The FINANCIAL — The FINANCIAL interviewed Giorgi Goguadze, People’s Bank’s General Director, regarding the company’s further development plans in the local market in parallel to tightened competition by the appearance of both new international and local players in the field.
People’s Bank, a local bank with aggressive social orientation claimed to have increased its portfolio by GEL 100 million in 2007.
Q. People’s Bank was the first local bank with an aggressive social focus. How ambitious were your expectations in the early days when the bank was making its very first steps in the local market?
A. The bank’s name itself People’s Bank is directly associated with the social focus strategy we’ve been engaged in since the very first days of our entering the market. Back then the retail approach was too weakly developed by the local banking sector and the majority of our population was without access to banking services.
During the very first year of the bank’s activities People’s Bank managed to attract around 10 thousand customers, the number of which reaches 1 million 600 thousand as of today, that’s about half the country’s mature population.
People’s Bank is the leading bank in terms of the number of customers and regional expansion coverage. Our professional approach to the subject has resulted in ambitious consequences. People’s Bank’s success story has certainly exceeded expectations.
Q. In order to carry out a number of useful social projects People’s Bank allocated a GEL 1 million budget financing CSR activities in 2007, how impressive is the 2008 budget?
A. People’s Bank is the most active and devoted company in terms of CSR approach. I would say though that the more companies that get engaged in this direction the better the lives of the local population will get.
The world accepted practice shows that it’s not up to the government only to be in charge of social focus development; the private sector should also share the responsibility and act as a decent socially active body.
People’s Bank was quite supportive in terms of financing sports, healthcare and cultural directions last year. As for 2008, the bank has allocated GEL 2 million – an unprecedented amount of investments – directed at CSR activities. You could hardly find any other company in the country spending 25% of its total profit on financing various social programs.
In 2008 we have far more aggressive plans in this respect. I’m proud to say that People’s Bank is very sensitive toward supporting national sports abroad. We’re a General Sponsor of the Olympic Committee. Education and healthcare also remain the bank’s priorities for the current year.
Q. “At present we’re working on a project in cooperation with the Ministry of Labour, Health and Social Affairs, regarding the People’s Insurance project,” you told The FINANCIAL last year. How has the story developed since?
A. People’s Bank recently presented the highly ambitious project Social Home to its customers. It’s an unprecedented initiative not only in the local market but supposedly worldwide as well. In parallel to the state progressive idea the project envisions particular infrastructure development.
Social Home is an incredible union of People’s Bank’s daughter companies launched for the customers’ sake. We purchased considerable stocks at “People’s Pharmacy” and initiated launching ambulatories throughout the country.
As a result, our customers are provided with an unprecedented opportunity to get all the services under one roof. Social Home envisions placing the bank and the insurance company on the first floor and the People’s Pharmacy and ambulatories on the second floor. Ambulatory services are free of charge for the people below the poverty line as the government pays for the premiums and People’s Insurance offers the highest discounts ever.
It was not our mainstream point to start new businesses like the pharmaceutical one but no company could be found in the market that would accept the proposal of offering such high discounts. Nowadays People’s Bank is capable of defining the price policy on its own and the local population is being offered high quality services for the least expenses.
In addition, People’s Bank is constructing a 250-bed modern infrastructure People’s Hospital in the Isani district. In this direction the bank will invest GEL 22 million and in the “Social Home” project itself – GEL 5 million.
Q. Could you please provide concrete statistics about the volume of the credits issued by People’s Credit in 2007?
By the end of 2006 People’s Bank’s portfolio was GEL 50 million, while today it has reached GEL 156 million. Hence, the GEL 100 million portfolio growth within a year was the most unprecedented success ever.
A. By the end of 2006 People’s Bank’s portfolio was GEL 50 million, while today it has reached GEL 156 million. Hence, the GEL 100 million portfolio growth within a year was the most unprecedented success ever.
The incredible growth was conditioned by the wide range of new credit offers initiated by People’s Bank. Credit Cards, Plastic Cards, Instant Down Payment – these are the services enabling People’s Bank portfolio to grow by GEL 1.5 million daily in terms of the retail approach.
