The Role of Specialized Agricultural Credit Institutions in the Development of the Rural Finance Sector of Armenia: Case of Credit Clubs

The paper aims at studying the challenges of agricultural finance in Armenia. Strengthening the rural credit markets and institutions in Armenia is of paramount importance. The study reviews and analyzes the outcomes of the Agricultural Credit Club Program implemented by the US Department of Agriculture Marketing Assistance Program in Armenia. The study identifies the attitudes and perceptions of member farmers relating to the level of interest rates and access to credit. The findings provided clear indications of the challenges facing the improvement or even development of rural financial markets and agricultural credit institutions from the demand side of agricultural credits. The study concentrates on several important issues like: problems with loan collateralization in rural areas, land reform and property rights, transaction costs for monitoring rural credits, the role of government in rural credit and finance markets, and the role of specialized agricultural credit institutions like credit clubs. The research was based on surveys and interviews. Surveys have been conducted among credit club members to identify and measure the benefits of such a rural credit cooperative initiative. Based on findings, certain recommendations have been proposed regarding the rural finance and credit mechanisms.