The FINANCIAL — Georgia’s historical export markets are facing problems in 2015. As a result, continuing its reorientation towards European and other markets remains the main challenge for Georgia. After 15 years in the banking sector, ProCredit Bank Georgia is changing its strategy to focus on small and medium business clients and will stop offering micro loans below EUR 10,000. A conservative approach to lending is the main reason why the Bank’s consumers will not face difficulties due to the recent dramatic devaluation of the Georgian Lari.
“Currently, the main challenge for everybody is to become more efficient. If we look to Georgia there are big problems in all of Georgia’s historical export markets. Georgia always used to export to Russia, to Ukraine, to Kazakhstan, Armenia, and Azerbaijan. All of these markets have quite a few problems facing them in 2015. Accordingly, Georgia needs to continue this process that has been going on for a couple of years, of reorienting itself towards European or other markets in general. That demands better organization and a higher level of efficiency from the enterprises,” Asmus Rotne, General Director at ProCredit Bank Georgia, told The FINANCIAL.
In 2014, total customer funds of ProCredit Bank Georgia increased by 5%, totalling GEL 592 million. The total loan portfolio was GEL 760 million, which is 7% higher than in the previous year. In 2014, net profit amounted to GEL 24 million, 21% higher than in 2013. ROE was 16%.
In 2015, the Bank plans to increase its market share, which is a sound ambition in light of the Bank’s target segment. Customer funds are expected to increase in the business segment, along with the growth of the loan portfolio. ProCredit Bank will continue to offer innovative banking services to its customers in 2015. One of the strategies for 2015 is to expand self-service areas and offer a greater variety of services to clients. For this purpose, the Bank will continue to invest in technological development.
It is no longer possible to start up a business with EUR 10,000 in Georgia. That was the main reason why the Bank decided to stop offering micro loans below EUR 10,000. The Bank will sell the 5% of its loan portfolio that consists of micro loans.
“We have been very active in this segment for the past fifteen years. Fifteen, or even ten or five years ago it was possible for an entrepreneur to start a micro business with very small amounts and develop it to what we would call today a small or even medium business. Less than EUR 10,000 was enough to develop a business to a very sustainable level. Since then, Georgia has developed a lot. The economic environment has developed a lot. And the taste of the consumer has developed a lot. Whereas 15 years ago you could set up a restaurant with USD 1,000, today probably very few people would go to any restaurant that one could set up with that amount. So, the investment amount that you need is much bigger now. That is one of the reasons why today there is much less potential for a micro business to grow from micro to a larger level,” said Rotne.
“In line with the Bank’s new strategy, we will direct our resources towards providing small and medium business clients with the best possible banking services. The Bank believes that these are fast growing segments that will create many additional jobs and contribute significantly to the country’s economy,” he added.
Over 75% of the loan portfolio of ProCredit Bank Georgia is issued in a foreign currency. Meanwhile Rotne said that no customer has appealed to the Bank asking for restructuration of a loan. He is optimistic that the overdue loan portfolio will not increase further as a result of the significant devaluation of the Georgian Lari towards USD.
“We take a very conservative approach to lending in foreign currencies. If a business wants a loan in a foreign currency but their income is in Lari, then we look at how much money they can really afford to pay back, also in the event that the dollar devalues. It is only on the basis of that that we make a decision. So, we leave a certain amount of room. That is why we do not usually have problems as a result of the fluctuation of the exchange rate,” Rotne told The FINANCIAL.
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