BANKING ON ARMENIA'S DIASPORA

[gamavor]

BANKING ON ARMENIA'S DIASPORA

 

business new europe

http://businessneweurope.eu/storyf1611/Ban...menias_diaspora

May 26 2009

 

Armenia's best export is its people and the government is hoping to

tap its wealthy diaspora by setting up a global retail bank that can

funnel some of their money into projects back at home.

 

There are three times more Armenians living outside the country than in

it and remittances make up the single biggest hard currency earner for

the country; it seems no matter how far Armenians travel, their hearts

remain at home. The government wants to capitalise on this loyalty

and instead of waiting for the money to be sent home, it will go out

and get it by setting up a bank with branches all over the world. "It

is a global retail bank that will target Armenians living overseas,"

Armenia's minister of economy, Nerses Yeritsyan, tells bne during May's

annual meeting of the European Bank for Reconstruction and Development

in London. "Imagine: if only 1% of all Armenians take a credit card

from the new bank, then that will generate enough money for us to

say goodbye to [international financial institution] funding forever."

 

The inflow of remittances is already worth billions of dollars a

year, but this is only the tip of the asset iceberg and a fraction

of the personal wealth of successful Armenia's who live overseas,

most of which is deposited in local banks. With large populations

concentrated in places like Moscow, London and Los Angeles - pop

music diva Cher is an ethnic Armenian - the locations for the first

branches are pretty obvious.

 

Home role

 

The government contributed $20m to the capital of the bank, which

has already been set up, but isn't operational yet. The plan was to

raise another $80m from Armenians around the world. "The other half

of the equation is the resources the bank mobilises and will invest

into targeted projects back in Armenia. It is a way for our diaspora

to take a more active role in the development of the country and at

the same time earn a good return on that growth," says the minister.

 

However, the crisis threw a wrench into the plans, as most of the

commitments - which came from both large Armenian-owned businesses

and private individuals - have been put on hold after markets

crashed around the world at the end of last year. "We took the

bank on a road show last year and found there was a lot of support

amongst the diaspora," says Yeritsyan. "However, these commitments

have been withdrawn for the moment while everyone is assessing their

position. But we are confident that they will return and we can push

ahead as planned with the bank."

 

In the meantime, the government has hired head hunters to find a top

quality international CEO, as the tricky bit of making a global retail

bank work is that it will have to compete with high street banks in

the US and UK in terms of the quality of its service. It won't be easy,

but Yeritsyan is literally banking on the loyalty that Armenians feel

towards their homeland to give the bank a competitive edge.

 

 

http://groong.usc.edu/news/msg270616.html

 

 

[Boghos]

Other countries have tried this before, such as Israel. They were state banks that also had a domestic presence such as Leumi and Happoalim (actually trade union's bank). I don't think Armenia is ready for this project.