The FINANCIAL –“The number of new companies has increased by 25% compared to the same period of last year,” said Kakha Kokhreidze, President CEO of the Georgian Chamber of Commerce and Industry, which is currently trying to assist individuals with starting up new businesses.
However, the tight rules on crediting offered by banks are hampering the development of new business projects, he believes.
“The state had created a corresponding environment for business,” Mr. Kokhreidze told The FINANCIAL. “Individuals are not afraid of starting up business, because there is no risk of illegal confiscation of property. But banks abstain from financing new, innovative projects and helping to make new businesses. Because of this problem the state plans to create co-financing funds, which would help people to get financed,” he added.
The interest rates of business loans offered by Georgian banks are higher compared to those in European countries. It’s about 11-16%. Some banks do not finance start-ups, especially when the new business has no background or does not have stable income.
The same problem related to high interest rates makes it impossible to start a new business for individuals with no financial resources.
“ProCredit Bank, like other banks, gives loans to entrepreneurs with a standard interest rate, but with some specifications. “It’s important that the client must have an existing business when searching for finances for a new start-up,” said Tea Lezhava, Marketing Specialist at ProCredit Bank Georgia.
ProCredit Bank, which is one of the leading banks focused on SMEs and agriculture, has seen a change in client behaviour since February as demand for long-term investment loans has been picking up again.
The small and medium-sized enterprises (SME) segment is one of the leading business segments of TBC Bank. The Bank has over 40,000 customers in this direction. The deposit portfolio of SME customers amounts to GEL 300 million and the credit portfolio – GEL 290 million. The credit portfolio of SME clients has increased by 30% and the deposit portfolio – by 40%, in comparison with the same period of last year.
“One of the most important factors in SME financing is to have good access to money; to be able to borrow long or short-term money and therefore be able to develop the products. EBRD tries to do this which is why they have credit lines with their partner banks and microfinance organisations,” said Loretta Martikian, CSO liaison at EBRD.
“EBRD finances SMEs in two ways: direct financing and indirect financing,” said Martikian. “Direct financing is only for medium business, financed by EBRD, and indirect is for small business, also financed through local partner banks and microfinance institutions.”
One of the new successful businesses in Georgia, “Eco Farm”, provides farmers with vegetable seeds and then purchases the product from them and sells it on the market. They have many large clients.
“We started our business with our constituents’ capital. We didn’t use bank services to take out a loan because of the unfavourable terms of interest rates,” said Giorgi Beridze, the Director of Eco Farm. “There is a special loan for agronomic industries, but the bank requires a guarantee in the form of real estate.”
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