Financial Crime World

Armenia Struggles to Balance Financial Inclusion with Fraud Prevention

Yerevan, Armenia - As Armenia seeks to boost its economic growth and development, it is facing a delicate balancing act between promoting financial inclusion and preventing fraud.

Challenges in Attracting Foreign Direct Investment (FDI)

Armenia’s share of inward FDI has been on a decline over the past decade, while access to domestic finance remains moderate with significant disparities. A recent study by the International Monetary Fund (IMF) reveals that governance-related structural factors have a significant impact on attracting FDI to Armenia.

Key Challenges Hindering Access to Finance

  • Poor accounting practices
  • Informality in the economy

The research suggests that these challenges hinder firms’ access to finance, making it difficult for them to grow and invest. To address these issues, experts recommend:

Structural Reforms to Improve the Business Environment

  • Implementing structural reforms to improve the business environment
  • Maintaining prudent macroeconomic policies
  • Strengthening financial reporting
  • Improving financial inclusion by reducing informality in the economy

The Need for Balance between Financial Inclusion and Fraud Prevention

The study also highlights the need for Armenia to strike a balance between promoting financial inclusion and preventing fraud. With the rise of digital banking and e-payments, the country is vulnerable to cyber threats and fraudulent activities that can undermine trust in the financial system.

Recommendations

According to Maria Atamanchuk, lead author of the study:

  • Adopting a multi-faceted approach to financial inclusion and fraud prevention
  • Improving the business environment
  • Strengthening financial reporting
  • Promoting digital literacy

The IMF Working Paper No. 2023/004 recommends that Armenia prioritize policy reforms aimed at improving governance, increasing transparency, and enhancing financial inclusion. The study also suggests:

Policy Reforms for a More Attractive Business Environment

  • Investing in building a robust financial infrastructure
  • Developing effective regulations to prevent fraudulent activities

By addressing these challenges, Armenia can create a more attractive business environment, increase foreign investment, and promote economic growth and development for its citizens.