The FINANCIAL — Solving the trade deficit is necessary to avoid further devaluation of the Georgian Lari, suggests Asmus Rotne, General Director of ProCredit Bank Georgia. Rotne does not expect a recurrence of the dramatic fall of the Georgian currency. Against the background of increased imports recently, Rotne is observing some positive shifts in the development of local production. ProCredit Bank Georgia has received EUR 15 million from the European Investment Bank. The credit line will promote attractive offers for business loans.
“Georgia has a trade deficit. This needs to be balanced somehow. To stabilize the GEL the volume of import needs to be reduced, perhaps not to the same level that export stands at, but reducing the trade deficit is important nonetheless. My expectations are that there will not be a repeat of such a dramatic drop in GEL like we had before,” Asmus Rotne, General Director of ProCredit Bank Georgia, told The FINANCIAL.
Due to the devaluated Lari, the cost of imported products has increased significantly in Georgia. In Rotne’s words, some of his client companies that were previously involved in import, have started developing local production. “We are slowly observing the establishment of local companies that are not targeting export but can be considered to be replacing imported goods. In the construction materials sector we have some clients that were previously involved in import but later came to the decision to start producing it themselves. So, there is a trend of development of local production, however I personally would like to see more activity in this regard,” said Rotne.
“The issue is that Georgians need to learn how to produce. No one has been involved in production in Georgia for many years. There are some nuances that need to be acquired,” he added.
Any Georgian entrepreneur who has a good idea and good skills has all the opportunities to build up a good business, believes Rotne. “If necessary, loans are available and the legal environment does not stop one from doing such business. The framework conditions are there and now it is up to Georgian businessmen, to members of the Georgian public who have a good idea, who are willing to work hard, and who can develop their business in a certain way. Everybody has to be able to learn, and of course take risks as well.”
According to Rotne, ProCredit Bank Georgia does not have any business sectors which are prioritized in terms of financing, as they look at each project on an individual basis. However, he distinguished the Georgian wine business and construction sectors as areas which the bank is more cautious about financing.
“Due to the global economic environment a lot of sectors are in trouble, for example the Georgian wine business is having difficulties. Still, there are other sectors, like tourism and HoReCa, that are growing rapidly,” Rotne said.
“We look at each project individually. We understand that there are some sectors which we have to look at more critically, but it does not mean that we do not finance them. Of course, we look at things very carefully when financing a client in the construction business today, because everybody is expecting that the prices might go down which would provide difficulties for some of the construction companies. However, it does not mean we do not finance them. There are also very good companies in this segment and if they have good projects and are able to manage their risks in a good way, then we will continue financing them. We do not have a blacklist,” he explained.
The total loan portfolio of ProCredit Bank Georgia at the moment is slightly less than USD 400 million, out of which about 20 million, roughly 5%, is for private individuals. The rest, or about 95%, is all for SMEs. The total loan portfolio of the Bank was GEL 760 million in 2014. It was 7% higher than in the previous year. In 2015 the Bank expects the total loan portfolio to be the same as it was in the previous year.
Last week, ProCredit Bank Georgia made a new agreement with the European Investment Bank (EIB) regarding a new credit line. According to the deal, the entire amount of the credit line is EUR 15 million and one portion of it, EUR 5 million, will be used in the near future.
ProCredit Bank and the European Investment Bank have been actively cooperating since 2012. ProCredit Bank has used 2 credit lines over 3 years with the amount spent within the credit lines coming to USD 31 million.
“The main target group of ProCredit Bank is small and medium business clients. Accordingly, the funding provided by the European Investment Bank under attractive terms, will promote attractive offers on business loans, which in turn will support business development and advancement.
We will actively continue the financing of small and medium business clients from the funds raised from the European Investment Bank. We believe that the contribution to the development of such companies is the best way to achieve economic growth of the country and more job creation,” said Rotne.
“Interest rates for USD have been gradually declining over the last several years. Just five or six years ago borrowers had to pay 13, 14 or 15% even for dollar investment loans. Today they have come down. So, many of our clients are able to get loans with single digit interest rates,” Rotne said.
According to EIB Vice-President Laszlo Baranyay, responsible for EIB operations in Georgia, “the competitiveness of the Georgian economy hinges, among others, on access to finance for productive investment. The EIB will provide such funding. This will have a positive impact on job creation and the living standards of the people of Georgia.”
EIB has signed loans for EUR 548 million in Georgia since it started its operations here in 2010. Some EUR 165 million – or 30% of the total volume – has been dedicated to SMEs and MidCaps, according to EIB.