People’s Bank is committed to keeping on launching products considering the market demand. We are adjusting our services to the customers’ needs, which eventually resulted in the above mentioned impressive statistics.
Q. What’s the target segment of people in the case of People’s Post and how successfully is this direction being developed by the bank?
A. I’d like to stress the importance of People’s Post in connection to the Social Home project. One of the services in the frame of the initiative is that People’s Post serves as the ultimate means for people who have health problems coming to the building. As soon as the person makes a claim, People’s Post delivers the desired medicine right to their door. This service will be available this summer.
People’s Post is absolutely different from the soviet perception of postal services. By means of our Shop & Ship co-branding cards one can make a purchase online and get home delivery service. Furthermore People’s Post has already implemented a joint project with the international postal office Aramex and still more success stories are ahead.
Q. Out of the overall 75, People’s Bank is an absolute leader at 45. What’re the major advantages about the company making it the top customer loyalty acknowledged local bank?
A. Five years ago there existed no single local bank which looked at the retail market as a target direction. Our competitors were sceptical about People’s Bank’s intention to make banking services accessible for the whole population, regardless of their social background. People’s Bank was the pioneer local bank to welcome customers with less than GEL 200 monthly incomes.
The other highly important constituent part of our policy is that the bank never operates ready-made recipes; every single product issued by the bank is a kind of order received from the customers.
The high awareness of a socially responsible bank also to a great extent contributes to the loyalty level of the company.
Q. How important are Fitch and S&P ratings for the bank in terms of the corporate loyalty approaches both in the local and international markets?
A. There’s no proper culture of international ratings perception in our country. Local ratings are also very important, though in this case there might be a risk of inadequate treatment and subjective assessments by the local bodies.
It’s a very progressive and to some extent inevitable condition for any bank to develop in a business environment with a healthy market competition.
Q. People’s Bank branch offices have extended through the conflict zones as well: Upper Abkhazia and Tskhinvali regions. Do you operate any special development policy in this respect?
A. People’s Bank was the first bank to insure BBB (Bankers’ Blanket Bond Insurance) risks. The insurance concerns the conflict regions as well. We have two branches in the Tskhinvali region and one in Upper Abkhazia, regions where no physical security is guaranteed at all.
We’re looking forward to being the first Georgian bank to start further expanding to the regions once the territorial problems are finally settled.
Q. How many new branch offices were opened in the regions and in the capital in 2007?
A. Since 2007 People’s Bank has revised its branching expansion policy. We’ve already covered the whole country and it’s time to provide investments in re-modernizing the already owned infrastructure. Last year we opened 17 branches, which was an exact demand-supply situation.
In this respect People’s Bank has allocated GEL 25 million for 2008, which also includes the final reconstruction of the Head Office.
Q. How cautious is People’s Bank in terms of IT equipment and IT security directions?
A. In 2008 People’s Bank will keep on with the universal development approach in all directions both in terms of retail and corporate markets. Although the retail market still remains the target development approach for the bank.
Every single product released in the current year will be worked out by means of the latest technologies. IT infrastructure development is a key priority direction for People’s Bank in 2008.
People’s Bank was the pioneer to launch NFC technologies in Georgia, operated in highly developed markets like Japan and Great Britain. Experts predict that the software, replacing plastic cards by mobile phone chip services, will have 450 million customers worldwide by 2010. People’s Bank has already launched pilot programs in this respect and I believe the bank will make a considerable contribution to the sector’s IT development in the local market.
I believe it is the next best option to take in parallel to the tightened competition in the market, when all the banks in the country are pretty good at offering new products and services every now and then.
As for the physical security, the bank established a security office employed by high-qualified staff. It’s a multi-profile service company consisting of 50 members at this point.
Q. How do you see the banking sector competition outlook in 2008?
A. I would more than welcome healthy competition as it’s the ultimate incite keeping us sober and thirsty for further development. Eventually the customers can enjoy a range of the best services being offered by local banks.
