Supporting home renovation and energy efficiency

Poor insulation, harsh winters in a continental climate, and limited purchasing power make housing conditions difficult in Armenia. Most residential buildings date from the Soviet era and are now severely deteriorated, with poor sanitary conditions and inadequate insulation. Average energy consumption is three times the European level. Homes receive little maintenance because residents lack the financial means, with 38% still living below the poverty line. Although renovation loans for middle-income households have become more widely available in recent years, disadvantaged households remain excluded because of their very low incomes.

NMC was established in 2009 to help address these housing challenges. Wholly owned by the Central Bank of Armenia, this public financial institution plays an important role in encouraging mortgage lending by local banks and helping middle-income households become homeowners.

The project aims to improve the energy efficiency of homes outside central Yerevan by facilitating access to microloans for low- and modest-income households. The concessional credit line provided to NMC is intended to encourage partner banks and credit institutions to offer smaller home renovation loans than those currently available.

The loan is accompanied by a €1.5 million European Union grant under the Neighborhood Investment Facility for the Eastern Neighborhood. This grant will fund technical assistance for NMC and its partner financial institutions, along with investment grants to encourage energy efficiency improvements.

The project has a strong social focus. It will help 3,000 disadvantaged households meet their home renovation needs by giving some of the poorest households outside the capital access to credit. Substantial reductions in energy bills will also improve their purchasing power. Overall, the project is expected to reach nearly 1.2% of the 275,000 disadvantaged households targeted, generate more than 42 GWh in household energy savings annually, and improve energy efficiency in the homes concerned by 40%. Renovation work will also benefit the environment by reducing greenhouse gas emissions.

The project is expected to help develop financing for home energy renovations through banks and other financial institutions in Armenia, particularly in rural areas and secondary cities, where banks have a smaller presence but needs are considerable.

Finally, technical assistance will strengthen the Armenian banking sector’s understanding of energy efficiency and how to finance it. It will also support campaigns to raise awareness of home energy efficiency. The project is expected to help reduce fossil fuel imports.