The FINANCIAL — Bank of Georgia, one of the leading Georgian banks, has launched credit line of GEL 18 million for the rehabilitation of old Tbilisi, initiated by the Municipality of Georgia.
“We think that this initiation is very important for the stimulation of the construction business. The credit line will support construction companies in completing already-started projects which have had their dates of completion delayed,” Irakli Gilauri, CEO of Bank of Georgia, told The FINANCIAL.
Development companies Arci, Kalasi, Bagebi City Group and Olympic Star will use the credit line from Bank of Georgia.
Gilauri says that the Municipality of Georgia guarantees that the sum that the Bank is giving to the development companies will be compensated.
“We will control the completion of the construction processes,” he notes.
The innovative financial package, which the Georgian Government has offered to society, was developed by the Georgian Government together with the National Bank.
“On the one hand we will mitigate the strict regulation of the banking sector in order to increase the crediting of the economy by the banking sector. In addition we have offered the construction sector this unique project, the first results of which will be visible in September. As you know this is a project of rehabilitation of the Old Tbilisi district,” states Nika Gilauri, PM of Georgia.
“The construction sector has been enabled to continue the process of building in this district, but will be monitored under a state guarantee. If even one project is a success then I will consider the whole direction a success,” the PM says.
Construction companies will receive money from the Municipality after finishing the projects. As for the Bank, it will create the account for this project this month.
The terms of the credit line which Bank of Georgia gave to the construction companies differs according to the various projects. Interest rates range from 16% to 18%.
“We consider the projects that we decided to finance to be the most profitable ones. There were some development companies which we outright refused to finance,” Gilauri declares.
Bank of Georgia has also stated a reduction of interest rates on deposits from 0.25% to 0.5%. Interest rates will be shortened on all types of deposits in any currency. New conditions of deposits will be launched from October 15.
“The surplus capital and enhanced number of deposits that reached its peak in August made us shorten interest rates on deposits,” Gilauri mentions.
“We will wait for a while and watch how events develop on the market. If our competitors reduce prices on deposits then we will reduce ours again before the end of 2009. Reduced interest rates on deposits will result in shortened rates on credit lines,” Gilauri says.
In September the Bank increased monthly limits on mortgage loans by USD 4.5 million. The Bank is focused on turning an unprecedented amount of surplus liquidity to loans. “Otherwise the Bank will just become a place for saving people’s money,” the CEO notes.
In addition Bank of Georgia has restructured the conditions of credit lines for its customers who faced difficulties and postponed from 12 to 24 months. “That means that we have twice reduced interest rates for customers,” Gilauri says.
“We want to support our customers and facilitate the process of covering interest rates on credit lines. Our decision will help customers to not join the lists of bad payers. We believe that all customers who eventually manage to cover their obligations towards the Bank, despite a failure to pay on time, will earn the chance to take out loans from us in the future,” Gilauri says.
He notes that some banks are wrongly evaluating the situation, so if a customer of theirs fails to pay on time, then they will not give that person a loan in the future.
“The actual current figure of ‘bad payers’ in the country is GEL 18 million,” Gilauri states.
Written By Madona Gasanova
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