The FINANCIAL -- The IFC Capitalization Fund, a fund managed by the IFC Asset Management Company, is investing USD 65 million in Bank of Georgia , the country’s largest bank, to help the Bank increase domestic access to finance and sustained economic growth. With this finance, Bank of Georgia can issue USD 500 million worth of loans. With its 10-year maturity, the loan is aimed at supporting the Bank’s loan portfolio growth and increase financial inclusion in Georgia by enhancing access to long-term finance.
“This subordinated loan will enable Bank of Georgia to strengthen its capital base and continue lending to Georgian companies and individuals, supporting economic growth and job creation,” said Thomas Lubeck, IFC Regional Manager for the South Caucasus. “This project is another step in a long and productive partnership between Bank of Georgia and IFC. Because this is a subordinated loan its structure is qualified as Tier II Capital which means that Bank of Georgia can increase its lending by USD 500 million,” he added.
“We are happy to partner with Bank of Georgia as it continues to grow and improve access to finance by expanding its lending operations,” said Marcos Brujis, Head of IFC Capitalization Fund.
“I am pleased with the opportunity to once again join forces with IFC and successfully close this important transaction. The subordinated loan facility, which qualifies as Tier II Capital will improve the overall capitalisation of the Bank, while at the same time help to drive down our cost of funding as it enables us to repay more costly subordinated facilities. I would like to thank our long-standing partner and shareholder IFC for continuous collaboration and our funding team for the successful completion of the transaction,” said Irakli Gilauri, Chief Executive Officer.
“Can anybody guess what the interest rate on a mortgage loan was in 2000? It was between 3 to 4 percent per month. Since that time quite a lot of things have happened. More money has come into the system, banks have accepted more deposits and more competitors have appeared on the market,” Lubeck said.
Bank of Georgia holds more than a third of the Georgian banking market in terms of total assets, loans, deposits, and shareholder equity. IFC is a shareholder of Bank of Georgia Holding plc, Bank of Georgia ’s UK-incorporated holding company, which is listed on the main market of the London Stock Exchange.
Georgia became an IFC member in 1995. Since then, IFC has invested more than USD 695 million in 57 projects across various sectors and supported regional projects developed in the country. IFC has also implemented a number of advisory projects focused on the development of the private sector. As Gilauri says, one third of the projects implemented with the finances of IFC in Georgia belongs to Bank of Georgia .
“The first project we did with Bank of Georgia was in 2000 when we did a small amount of funding, however managed to help 700 people who improved their living conditions. Bank of Georgia was the first bank in the country to sign a global financing agreement with IFC. You really know who your friends are when times are challenging. In 2008, after the war IFC came to provide a USD 100 million subordinated loan and senior loans to help the Bank with capital caution as well as liquidity so that the Bank could continue lending,” Lubeck said.
“We also look forward to doing many things in the future. With its financing IFC tries to support private sector development and make economic growth to increase further. Globally, the private sector is the one who provides nine out of ten jobs created. When there is capital it is always possible for the Bank to allow more lending to individuals as well as entrepreneurs. Separately, the Georgian Government has decided to develop hydro power which is about 4,000 Megawatts. This is actually something that will help Georgia with its overall energy security. Now it is wintertime and Georgia has to import energy from other countries. There are energy needs but the hydro power projects are not yet developed enough in Georgia to produce this energy domestically. It will allow Georgia to export energy in summer as well and make money this way,” Lubeck said.
IFC, a member of the World Bank Group, is one of the largest global development institutions focused exclusively on the private sector. In fiscal year 2013, IFC’s investments climbed to an all-time high of nearly USD 25 billion, leveraging the power of the private sector to create jobs and tackle the world’s most pressing development challenges.