33,818,766 5%

Shirak 29 15% 30,334,560 14%

Syuniq 77 25% 155,979,958 26%

Vayots Dzor 4 1% 8,081,120 1%

Tavoush 36 9% 89,825,914 9%

Other 0 0% 0 0%

Total 288 100% 697,312,581 100%


Table A8.7: AraratBank subloan portfolio as of 31 December 2017


Economic sector

Trade 52 71% 547,480,784 68%

Production 0 0 0 0.0

Agriculture 0 0 0 0.0

Manufacturing 0 0 0 0.0

Service 0 0 0 0.0

Construction 0 0 0 0.0

Other 21 29% 252,307,067 32%

Total 73 100% 799,787,851 100%

Purpose of Loan


Working Capital 55 75% 540,986,510 68%

Mixed 6 8% 109,802,689 14%

Other 9 12% 108,514,131 14%

Total 73 100% 799,787,851 100%

Collateral


Immovable collateral 69 95% 716,562,810 90%

Movable collateral 3 4% 82,291,936 10%

Other guarantees 1 1% 933,105 0%

Unsecured loan 0 0 0 0%

Total 73 100% 799,787,851 100%


<3 0 0 0 0.0

[3-6] 0 0 0 0.0

[6-12] 2 3% 46,498,301 6%

[12-24] 3 4% 40,900,000 5%

[24-36] 16 22% 91,245,636 11%

[36-48] 38 52% 329,587,945 41%

[48-60] 14 19% 291,555,969 36%

>60 0 0% 0 0%

Total 73 100% 799,787,851 100%

Loan type

New loan 17 23% 214,348,367 27%

Repeat loan 56 77% 585,439,484 73%

Total 73 100% 799,787,851 100%

Region

Aragatsotn 0 0% 0 0%

Ararat 1 1% 1,467,198 0%

Armavir 1 1% 17,783,514 2%

Gegharkuniq 0 0% 0 0%

Yerevan 61 84% 735,336,174 92%

Lori 2 3% 7,900,355 1%

Kotayq 3 4% 12,362,037 1.5%

60 Appendix 8


Shirak 5 7% 24,938,573 3%

Syuniq 0 0% 0 0%

Vayots Dzor 0 0% 0 0%

Tavoush 0 0% 0 0%

Other 0 0% 0 0%

Total 73 100% 799,787,851 100%


Table A8.8: CARD UCO outstanding subloan portfolio as of 31 December 2017


Economic sector

Trade 65 21% 283,033,132 36%

Production 9 3% 55,019,348 7%

Agriculture 213 70% 391,966,283 50%

Manufacturing 0 0% 0 0%

Service 16 5% 44,979,033 6%

Construction 0 0% 0 0%

Other 2 1% 10,097,935 1%

Total 305 100% 785,095,731 100%

Purpose of Loan


Working Capital 71 23% 78,829,350 10%

Mixed 144 47% 398,203,663 51%

Other 0 0% 0 0%

Total 305 100% 785,095,731 100%

Collateral

Collateralized loans 305 1 785,095,731 1

Immovable collateral 124 0 602,832,092 1

Movable collateral 0 0 0 0

Other guarantees 181 1 182,263,639 0

Unsecured loan 0 0 0 0

Total 305 100% 785,095,731 100%


<3 0 0% 0 0%

[3-6[ 0 0% 0 0%

[6-12[ 3 1% 501,506 0%

[12-24[ 86 28% 79,701,744 10%

[24-36[ 110 36% 176,789,124 23%

[36-48[ 41 13% 107,833,483 14%

[48-60[ 50 16% 321,432,623 41%

>60 15 5% 98,837,251 13%

Total 305 100% 785,095,731 100%

Loan type

New loan 305 100% 785,095,731 100%

Repeat loan 0 0% 0 0%

Total 305 100% 785,095,731 100%

