The FINANCIAL — Since the change of government in Georgia (in October 2012) Progress Bank, founded by the current Minister of Energy and Deputy Prime Minister of Georgia Kakha Kaladze, has raised its assets to GEL 40 million.
The political changes in the country gave the Bank a free environment to operate in, previously limited because of the political affiliations of the Bank. Konstantine Sulamanidze, CEO of Progress Bank, says that the Bank was negatively affected by the involvement in politics of its shareholders.
Progress Bank was founded by Kala Capital which is owned by Kakha Kaladze, current Deputy PM and Minister of Energy of Georgia, in 2008. 78% of the Bank is still owned by Kala Kapital, and the remaining 22% by the Prime Minister Bidzina Ivanishvili who joined the bank late 2012.
“Many international organizations like EBRD and IFC have limited cooperation with companies linked with politically exposed persons (PEP). If our bank’s owners were not to be involved in politics then that would definitely have a more positive effect on our bank. The names of our shareholders are well known in the business environment around the world. Meanwhile their participation in politics carries with it negative implications for our banking activity,” Sulamanidze told The FINANCIAL.
Progress Bank reported loss amounting to GEL 100,000 for the beginning of 2013. The results of the first two quarters of 2013 are more optimistic however.
“We had profit of up to GEL 236,000 in the last two quarters. The loss of January 2013 was as a result of our activity. When you become more active you have expenditure and only later receive profits. We got an opportunity to work at full capacity and thus started operating so. Loss of GEL 100,000 was the cost of our work.
“The first branch of Progress Bank was opened in November 2008. This was the post-war period in Georgia. The founder of the Bank had different plans which included serving various businesses. However, the post-war situation and global economic crisis affected these plans and the development of the Bank. We therefore decided to change strategy.
We were in a mode of expectation and uncertainty. We were operating with GEL 12 million, the minimum capital. Competing with the large banks was very difficult. But still we managed to recover.”
Q. Are you considering the possible sale of your shares?
A. We have our development strategy based on existing shareholders structure already laid out. However, anything is possible – this is the specific of doing business. We are open to cooperation with potential investor but not with just anyone. We will only be open to those companies which will bring real success to the Bank and the country’s economy as a whole. It could be an individual or an international institution that will share their collected experience with the whole country. We will not partner with any companies which are only focused on their own financial gain. Georgia has always been attractive to foreigners and our bank is also attracting interest from abroad, hence everything can happen but we are not focused on sale possibility, we keep up growing according to the internal development strategy
Q. In April 2012 you signed a contract with Visa and became its member. When will you start offering their cards to your customers?
A. We signed a contract with Visa last year. But they had frozen process at one stage, because of the fact that the accounts of our shareholders had been blocked. After the October elections however, VISA resumed the process. Every legal process has already been settled. Only the technical stage remains underway. So, from the middle of September we will be issuing the cards.
Q. Who are the main clients of Progress Bank?
A. Our customers are representative of every field. Individuals as well as corporate entities are among the list of our clients. They are mostly from small business. Due to the scale of our bank, we are not serving any large scale corporations. We are mostly working on micro loans being issued for small and medium-sized organizations.
The credit portfolio issued for micro loans roughly amounted to GEL 15 million (as of July 2013). Developing micro loans is our main strategy. Funds in Georgia for micro lending are only available with very high rates and we are going to be the ones to start offering competitive terms. Currently more than 51% of our credit portfolio is made up by micro loans.
An 18% interest rate on a micro loan is an unprecedented rate for the Georgian market. The maximum amount is USD 50,000. We will maintain this competitive rate in the future. Entering the list of the top 15 banks of Georgia by the end of 2013 was our goal. According to the results of June 2013 though, we have already achieved this. In order to move to the next step we need at least to double our assets.
Currently we are operating with three branches and next year we are going to open additional two new branches. Micro loans are our main niche, however we plan to develop cooperation with large corporations as their secondary, supporting banks. This strategy will allow us to establish link with huge companies.
The consumer satisfaction index will be our main advantage. We want to maintain a high level of consumer happiness and satisfaction. I do not think that interest rates alone can bring about this index. Personal relations, respect towards customers and serving each individual as a VIP guest will determine the advantage of Progress Bank.
Q. What will be the main challenge for your bank in 2013?
A. We will be focused on the modernization of our business modelling and processes. We aim to become closer to our customers. Next to our strategy for growth we would like to maintain the commitment towards our customers that we have already established. Maintaining this standard next to market share enhancement will be our main challenge.
Launching mobile banking is also a part of our plan. We are choosing educated consumers and are going to simplify the usage of our services for them.
Biography:
Konstantine Sulamanidze, PhD in Bank Risk Management, started his banking career in 2002 as Credit Administrator at United Georgian Bank (Current VTB bank Georgia). He worked at Bank Republic, Societe Generale Group and in 2008 moved to Progress Bank, as Operation Director. In 2009 he was appointed CEO of the Bank.
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