Increased credit burden is a triple blow

According to the Central Bank of Armenia, an analysis of loans issued by commercial banks has revealed that nearly half of the loan portfolios of Armenian banks consist of mortgage and consumer loans. This means that the burden of half of the granted loans falls directly on the shoulders of citizens.

Before addressing the issue of this burden on citizens, it is important to highlight that the funding allocated to other sectors—such as education, science, technology, and other essential areas—is significantly lower compared to mortgage and consumer lending, a telling indicator of the qualitative characteristics of the modern structure of the Armenian economy. It turns out that these sectors are not attractive for banks, which cannot but cause concern.

As for the burden on citizens, the situation becomes even more troubling when viewed in the context of uncertain economic prospects. Today’s credit burden for citizens may at any moment turn into unfulfilled obligations with all the ensuing social consequences. This is also confirmed by the excessively high interest rates at which these loans are granted.

Finally, there is a third component to consider—risks arising from borrowers failing to properly service their debts. These are the possible risks and challenges to the banking system—a sector that plays a key role in the economy.