Region

Aragatsotn 79 26% 93,159,915 12%

Ararat 82 27% 269,745,676 34%

Armavir 37 12% 77,488,438 10%

Gegharkuniq 32 10% 94,718,861 12%

Yerevan 30 10% 139,686,336 18%

Lori 3 1% 6,358,350 1%

Kotayq 15 5% 44,635,095 6%

Shirak 15 5% 19,657,006 3%

Syuniq 5 2% 7,023,264 1%

Vayots Dzor 4 1% 16,728,208 2%

Tavoush 3 1% 15,894,583 2%

Appendix 8 61


Other 0 0% 0 0%

Total 305 100% 785,095,731 100%


Table A8.9: InecoBank outstanding subloan portfolio as of 31 December 2017


Economic sector

Trade 20 69% 373,099,159 55%

Production 4 14% 91,574,533 14%

Agriculture 0 0% 0 0%

Manufacturing 2 7% 33,880,934 5%

Service 0 0% 0 0%

Construction 0 0% 0 0%

Other 3 10% 175,272,792 26%

Total 29 100% 673,827,418 100%

Purpose of Loan


Working Capital 17 59% 314,500,806 47%

Mixed 0 0% 0 0%

Other 3 10% 57,236,462 8%

Total 29 100% 673,827,418 100%

Collateral


Immovable collateral 25 1 536,447,274 1

Movable collateral 0 0 0 0

Other guarantees 4 0 137,380,144 0

Unsecured loan 0 0 0 0

Total 29 100% 673,827,418 100%


<3 1 3% 10,000,000 1%

[3-6[ 3 10% 156,360,000 23%

[6-12[ 5 17% 55,722,684 8%

[12-24[ 5 17% 58,297,390 9%

[24-36[ 2 7% 53,521,177 8%

[36-48[ 7 24% 198,424,138 29%

[48-60[ 6 21% 141,502,029 21%

>60 0% 0%

Total 29 100% 673,827,418 100%

Loan type

New loan 25 86% 590,063,415 88%

Repeat loan 4 14% 83,764,003 12%

Total 29 100% 673,827,418 100%

Region

Aragatsotn 0 0% 0 0%

Ararat 0 0% 0 0%

Armavir 6 21% 165,441,850 25%

Gegharkuniq 0 0% 0 0%

Yerevan 16 55% 410,570,812 61%

Lori 4 14% 77,636,362 12%

Kotayq 0 0% 0 0%

Shirak 3 10% 20,178,394 3%

Syuniq 0 0% 0 0%

Vayots Dzor 0 0% 0 0%

Tavoush 0 0% 0 0%

Other 0 0% 0 0%

Total 29 100% 673,827,418 100%


62 Appendix 8

F. SUBLOAN IMPLEMENTATION

1. Loan Appraisal

i. Distribution of Subloans 8. The actual distribution of SME subloans portfolio did not deviate from the ADB criteria. The current SME loans distribution criteria set in the loan and project agreements are adequate to ensure increased access of SMEs to finance. No amendments were needed.

ii. Covenants 9. In general, the relevant covenants in the loan and project agreements signed are adequate to regulate the process of FIL utilization, selection of PFIs, SME loans distribution, except issues discussed above in para 4 of the Annex).

iii. Quality of Appraisal 10. CBA does not intervene in appraisal of the SME subprojects, which is done by the PFIs. SME sub-projects appraisal at PFIs’ level is executed at satisfactory level.

