By Siranush Gevorgyan – Armenia – Taguhi Gevorgyan dreamed of a prosperous future when she took out a bank loan to build a greenhouse and grow vegetables in her home village of Vanand in western Armenia.

The 56-year-old mother of three has now been left ruined and dispossessed after failing to meet demands for sky-high interest payments on the loan she took out.

Gevorgyan lost the home she built with her late husband 20 years ago because she put it up as security, and now lives in an empty house belonging to a cousin.

“The problem was the high interest rates demanded by the bank, and my own inexperience which meant I wasn’t able to grow and sell a good crop. And we spent some of the money on other essentials,” she told IWPR.

She asked for the bank she dealt with not to be named, to avoid causing problems for other people in similar situations.

As a result of the global economic crisis and its impact on Armenia, the money problems that hit Gevorgyan are now common.

In a country where half the population works on the land, many people took out loans to develop their farms at a tine when interest rates were low.

After the global financial crisis struck, however, interest rates spiked, leaving farmers struggling to pay the banks what they owed. Officials say rates are twice what they were before the crisis.

The justice ministry says that in the first six months of 2010, nearly 8,500 legal applications for repossession were decided in favour of commercial banks, totalling 5.9 billion drams or 16 million dollars, while credit organisations won 1,300 cases they brought for non-payment, for a total of 389 million drams.

Most cases were in the Kotayk, Ararat, Armavir, Lori and Aragatsotn regions, all of which have large farming populations.

Local officials are often reluctant to talk about such matters, preferring to avoid drawing attention to their areas.

“What do you want to write about that for? Our village could end up being blacklisted by banks,” said Vachik Adilkhanyan, head of the village administration in Geghanist, a village in the Ararat region where many farmers borrowed to built greenhouses and are now struggling with debts.

Another official in the village said farmers were only just managing to pay for the gas they needed to heat their greenhouses, and were falling further and further behind with interest payments.

Farmers are increasingly concerned by the situation. Hrachya Berberyan, chairman of the Agrarian-farmer Union, accused the banks of charging excessive interest rates.

He said World Bank money that had been lent to Armenia “almost interest-free” was distributed to the banks so that they could issue loans.

“The banks said they’d offer finance to farmers at interest rates around 15 per cent,” he said. “However, the fact is that villagers are paying 2.5 or three per cent a month on their loans. How can they develop their businesses when they’re paying 30 per cent a year?”

Berberyan said the banks must carry some of the blame for recent price rises affecting potatoes, fruit and other produce. Aside from bad weather this year, supply has been reduced because the area of land sown with vegetables, grain and other crops has shrunk as farmers are forced out of business.

IWPR was unable to obtain interviews with the main banks that lend to farmers.

Mariam Yesayan, head of the Aregak credit organisation, was prepared to speak, but since her company specialises in microcredit that is not secured by property, she could not comment on the problem of repossessions. She said her company had seen only 65 loans go unpaid in the 12 years of its existence.

The government has regularly declined to intervene in such affairs, although a question was asked in parliament in May by independent member Lyova Khachatryan, about why banks could charge high rates on money that originated in very low-interest loans from international organisations.

The credit squeeze looks set to drive more farmers off the land.

Taguhi Gevorgyan’s son Sergey has been forced to leave home and travel to Russia to earn money in hope that the family can start again.

“My son told me, ‘Mum, I will work for a couple of years, and we’ll be able to build a new house’,” Gevorgyan said.

Siranush Gevorgyan is a correspondent for Armenianow.

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