The FINANCIAL — In 2012 Georgian commercial banks started reducing interest rates on deposits. Experts from local business schools interviewed by The FINANCIAL, stated that depositors will now start looking for alternative means of benefits and start investing their savings in business instead. So, if you are looking for a lucrative 2013, here is our advice on where to put your money this year.
“I think that in 2013 it will be better to invest in the real estate market. Customers can buy property, followed by a title deed, and with less risk of being affected by any political processes,” Irakli Glonti, Chairman of the Center for Community Initiatives, told The FINANCIAL.
USD 200 000 is enough to buy a house or land, commercial or office space.
“Despite the fact that the property’s rental or leasing itself might be a problem and is, as the banking sector, to some extent related to the country’s current political and economic situation, I would recommend investing in this sector,” said Glonti.
“Furthermore, if we compare the benefits received from deposit interest rates to rent or lease we can easily see that real estate brings more financial profit. In addition, the value of our property is continuing to rise,” he added.
Michael Cowgill, President and co-founder of Georgian American University thinks that it may be more appropriate to discuss in which sectors there are opportunities as any business venture has elements of risk and uncertainty.
“I believe that there are opportunities in both tourism and agriculture. But anyone close to these sectors knows the inherent risks and uncertainties – demand, access to the market, even the weather has an effect on the profitability of both of these sectors. It should also be noted that even in areas where it appears the market is saturated, there are successful business ventures that have started up – new restaurants and even new wineries. Similarly, we have seen many businesses start up and fail based purely on their trying to follow and copy successful ones. So, how to ensure that a venture has the best chance of success? Have a passion about what you are doing; do your homework; understand the business and market in and out – and yes, sometimes luck plays a part. Will it be safe and profitable? Be optimistic but realistic. I do not know what percentage of new ventures fail in Georgia, but globally – way over half. But being fully prepared gives one a much better chance at success,” said Cowgill.
Cowgill believes that education is a “stable” sector. But again, he said that “safe” is a very relative term and education ventures are subject to the same risks seen in other sectors. “Are there still opportunities for growth? We have many good private universities that are increasing their programmes in response to the market demands. We have seen new private elementary and secondary schools started up. There may still be opportunities in select situations, one has to fully understand the business aspect of the private education sector to be successful”.
“For our business students at GAU, a 4-year BBA degree costs on average USD 3,500/year and a similar annual cost for a 2-year MBA degree. We try very hard to provide the same (or higher quality) of education as a student would receive from respected international universities. The costs here are at least 1/10th the costs of these other international universities – so a real bargain for something that is so valuable to a student’s future. Sometimes graduates have unrealistic expectations for starting salaries, but a range of USD 500 – USD 750/month is typical with banks on the lower end, and international private companies, including accounting firms, towards the higher end,” Cowgill said.
In his words, there are many variables but a Georgian student could generally expect to earn back their money spent on education in a couple of years, far less time than the students graduating from international universities abroad. “This great education value is further evidenced by the growth in international students coming here to study in Georgia,” he added.
“Although a student loan may increase the payback period by a year or so, a good education is both essential and still such good value that a student and family should do everything possible to make it happen,” Cowgill recommended.
“Predicting the banking sector seems difficult to me at present. We often hear promises from our officials regarding the banking sector. I personally would rather see decisions being made in politics rather than promises. This has happened many times in recent months,” said Glonti, Center for Community Initiatives.
According to National Bank of Georgia, during 2012, the largest volume of deposits amounted to 5,269,633 thousand in September. As of 1 December, the deposit portfolio decreased by 98,622 thousand and totalled 5,171,011 thousand.
Nino Mosiashvili, 35, was saving money at one of Georgia’s commercials banks. In November she decided to withdraw her money and open a bread bakery in the suburb where she lives. “I saved 30,000 and had been keeping it in the bank, but in the event I needed even a thousand and took it out from my deposit, I would have been considered a rule breaker and received a lower interest rate. So I decided to start my own business. I hired a small space next to a corner shop and hired a national bread (‘shoti’) baker.”
“I am being quite successful in my business at the moment and do not regret the decision I made one bit,” Mosiashvili admitted to The FINANCIAL.
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