The FINANCIAL — According to Association of Banks of Georgia (ABG), number of plastic cards in Georgia has exceeded 2.4 million. “This indicator confirms that the growth is 1.9 times that of the same period in 2008. 91.1% comes on debt cards, instead of 99.1. It is the reason of fast growing credit card tendencies”, George Tsutskiridze, Executive Director of ABG says.
According to Tsutskiridze, in the upcoming 2-3 years, the indicator will grow by 3-5 times.
The Association of Banks of Georgia (ABG) was established in 1994. The aim of the organisation is to protect banks’ rights and interests, coordination of their legal action guarantees, to establish and evaluate the Institution of Banking Ombudsmen in Georgia;
ABG owns the Georgian Banking Training Centre (GBTC) for improving the qualifications of bank and financial managers and employers, organization of training and tests, and offering technical, technological and experts’ aid. At the moment the association has 19 members and their number is increasing every year.
Q. The Association of Banks of Georgia (ABG) was established in 1994 by the leading commercial banks of Georgia. How many members does ABG have at the moment?
A. The members of ABG are 19 commercial banks from the 22 existing in Georgia. The Association of Banks had several structural changes since the day of its establishment. Today ABG is able to decide operative questions as well as give consultations to its members, it must be mentioned that the association was lacking these abilities the previous year. All arbitrary initiatives undergo examinations in the ABG committee.
ABG’s estimation about new initiatives is sent to the appropriate institutions: National Bank of Georgia, and the Georgian government and Parliament. I want to mention that none of the orders or instructions are accepted by the National Bank without ABG experts’ conclusions. The same is said for banking law, which is connected to the legislation changes in Parliament.
A few years ago a document was prepared by ABG’s expert group for a governmental project, which was sent to the Georgian Parliament and government. I want to add that our verdicts were accepted in this bill. Today a new project about account opening is being worked out in different banking institutions with the support of ABG. It will give the Georgian banking sector the chance to get closer to the standards of European banking law.
Q. Who are the newest members of the Association of Banks of Georgia?
A. The oldest members of ABG are those banks which were established on the market in early 1990, today they are Georgian bank brands: Bank Republic, TBC Bank, Bank of Georgia (BoG), Cartu Bank, and VTB Bank Georgia. The number of ABG members is growing every year, despite banks occasionally leaving the banking market.
The banks added to the association in previous years are: commercial bank Investbank (2003 Y), Ziraat Bank of the Republic of Turkey Tbilisi branch (2004 Y), commercial bank Standard Bank (former Agro-business bank of Georgia (2005 Y), commercial bank Tao Bank, ProCredit Bank, and International Bank of Azerbaijan, which were added in 2008. Now ABG is holding negotiations with several new foreign banks and two leading credit institutions. I hope that by the end of this year all banking institutions in the country will be members of ABG.
Q. How do the trainings at ABG help with the employment of its participants?
A. I want to mention that every European Bank Association has such training centres. Such training centres give the opportunity to the different banks’ staff to improve their experience. The banking and financial sector is developing very quickly, so it requires the permanent reequipping of staff. Innovations are important for the implementation of new banking products. We know that leading European banks allocate about 10-15% for staff trainings. The Georgian Banking Training Centre (GBTC) was established in 2007 by the Association of Banks of Georgia (ABG) and Caucasus University (CU) which operates in Tbilisi, Georgia. GBTC is a partner organisation of ABG.
The primary objective of GBTC is to address the Georgian banking sector’s needs and provide certificate-training programs for professional bankers that will meet the requirements of the local business community as well as international standard and certification requirements. The innovative programs, excellent teaching, research and service, as well as a strong business network make GBTC unique. Although GBTC is initially designed for commercial banks, it will later be open to all financial companies; including but not limited to Micro Finance Institutions (MFIs). The aim of GBTC is to provide financial services professionals with continuous and effective education and training. GBTC will promote the highest standards of performance in the financial services industry by validating individuals’ knowledge and expertise to foster their self-confidence and personal growth. The program is well adapted to the Georgian system. Greece’s Bank Association assisted us in the launch of GBTC, they have one of the strongest training centres in Europe. Besides Caucasus University, we actively cooperate with the State University of Georgia.
Q. Georgian banks have obviously started developing a focus on the retail banking market, how would you comment on this strategy?
A. The retail banking sector is increasing rapidly not only in Georgia, but in the whole world as well. Its development is connected to the establishment of the consumer sector. Besides that it is an additional profit for the banks. I can say the same about the growing volume of consumer credits. Internet Banking, Mobile Banking and different debatable and credit cards are the most popular banking products.
Q. Is retail banking generally regarded more profitable for banks compared to the corporate sector?
A. It is true that retail banking is a profit gaining means for banks, but it is not impossible to compare the corporate sector to the retail one. It is the same as comparing the retail service market with the wholesales market. Today banks are offering a wide range of corporate services to customers, with the use of retail banking elements.
Q. Consumer credits became one of the most popular bank products, what caused it and what can be done to the further development of consumer credits?
A. Competition obliges banks to offer refined and more acceptable conditions of consumer credits to the customers who are going to purchase automobiles, modern technique and furniture. Banks are trying to simplify the procedure of getting a consumer loan, the reason of this simplifying is express or fast credits. Today banks are offering several types of consumer credits with plastic cards and non percent instalment programs. Retail and consumer banking will continue growing in the future together with improved IT technologies. Banks must master novelties in the IT sector.
Q. The number of plastic cards in Georgia exceeded 1 million according to the statistics of 2007, how impressive is that figure for Georgia and what does it indicate?
A. The number of plastic cards in Georgia exceeded not just 1 million, but 2.4 million. This indicator confirms that the growth is 1.9 times that of the same period in 2008. 91.1% comes on debt cards, instead of 99.1. It is the reason of fast growing credit card tendencies. If we take into account the volume of the Georgian population this indicator is great, but in the upcoming 2-3 years, the indicator will grow by 3-5 times. Mostly it depends on the creation of new job places in Georgia. The usage of cards is growing, according to the service centre expansion. A few years ago only a couple of ATMs were operating in the city, today the situation has changed greatly. ATMs are present in every district of the town which it makes far more comfortable to use credit cards. Post terminals are also being widely used not only in supermarkets but in restaurants as well.
Q. How would evaluate the development of the banking sector in Georgia compared to its neighbouring countries?
A. Our estimation is based on the analysis of what is going on in neighbouring countries. The Georgian banking sector is less developed compared to the European banking sector, but to be objective Georgia must be compared to similar countries, for instance countries of the post Soviet Union. Georgia remains behind Russia but the Georgian banking sector can be regarded ahead of Ukraine and Kazakhstan. It must also be mentioned that Georgia outruns those counties with its universal banking law. International banking associations agree with the idea of the prospects of the Georgian banking market development.
Q. A lot of international banks are entering the Georgian market, why is Georgia regarded an attractive place to starting banking business when the market is already saturated with local banks?
A. The idea that the Georgian banking sector is already saturated is not correct. The lack of the market is caused by the undeveloped economy. New investments are a guaranty of the increasing economical side of the country and this directly reflects on the bank sector development.
Q. How do the rival banks manage to cooperate with each other and how they do manage to compete successfully with one another?
A. Today banking competition is based on pure market principles. It means that banks gain when they are oriented on customers’ interests, and offer more acceptable principles of banking conditions. A bank can not establish itself with expensive but low quality service.
Written by Natia Taktakishvili
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