2. FIL Implementation

11. Overall, the project implementation was difficult due to the mistakes in FIL design.

Appendix 9 63

POLICY MATRIX STATUS

Tranche 1 Policy Actions Tranche 2 Policy Actions

Output 1. Improved Institutional Framework Supports Women Entrepreneurs and MSMEs

1.1.SME DNC to have established an internal strategic planning committee, which makes recommendations in relation to the development of priority sectors and strategic aims in consultation with stakeholders

Status: Implemented

MOE to (a) adopt and implement national strategy for small and medium entrepreneurship development, including women’s entrepreneurship promotion

Status: Implemented

(b) implement interagency coordination working group on women’s entrepreneurship promotion

Status: Implemented

1.2. SME DNC to have strengthened governance by establishing an audit committee, which monitors financial and economic activities and ensures that there is an adequate system of internal control and risk management

Status: Implemented

SME DNC Board of Trustees to strengthen governance by (a) appointing new independent Board of Trustees, of which at least 50% shall be women

Status: Implemented

(b) requiring Board of Trustees to undergo training by accredited trainer on good corporate governance practices

Status: Implemented

(c) strengthening risk management committee (of which at least 50% shall be women) for risk monitoring, risk control, and risk analysis associated with financial products provided

Status: Implemented

(d) adopting internal procedures to assess credit risk related to provision of financial products, which incorporate good practices, and train staff on these procedures

Status: Implemented

(e) establishing appraisal panels for fund allocations at regional level involving SME DNC and relevant stakeholders

Status: Implemented

1.3. SME DNC Board of Trustee to have ratified improved approach to support start-ups (including 100% loan guarantee and CEFE3 training approach)

SME DNC to adopt a tailored approach to support women entrepreneurs and MSME start-ups

Status: Implemented

64 Appendix 9


Status: Implemented

1.4. SME DNC to have registered start-up entrepreneurs by sector and region, sex-disaggregated Status: Implemented. However, in 2016 collection of sex disaggregated data stopped. MOE is already addressing this issue and re-collection is expected to resume in 2019 (para 50 of the PCR).

SME DNC to (a) develop data base to at least 10,000 entrepreneurs and MSMEs, with sex disaggregated data

Status: Implemented

(b) undertake annual surveys on women entrepreneurs and MSMEs to identify needs and effectiveness of support services provided, including lessons learned and opportunities to be developed for women

Status: Implemented

1.5 SME DNC to have assessed the role of women entrepreneurs in growth sectors by (a) implementing a PACA4 exercise in 3 communities

Status: Implemented

(b) pursuant to result of PACA, define target groups (by sector and region)

Status: Implemented

SME DNC to (a) identify suitable opportunities for women owned businesses in growth sectors

Status: Implemented

b) implement action plan, with targets and indicators, for developing women entrepreneurs in identified sectors.

Status: Implemented

Output 2. Improved Capacity of Women Entrepreneurs and MSMEs

2.1. SME DNC to have strengthened its provision of nonfinancial services (training and Business Development Services (BDS)) by (a) developing partnerships with private sector providers of training and business development services for women entrepreneurs and MSMEs

Status: Implemented

(b) conducting 8 start-up campaigns serving more than 100 people of which at least 40% are women

Status: Substantially implementeda

SME DNC to support women entrepreneurs and MSMEs by (a) providing at least 20 start-up training programs

Status: Implemented

(b) implementing at least 4 awareness campaigns about BDS resources

Status: Implemented

(c) improving its website and online market place to meet the specific needs of women entrepreneurs

Status: Substantially complied

(d) using information and communication technologies (ICTs)6 to increase the reach of start-up campaigns to serve at least 2,400 people annually, of which at least 50% are women

Status: Implemented

Appendix 9 65


2.2. MOE to have promoted women entrepreneurship by launching a pilot annual awards program for women entrepreneurs and MSMEs

Status: Implemented

MOE to (a) establish the awards program as an annual campaign to promote woman entrepreneurship

Status: Implemented

SME DNC to (a) design and pilot a mentorship network for women entrepreneurs (and feasibility of using ICTs to support it)

Status: Implemented

Output 3. Improved Access to Finance by Women Entrepreneurs and MSMEs

3.1. SME DNC to have (a) adopted revised loan guarantee scheme (b) issued at least 80 loan guarantees under new scheme (approximate aggregate value of $0.6 million) to existing and new MSMEs (for the period February – August 2012) of which at least 30% are women entrepreneurs and MSMEs

Status: Implemented

SME DNC to (a) issue at least 300 (approximate aggregate value of $1.5 million) loan guarantees and or other financial products to active MSMEs and start-ups of which at least 50% are women entrepreneurs and MSMEs (b) ensure application of ADB Safeguards policy compliance in the subloan processing and implementation.

