The FINANCIAL — “Demand on micro credit products sharply increased after the August War in Georgia and at the beginning of the world economical crisis. The number of our portfolio per month reaches USD 300,000 and increases per day,” Lasha Nikolaishvili, Director of Rico Group Incorporated, told The FINANCIAL.
“Our estimating system first of all ensures our own risks. When we estimate our client’s houses or gold we fix it at lower prices,” Nikolaishvili notes.
Micro financial organization Rico Credit started working in 1997. It offers micro credit service, money transfers and hypothec credits. Currently Rico has 6 branches, with 100 employees.
“In the first two months after the Russo-Georgian war the demand for micro credit service sharply increased. Now the situation is stable,” Nazi Kandelaki, founder of Credit service +, says.
LTD Micro Financial Organization Creditservice + has ten years of history. The company already has 23 branches and 100 employees.
“Yesterday we concluded a loan of the amount of USD 15,000 which is an unusual sum for such small financial organizations. This is a segment which previously used banks for receiving loans of such an amount,” Nikolaishvili says.
As Nikolaishvili explains, the maximum amount that micro financial organizations and private moneylenders can offer to customers is GEL 50,000 (USD 30,000). This amount is limited by NBG.
Because of the huge demand on money most moneylenders have raised their interest rates. “Now it’s 3.5% per month. During the war it was 4% because demand was too high,” Nikolaishvili, Rico credit, notes.
Micro financial organizations also offered hypothec credits, but the recent crisis on the real estate market does not attract micro credit organizations to continue getting loans in this direction. “We also have hypothec loans but we only financed one builder who pays his percents and actually we don’t want to finance any others,” Kandelaki says.
In Credit Service + annual interest rate on hypothec credits is 48%. But before the war it was 36%.
During the war micro financial organizations that were mostly financed by individuals faced monetary problems. Individual investors started asking for their money. As Kandelaki says, after stabilization of the situation money was returned.
Most of the micro financial institutions have additional financing from local banks.
“Standard Bank financed us with USD 1,600 billion,” Kandelaki says.
“We are closely cooperating with newly established bank Progress Bank, which financed us with USD 600,000 recently,” Nikolaishvili declares.
As Nikolaishvili says, the current situation can be used for micro credit organizations to regain the lost customers of big banks.
“Progress Bank was the only bank that decided to finance us. It is not focused on just creating a huge number of branches. Progress has the strategy of an investing bank. They serve large clients only and their risks are more secured,” Nikolaishvili notes.
“Currently our banks have faced huge problems because of the quantity of their portfolios and not the scales. A huge amount of easy money was the reason for the crisis. Supplying customers with credit was like a drug addiction. When you receive the medicine you feel some pleasure for a short time, but when this short time pass it becomes a problem for the drug addict as well as for the retailer,” Nikolaishvili added.
“Such organizations like ours have been stably working even during the time of banks’ floundering. People have frequently come to moneylenders and mortgaged their wedding rings to cover credit. But we had loyal clients long before the crisis,” Kandelaki notes.
Contrary to micro finance organizations working with gold, auto lenders faced a very serious problem.
“All of our clients are facing the problems of covering their credits. All cars leased are still being used by their owners and most of them are wanted,” Ia Makharadze, Director of LTD Milady and Company, says.
“Before the August war from a total of 300 clients 5 were registered as bad payers. Now from 300 bad payers only 5 are considered good payers,” Makharadze says.
We estimate leasing cars at 50% lower than real market prices, but currently prices have reached their lowest value. As Makharadze notes, now the company is just focused on getting back their own money.
In 2008 annual turnover of the company was USD 3 billion. Makharadze thinks that in 2009 this number will be reduced three times.
Milady and Company has not interrupted accepting car leasing, but now they will lease new and popular models like Mercedes, BMW, Jeep.
Interest rate at auto loans is 6-10% per month. Milady and Company was the second organization, after ProCredit Bank, which continue to let their clients use their cars.
Written By Madona Gasanova