Armenian government to assist 'high-risk borrowers' in paying off loans
Armenian government to help borrowers repay debts
The Armenian government has decided to support individuals deemed “high-risk borrowers” by local banks, as they have been unable to repay their loans for at least three years. The programme targets borrowers whose outstanding principal debt does not exceed 1 million drams ($2,500). Assistance will only be available to individuals officially registered as employees of an organisation, a mandatory condition. Preliminary estimates suggest that 218,000 people may qualify for the programme.
The initiative has already been approved by the Cabinet. Applications for assistance will be accepted starting February 2025, when an online platform for submissions becomes operational.
“The aim is to help potential beneficiaries restore their economic activity, enable them to work legally, and rebuild their creditworthiness and reputation,” the project’s authors explained.
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Borrowers to receive financial aid equivalent to their income tax payments
The essence of the project is that beneficiaries will receive financial aid equivalent to the income tax deducted from their salaries. This amount will be directed toward repaying their loan obligations.
The duration of financial assistance will not exceed 24 months, starting from the beginning of the month immediately following the approval of the application for aid.
During these two years, 20% of the participant’s salary will also be allocated to loan repayment.
Only 20% are registered employees
Labour and Social Affairs Minister Narek Mkrtchyan reported that only 20% of the potential beneficiaries, or 43,600 out of 218,000 people, are officially employed.
“The majority of high-risk borrowers work informally. Some are also registered in the vulnerability assessment system as low-income families and receive state benefits,” he stated.
According to the “Labour Market in Armenia-2023” study published by the Statistical Committee in December 2023, 434,200 people in Armenia are employed informally, meaning they work without a formal employment contract.
The minister emphasised that approximately 65% of potential beneficiaries are aged 26-50, describing this age group as the “most active working period.”
Mkrtchyan noted that most unemployed individuals “drop out of economic activity processes, including losing access to modern financial tools.”
Additionally, this situation negatively impacts the social guarantees the state could provide them, particularly the size of their future pensions.
The government expects that by the end of the programme’s application period, 31 January 2026, around 60% of the target group (131,000 people) will benefit. The programme’s authors also anticipate that approximately 90,000 people will gain formal employment contracts as a result of the initiative.
“This is not debt forgiveness”
According to the Central Bank, as of October 1, 2024, the number of borrowers with poor credit histories exceeds 340,000, with a total debt burden of 642 billion drams ($1.6 billion). In April 2023, this figure stood at 525 billion drams ($889 million).
“The debt burden has increased by more than 100 billion. This prompted us to consider implementing a programme for people facing difficult life circumstances,” Narek Mkrtchyan stated during a government meeting.
He emphasised that this is not about debt forgiveness but about providing people with the opportunity to repay their loans through their own work.
Armenian government to help borrowers repay debts