Status: Implemented

Output 4: Improved Business Environment Supports MSMEs

4.1 MOJ to have reduced the cost of registering businesses (including MSMEs) by eliminating a registration fee of (AMD17,000)

Status: Implemented

4.2 Accounting Center to have provided services of preparing taxation reports, conducting counseling on taxation to at least 470 MSMEs (at least 30% are women) (January – August 2012)

Status: Implemented

Accounting Center to (a) adopt strategy, including financing plan, to ensure ongoing services to MSMEs, including the needs of women entrepreneurs and MSMEs

Status: Implemented

4.3 MOF to have simplified the patent fee system to enable businesses to pay patent fees on flexible terms including monthly or sequential months (but not more than twelve months)

Status: Implemented

4.4 MOF to have simplified tax reporting by eliminating requirements for maintaining special

SRC to

66 Appendix 9


tax books (book of registration of revenues and book of shipment of inventory holdings)

Status: Implemented

(a) broaden the base for electronic tax reporting by piloting a platform for paying taxes via points-of-sale terminals and the official website of SRC

Status: Implemented

4.5 Government/MOE to have initiated the establishment of a virtual one-stop shop to include efficient and up-to-date access to information, products and services for starting and growing businesses (micro, small, medium-sized and large)

Status: Implemented

Government/MOE to support business development, including women entrepreneurs and MSMEs by (a) implementing a virtual one-stop shop to enable businesses efficient access to information, products and services for starting and growing businesses through effective utilization of ICT

Status: Implemented

(b) consolidating existing databases into one database on micro, small, medium-sized and large enterprises in Armenia, sex-disaggregated

Status: Implemented

4.6 Government/MOE to have broadened the cooperation between the SME DNC and ADA in promoting micro, small, medium-sized and large enterprises—including women entrepreneurs and MSMEs—through the establishment of a working group

Status: Implemented

Government/MOE to (a) adopt an action plan to ensure collaboration between SME DNC and ADA and enable efficient and effective support to micro, small, medium–sized and large enterprises, including women entrepreneurs and MSMEs

Status: Implemented

MOF = Ministry of Finance, MOE = Ministry of Economy, MOJ = Ministry of Justice, SME DNC = Small and Medium Entrepreneurship Development National Center, ADA = Armenian Development Agency, ICT = Information Communication Technology, MSME = micro, small and medium-sized enterprise, PACA = Participatory Appraisal of Competitive Advantage. a In 2013 SME DNC conducted 25 start-up campaigns in 2013 however the participation rate for women was below 40% target. It equaled to 32% in 2013 and 37% in 2014. b As per SME DNC, in 2015 its webpage included specific sub-tab for women, which provided (i) detailed information

on SME DNC`s support programs for women entrepreneurs and (ii) sex-disaggregated data on SME DNC operations. Later, the webpage underwent several changes and its current version (as of 28 August 2018) does not include separate sub-tab for women entrepreneurs. At present, it provides links to Women Entrepreneurship Strategy in Armenia (https://smednc.am/files/pdfs/attachments/original/b7d39e3430.pdf); 2013 Needs Assessment for Business Development Services among women entrepreneurs (https://smednc.am/files/pdfs/attachments/original/bc6b500b.pdf) and success stories of several women entrepreneurs (e.g. https://smednc.am/en/multicontent/success_stories/413/).

https://smednc.am/files/pdfs/attachments/original/b7d39e3430.pdf

https://smednc.am/files/pdfs/attachments/original/bc6b500b.pdf

https://smednc.am/en/multicontent/success_stories/413/

45230-001: Women's Entrepreneurship Support Sector ...€¦ · 3. Project title Women’s...

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