The FINANCIAL — Last year JSC MFO CRYSTAL and FMO (Netherlands Development Finance Company) signed the USD synthetic local currency (GEL) term facility in an aggregate amount of USD 10,000,000. The loan facility is being utilized for financing energy-efficient and renewable energy solutions as well as for on-lending to micro, small entrepreneurs and farmers throughout Georgia. We spoke with Jan-Willem Hoek, FMO Investment Officer, and Naomi Campbell, FMO Environmental and Social Officer about microfinance, entrepreneurship and Georgia’s green finance products.
FMO has been cooperating with JSC MFO Crystal for a while now. How is the partnership developing?
Jan-Willem Hoek: We started a regular contact 3 years ago and it ended up in signing a contract for 10 mln US dollars last March. From the start we had a very good relationship. Crystal is a very transparent, open and innovative company. The leadership is always keen to integrate new features and techniques.
Before we went to business, I asked them if it was interested in doing part of its financing in green. That was well-received by the management and supervisory board. That is quite unique. Usually you find a bit more resistance before going into innovative features at first financing. For Crystal it was nearly adopted right away. We signed a contract in March and for a certain period of time I didn’t hear anything from Crystal in regards of green finance. Then, after three months, I was invited to a presentation where Manuchar Chitaishvili, Chief Innovation Officer made a presentation to stakeholders, NGOs and ministries of energy and economic affairs. Then I saw all the hard work that had been done behind the scenes and then I knew: OK, green has really landed within Crystal. Crystal is eager to learn from FMO and vice versa. Manuchar seems to be one of the new thought leaders in the region. He was invited for a so called Innovation Bootcamp training course in the Netherlands. In return, ten new leaders and managers of FMO will visit Crystal in March. Together with Crystal management they will have a management/leadership programme. So, if you ask how the partnership is developing – it’s really amazing. The cooperation is very intense.
What are the modern challenges of the micro-financial sector in the world and particularly, in Georgia?
Jan-Willem Hoek: It’s always a difficult market. You always have to compete against the bigger banks. It’s an unregulated market. You have to watch very carefully on your portfolio. And the challenges are: how can you keep a healthy portfolio with good margins. Same applies here in Georgia. It’s important to understand how a microfinance organization is handling its clients. The customer protection principles are very important, whether you are transparent enough on pricing, how do you make an assessment of the credit, etc. We see that Georgian Central Bank is also very active in that respect and closely cooperates with microfinance organizations and banks. I would say, Georgia is ahead of a pack due to the fact that the banks, microfinance organizations like Crystal and central bank are picking this all up well.
What do you think about the entrepreneurial culture here?
Jan-Willem Hoek: There are two things on entrepreneurial culture within Crystal that I like: they are very innovative. I see them going for IFRS 9, Fitch rating, issuing corporate bonds, engaging in green lines. I went to a training course called “Women in Business”. I went, with Ms Maya Kobalia of Crystal, to Zambia together for the project. International practices are incorporated here within the company very fast. The other one is of course – your clients. I think most of the clients are driven by economic circumstances, debts, they want to make for living in the agro business. On its path towards European standards, Georgia should reform the agro sector even more. Then even larger scale of agro segment will be available for Crystal’s too. The tourism sector is developing here very rapidly. Seven million visitors came to the country last year. But we know that it’s a vulnerable sector and depends on various unpredictable factors.
Why should people move to the energy efficient green products? Why is it important? How is the situation in Georgia?
Naomi Campbell: in terms of what Crystal is doing in the direction of green products is very impressive. Much has been achieved in less than one single year in terms of the loan from FMO received in March, 2017. I like the model you have, where local producers are encouraged to work on energy effiicient products. It’s important that the green products are locally sourced, both in terms of boosting the economy and for the quality of the product. I think it’s important to make your clients aware of the importance of energy efficiency due to green themes , such as climate change and environmental risk that we are facing. Internationally, the world has signed up for the climate negotiations and signed the Paris agreement. We all together have decided to move to the green direction. I think it’s important that we recognize globally that the climate change is real and it is happening right now. The energy efficiency has its economic benefits. The value of moving to green direction is very positive. Investment in green products makes the costs lower. So, what’s Crystal doing in this direction is fantastic and it’s all very positive for clients, for Georgia and international community. It’s all contributing into a bigger scale.
Is the government and the state open to innovations and reforms?
Jan-Willem Hoek: I think that current central bank and government know what to do and are very capable. The central bank’s regulations starting in 2017 about de-dollarization of the economy will benefit the clients in a long term. The online lending business was unregulated before, but they took strict measures against it just recently. Further Government is opening up, visa liberalization with the EU was an important step towards better future. Georgia has become a stable hub in the region.
What should a microfinance organization consider to be successful?
Jan-Willem Hoek: Know what your client wants! Be on top of the game. Know what every client wants individually. I know that your portfolio is large, however, if you have loan officers on the ground being spiders in their network, you know what people want. As a microfinance organisation, you need to have flexibility to cater those needs. If your client needs information and knowledge, will it be on diary production, cheese production, fertilisers, you need to get this knowledge and bring it to the client. Every loan officer of the company is an ambassador of Crystal, the highest representative of the company in the region. You need to try finding out what clients’ problems are and support them all the time.
You have visited Georgia many times. What are 3 main features of the local culture that you like/dislike the most?
Jan-Willem Hoek: What I’d really like to see improving is: better access to the healthcare. The other one is: road safety. In the Netherlands we usually ride bikes daily.
I like that Georgians are very open and willing to accept the international practice and experience. I like their hospitality. I think Georgians are the most hospitable people in the world. I truly hope that you will keep up on the economic improvement with staying Georgian as you are, open and friendly.
Naomi Campbell: It’s my first time here. The hospitality is true. The level of interest in innovations, new ideas is very high. I am not sure if I have seen such level anywhere else. I also think the Georgian food is fantastic. I really look forward into how Crystal develops in next years and more, the direction is correct.
More Information about Crystal: http://ir.crystal.ge/
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