Established in 1916, the Farm Credit System in the United States is a federally chartered network of cooperatives and other organizations, which lends money to agricultural producers, rural homeowners and farm-related businesses and cooperatives. Now, a financial cooperative has been started in Armenia based on the same concept, heavily influenced (and supported) by the system in the United States.
Farm Credit Armenia Universal Credit Organization Commercial Cooperative is currently the only financial institution in Armenia based on true cooperative principles. Its member-borrowers (farmers and rural residents) are its owners, controllers and beneficiaries. Farm Credit Armenia provides loans to farmers, private entrepreneurs and legal entities from different provinces around Armenia for agricultural production, food processing and other agriculture-related activities, as well as agricultural machinery leasing.
According to Armen Gabrielyan, Farm Credit Armenia's CEO, its services are sometimes up to twice cheaper than the competitors' offers. Additionally, he says, "it has one of the most democratic boards in the country." The Board of Directors is composed of one member-farmer from each region of Armenia and two independent experts.
Back in 2005, Gabrielyan was the head of the credit department for the Center for Agribusiness and Rural Development Foundation. He came up with a proposal to develop a cooperative lending institution, whose owners, users and beneficiaries would be Armenian farmers. After becoming familiar with the US Farm Credit Systems cooperative lending principles and as a result of a bilateral oral agreement, the Armenian Ministry of Agriculture and the U.S. Department of Agriculture (USDA) agreed to investigate the creation of an independent and sustainable rural cooperative financial system in Armenia, with initial support from the USDA.
A team from Farm Credit Administration, which oversees the Farm Credit System in the US, visited and studied Armenian agriculture and endorsed and supported the idea. In 2006, Armenian staff members were trained in the United States, and the Farm Credit Armenia cooperative was officially founded in September 2007. It now has around 2,000 member-borrowers and 34 employees, an annual gross revenue of $1,527,000 and net profit of $476,000.
Henrik Yevreyan, a fish farmer from the village of Hovtashat, in the Ararat region, is one of Farm Credit Armenia's successful borrowers. He mostly breeds trout, starting from eggs, and sells his fish wholesale. Yevreyan started his business in 2008, when he acquired an acre of land together with his cousin and started building fish ponds. With two initial loans from Farm Credit Armenia in 2011 he drilled artesian water wells, acquired fish fodder and a water counter device and built a pipeline to distribute water to his fish ponds. With the third loan in 2012 he acquired another three-quarters of an acre to build more fish ponds. His sales volume increased 10 times from 2008 to 2011, and in autumn 2012 it was already three times greater than in 2011.
Yevreyan offers a vivid example of how a successful business can be grown thanks to cooperative lending. In the future, says Gabrielyan, the goal of Farm Credit Armenia is to become a farmers' bank and to be the market leader in the agricultural lending market.
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