Plans Underway in Syunik for Community Credit Consultants

Before I could even get my foot in the door of the Babayan house, three year-old Davit yelled out, “Kamo was here. He tore the rug from the wall and took off with it.” He repeated this a few times, probably hoping to hear some words of consolation from the unknown guest. 

Grandpa Samvel Babayan finally explained what the young boy was blabbering about. “We owe someone money. The creditor came and took the rug, saying that he’d bring it back once we paid the debt.” The debt owed by the Babayan family was paid off with just the rug. In 2008, the family put their home in the village of Verishen, Syunik Marz, up for collateral in exchange for a 2 million AMD loan from ACBA Credit Agricole Bank. They wanted the money to invest in the family business.

Babayan family loses house in bank seizure

Samvel Babayan says that they used the loan to purchase 220 head of sheep from a man named Melik in the village of Tegh. Mr. Babayan says that the only revenue they got were the sixty lambs born from the herd. In an unfortunate twist of fate, the rest of the herd was soon infected with brucellosis and had to be put down. He says the village veterinarian was informed about the incident. The Babayan family was caught in a bind. The first payment on the loan was due but the family was still trying to find out if the livestock were indeed infected before the actual sale took place. For a long time, the Babayan’s never paid off the loan principal or the interest. For violating the terms of the loan, ACBA’s Goris branch took the matter to the courts last year. In May, the court ordered that the house, put up as collateral by the Babayan’s, be seized. According to Gagik Ohanyan, an official with the Syunik Compulsory Enforcement Service (CES), the court established the debt owed by the family at 1.752 million AMD. All the while, the bank and the Babayan’s had entered into negotiations. Nvart, Samvel Babayan’s wife, says that they sold off the rest of their livestock and went to another credit agency for a loan in order to pay off the interest on the ACBA loan. The family also borrowed money from individual creditors. Mrs. Nvart notes that while credit officials with the bank’s Goris branch and CES personnel gave them a certain “grace period” to pay off the loan, the family just wasn’t able to pay it all off. As a result, their house was put on the auction block. The family held out hope that the house could still be saved even though only one member of the household was working. This was the father, who worked at a private farm.

Agricultural loans pose specific risks

The question of whether or not the Babayan’s used the loan money judiciously is perhaps another matter. We should remember, though, that Edgar Tokhsats, who heads the Syunik Foodstuff Safety and Veterinary Department, denied claims that the 200 heads of sheep had been infected by the disease. At the heart of the matter is the fact that the credit agency never took such a risk factor into account, even though one could argue that making loans in the agricultural sector carries an inherent risk. According to Gagik Petrosyan, who was selected to head ACBA’s Credit Department at the Goris branch one month ago, such evidence was never included in the loan contract. He didn’t deny the fact that there were many outstanding agricultural loans in the area where the deadline for payment had expired and that the bank had entered into negotiations with the loan recipients in order to avert taking the cases to court. The Babayan’s aren’t the only family in the region that have ended up in the clutches of the “credit web”. The criminal case involving the former head of Ardshininvest Bank’s Gyumri branch office is still under investigation. Due to the bank official’s actions, scores of local families suffered losses. There’s also the case involving the ex-head of “SEF International’s” Gyumri branch. The representative of this credit agency was found guilty last year of expropriating customer loan payments. Avert Harutyunyan, SEF’s Regional Director, said that while some people have been found guilty in the case involving the unpaid 32 million AMD loans, the investigation is continuing given that the fate of seventy debtors is still undecided. Mr. Harutyunyan added that loan recipients often violate the terms of their contracts and that unpaid loans constitute 12% of total loans made; six times the norm.

Syunik plans advisory agency for farmers

It thus becomes apparent that a large segment of potential loan applicants do not possess enough information before signing on the dotted line. The issue was raised by the Swiss Agency for Development and Cooperation, an official aid organization of Switzerland, during the preliminary stages of several agricultural programs being drafted by the Syunik Regional Administration. One of the projects, the “Farmers’ Revenue and Credit Advisory Program”, envisages the training of one consultant per sixteen regional communities and the creation of a financial/advisory agency. In the opinion of Mr. Harutyunyan from SEF, this isn’t an effective approach to address the credit issue. However, many local community government heads, who often sign as guarantors for loan applicants, believe that such measures might serve to educate villagers regarding the loan process and what they need to take into account before assuming such financial obligations. Mr. Harutyunyan says that in the near future SEF is planning to offer local government heads credit funds to make up their municipal budget deficits. In the meantime, he’s convinced that what’s needed is a broad-based informational campaign aimed at potential rural loan applicants, explaining both the risks and advantages of credit financing. Mr.Harutyunyan is sure such a campaign will be launched.