Rural Areas Economic Development Programme

Rural Areas Economic Development Programme

The programme has the objective of increasing incomes on a sustainable basis for rural people in mountain zones in the provinces of Aragatsotn, Gegharkunik, Lori, Shirak, Syunik, Tavusgh and Vayots Dzor. Poverty is widespread in the project area, which covers about 80 per cent of the land area of Armenia and is home to about 40 per cent of the country’s total population. After land was privatized, land use and cropping patterns changed considerably as new smallholder farmers adopted a small-scale, mixed farming system as a means of survival.

One of the programme’s objectives is to stimulate sustained economic growth for rural people by providing access to financing for small and medium-size enterprises, improving access to business intermediation services and establishing the infrastructure required for commercial activities. Economic and banking activity in the area has been almost non-existent, with the exception of the Agricultural Cooperative Bank of Armenia (ACBA), which provides financial services to rural people in disadvantaged provinces.

Access to financial services is a key to rural development for the unemployed men and women, small-scale and medium-scale farmers, rural entrepreneurs, agro-processors and traders who are targeted by programme activities. Through the programme rural people who have benefited from earlier phases of IFAD support, including farmers who are members of water users’ associations, producers’ groups and village associations, have an opportunity to further improve their incomes. Farmers can borrow the funds they need for seasonal activities or for capital investment, and other rural people can find employment in enterprises created by commercially oriented investors.

The programme moves beyond a more narrow focus on agricultural development to emphasize rural development, providing opportunities for the many rural poor people who turned to subsistence agriculture as a strategy for survival to move back into occupations for which they are better trained and in which they have experience.

A substantial portion of the IFAD loan supporting the programme provides capital to commercial banks and other eligible financial institutions for refinancing. The capital is channeled to financial institutions through the Rural Finance Facility (RFF), a permanent, autonomous unit established by the government to carry out refinancing operations (see Partners and Innovation for development). Loans are generally in amounts of up to US$5,000 for household-based on-farm and off-farm enterprises and between US$5,000 and US$150,000 for small and medium-size enterprises.

Financing supports efforts to intensify agricultural production, expand livestock operations, develop machinery-contracting businesses offering mechanized services to small-scale farmers, and develop small agro-processing factories. The programme supports investment proposals for small-scale infrastructure related to commercial activities such as water points for livestock, small irrigation and road works, and to environmental activities regarding dairy and slaughterhouse enterprises.

Source: IFAD