In Armenia, both external and domestic financing face challenges. Armenia’s share of inward foreign direct investment (FDI) in private external financing has declined significantly over the past decade. 

Access to domestic finance in Armenia is also moderate and masks important disparities. Against this  background, this paper analyses the determinants of inward FDI and examines the impediments to increasing  access to domestic finance. The paper confirms empirically that governance-related structural factors have a  significant impact on inward FDI. Similar structural factors, informality and poor accounting practices are  reported among major challenges for increasing access to finance for firms in Armenia. This paper finds that to  improve financing in Armenia include: implementing structural reforms to improve the business environment,  maintaining prudent macroeconomic policies, strengthening financial reporting, and improving financial  inclusion through reduced informality in the economy.