By Brad Stave, VisionFund International - Marketing
About 60 thousand children have been impacted through micro lending at SEF International UCO LLC since its setup in 1997. A subsidiary of VisionFund, this Armenian microfinance institution (MFI) extends small loans to businesses and farmers. Through a variety of loan products the MFI helps improve living conditions for families throughout Armenia. SEF has provided more than 11,000 loans exceeding USD 9.3 million, and has expanded its customer base by 80% in 2010.
This success seemed unreachable, when SEF was struggling to cope with local currency volatility and deteriorating loan portfolio performance accompanied by a shrinking customer base in early 2009. To worsen the situation, the MFI was not fully prepared to deal with such issues in terms of human capacity, business processes, and strategic management.
In 2007 World Vision and VisionFund leadership recognised the changing nature of challenges SEF faced, and the growing need for new management. Thus, leadership began a search for a new CEO to build a stronger institution and push the company to the next level of growth.
Garegin Gevorgyan, Ph.D., was headhunted and hired from the finance industry in late 2008. Almost immediately after his arrival, the Armenian economy experienced a dramatic one-day devaluation of local currency of roughly 25% on March 3, 2009.
Two weeks later, SEF had a negative foreign exchange gap, which is a relationship between foreign currency assets and foreign currency liabilities expressed as percentage of equity capital, of 130%.
Luckily for SEF, VisionFund leadership quickly responded to the emergency situation and sent a team of VisionFund finance professionals to assist in reviewing the situation. Further, VisionFund invested more equity capital to signal its full support for SEF. As a result, SEF improved its foreign exchange gap ratio, and currently is sufficiently funded for planned growth.
As burning issues were dealt with, the management team focused on improving loan portfolio quality, expanding product offerings, and servicing more locations. Further, SEF actively participated in several programmes, becoming a Kiva partner, enrolling in the World Vision Micro project, and participating in a WVUS major donor fundraising campaign. In 2010 SEF was granted a BBB social rating and a BBB- financial rating. “We aim to serve customers in all areas where World Vision implements area development programmes in Armenia, and plan for long-term sustainable growth through better products” states Mr. Gevorgyan.