The FINANCIAL — Bank of Georgia is reducing interest rates on micro credits. Whereas previously this figure was 24%, now it is about 20%, one of the lowest interest rates on the market. Bank of Georgia has decided to increase limits on micro business financing. Management of the Bank considers micro business less risky.
“Our decision to increase the limit was due to several reasons. The first is that risks have reduced in micro business. We can also see that macro economical activity is rising,” Irakli Gilauri, the General Director of Bank of Georgia, one of the leading Georgian banks, told The FINANCIAL.
“For several months after the beginning of the global recession the monthly limit on micro credits was GEL 5 million. We increased this limit by 2.5 percent. Presently we plan to launch credit lines to the amount of GEL 12.5 million per month. The average amount of micro credits will be from GEL 500 to GEL 150,000,” Gilauri notes.
The reason for banks’ recent positive turn towards micro credits is due to the newly shortened risks in this sector.
Gilauri notes that the number of bad payers from the micro business sector is quite low and reaches only about 2%.
The number of deposits increased in May and June. In May they increased by GEL 10 million and in June GEL 13 million.
Bank of Georgia has kept high liquidity. The total redundant sum is about GEL 220 million.
As Gilauri mentions, from September the Bank will reduce interest rates on deposits because supply is higher than demand. “It is difficult for me to foresee by how many percents we will reduce interest rates for deposits. It will be regulated by the market.”
The Bank is actively launching credits now. Management is thinking to prioritize consumer loans for the future.
“After the August 2008 Russo-Georgian war we launched micro credits amounting to GEL 4 million per month. In the list of prioritized business directions micro financing remains at the top, as well as middle and small sized businesses,” says General Director of the Bank.
Bank of Georgia is continuing to launch hypothetic credit lines. Executors are actively discussing their participation in the municipality project focused on the reconstruction of old Tbilisi and aimed at supporting the development of business.
“It is hard to name the concrete sum that we plan to launch for this project because this initiation is still under development,” Gilauri says.
Currently the number of bad payers in the portfolio of Bank of Georgia is 4.7%. In the direction of micro credits the sum of bad payers is 2%. The Bank raised the limit in the directions where customers are more accurate in order to pay for their responsibility towards the Bank.
“Thus we can say that the interest rate is a mechanism for avoiding risks,” Gilauri notes.
“Before the August war and global recession the number of bad payers was 1.5-2%. Still the total capital of our bank and high interest rate always helped us to absorb planned benefit. In May and June the number of bad payers has sharply decreased. Such figures encourage us to have more positive expectations for the future,” the General Director claims.
In his words, despite the recent discharges, Bank of Georgia remains the biggest employing organization in the banking sector. “In the Bank only we have about 2,800 employees. Together with our subsidiary companies, the total number of employees reaches 3,800.”
Written By Madona Gasanova
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