Survey of the Legal and Regulatory Environment for Microfinance in the Republic of Armenia

This report updates a survey of the legal and regulatory environment for microfinance institutions (MFIs) in the Republic of Armenia that was prepared in 2001. It:

• Identifies developments in the legal and regulatory environment for MFIs in Armenia;
• Recommends legal and regulatory reforms.

The paper is divided as follows:

• Part 2 sets forth summary conclusions;
• Part 3 outlines the current scope of microfinance activities;
• Parts 4, 5 and 6 discuss respectively, changes in laws and normative acts since the 2001 survey affecting non-profit micro lenders, commercial micro lenders and banks engaged in microfinance activities;
• Part 7 discusses changes affecting providers of financial services generally;
• Part 8 outlines recommendations for legal and regulatory reform.

The report concludes that:

• The most significant development has been the adoption of a new Credit Organizations law (COL);
• Micro lending institutions face problems about:
  • The legality of their lending activity;
  • Unavailability of deductions in calculating profit tax;Administrative expenses.

The report recommends that:

• The legal obstacles faced by NGO micro lenders could be overcome by:
  • Bringing these micro lenders under the jurisdiction of the Central Bank of Armenia;
  • Giving the Ministry of Finance specialized non-prudential regulatory jurisdiction over such institutions;
• For commercial micro lenders, the primary emphasis should be on lightening their regulatory burden;
• For banks engaged in microfinance, steps should be taken that would make it easier for banks to engage in the types of lending that are typical in microfinance.