However I would add that People’s Bank is ambitious to remain the leader in the social segment no matter how influential an international bank enters the market.
We are saving no finances in terms of the IT development approach. People’s Bank has invested GEL 5 million in rather sophisticated software from Intracom, which has no analogue in the Caucasus region. The IT development focus is the ultimate advantage about People’s Bank in handling the aggressive competition expected in the sector in 2008.
Q. Do you think the entrance of international giants will foster the local stock markets’ development?
A. I don’t see how the entrance of international giants might have a negative impact on the development of local banks. The more international expertise brought to the country, the better it is for the sector. I believe the currently strained political climate and the problem of the conflict zones will soon be resolved and a huge flow of foreign investments will start in Georgia.
As for the stock markets, there are several companies traded on the local stock exchange. I think launching alternative stock exchanges will only benefit the market and avoid a monopoly from appearing in the field.
Q. In terms of the employment of new staff, do you operate a training centre on your own and what do you regard to be the basic issues to be considered while hiring new employees?
A. Our task, as one of the largest employer in the country with around 5,500 staff, is to maintain the high quality of services in parallel to the increased number of the company’s employees.
The major factor that we consider while hiring new staff is their skills. Of course experience is preferable, though the banking sector is a business updated on a daily basis and what matters most in our field is the capability to easily comprehend the news and feel the pulse of the sector development.
Our experienced employees are in charge of training the new ones and what’s more we also operate our own training centre.
Q. As for the top management, Beso Abuladze, the Director of Infrastructure Development Direction at the bank is a former employee of Bank of Georgia. How frequent are the cases of attracting human resources from rival banks and was it a case of Head Hunting as far as Abuladze was concerned?
A. The leading Georgian banks are more experienced in the market and they have around 15 years of experience in this field. Hence I see no reason why we should mind attracting professional sources from our competitors. Although I can’t remember a single case when a People’s Bank employee continued his career at any other Georgian bank, which once again stresses our corporate commitment and the fact that People’s Bank knows the value of human resources.
Q. BSI and Pedersen & Partners are two well-known recruiters in the local market. Do you refer to their services in terms of HR issues?
A. At this point we’re not targeted at outsourcing development. Though People’s Bank has ambitious plans in this respect as well and we also intend to cooperate with other recruiters located abroad.
Q. How well-paid are People’s Bank employees and which are the best demanded positions both in terms of low and top management levels?
A. The banking sector is the most attractive occupation as we’re regarded the best paying employers nowadays in the country.
Competition is too tight in this respect as well. Banks offer unreasonably high salaries to rival companies’ employees in order to on one hand hire professionals and on the other- weaken the competitor.
Q. Do you have any private business apart from your major engagement in People’s Bank?
A. I have a rich past of experience in the private sector. Though being a General Director of People’s Bank is a highly responsible position and a couple of years ago I came to the point when it was necessary to make a choice. Hence I quit all private businesses regardless of whether in agriculture, tourism, import or real estate. The money I got from selling the businesses was put in to the bank’s capital.
Q. You’ve been holding the position of People’s Bank’s General Director since 2003. Prior to that you were working in the banking sphere from 1994. From 2000-2003 you served as Director of the Agro-industrial Bank JSC. Could you remember the early times when you first got engaged in the banking business and what your major motivation was?
A. The story goes far back to when I was 19. My first experience in the banking business was at Export-Import Bank. Back then there was no boom happening in the sector, though in the early 1990s there were already slight signs that the banking business had a promising future ahead of it.
To be honest, I had rather modest ambitions and could never predict climbing the corporate ladder to the very top.
It’s a huge responsibility to manage a bank employing 5,500 people and serving 1 million 600 thousand customers. In addition it’s a great psychological pressure as you’re in charge of the financial welfare of each and every staff member.
I can hardly find time to rest and sometimes the seminars held outside Tbilisi could serve as compensation for the strained work environment.
Written by Kate Tabatadze
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