The FINANCIAL - 87.5% Higher Interest Rates on Loans for Individuals in National Currency

87.5% Higher Interest Rates on Loans for Individuals in National Currency

87.5% Higher Interest Rates on Loans for Individuals in National Currency

The FINANCIAL -- According to data by National Bank of Georgia, the market interest rate on loans for May 2014 is 21.1%, which is the average interest rate for legal entities and individuals in the national currency. The interest rate on loans for legal entities in the national currency is 13%.

Compared to the previous month when the interest rate was 12.1% there has been an increase of 6.9%.  If we compare the numbers to the same period of the previous year when the percentage was 13.7%, we would have a decrease of 5.1%.

The interest rate on loans for individuals in the national currency is 24.3%. Compared to the previous month’s interest rate there has been neither a significant increase nor decrease. The percentage of increase when comparing May to April was 0.2%.  But if we compare today’s interest rates to the same period of the previous year we would have a 1.4% increase.

In the case of the interest rates for legal entities there was a tendency of decreasing rates from the same period of the previous year. The lowest interest rate was in February 2014 - 11.8%. After this there have been slight increases in interest rates till now. The increases were 1.8%, 1%, and the highest increase - 6.9%, which was from April to May. As a result, if comparing February 2014 to May 2014 we had approximately a 10% increase in interest rates on loans.

In the case of the interest rates for individuals there were increases and decreases when comparing monthly data from the previous year till now. The lowest interest rates were in November 2013 - 21.9%. The interest rates were lowest for legal entities in February 2014, in the case of individuals we had the highest rate throughout the year. Comparing November 2013 to May 2014 there was growth of 11.2%.

The percentage of the interest rate in the national currency for individuals is 87.5% higher than for legal entities. For February 2014 when there was the lowest interest rate for legal entities and highest interest rate for individuals, the percentage difference between them was 107.7% higher interest rates for individuals.

The interest rate on loans in a foreign currency was 12.1% in May 2014 on average for legal entities and individuals. The percentage of interest rates on loans for legal entities was 11.5% in a foreign currency. Compared to the previous month when the interest rate was 11.2% there was an increase of 2.5%. If we compare the numbers to the same period of the previous year the percentage for that time was 12.6%, and we would have a decrease of 8.8%.

The interest rate on loans for individuals in a foreign currency is 13.2%. In the previous month the interest rate was 13.5%. The percentage of decrease comparing May to April was 2.4%.  But if we compare today’s interest rates to the same period of the previous year we would have a 21% decrease.

The lowest interest rate for loans in a foreign currency for legal entities was in February 2014 - 10.9%, as it was in the case for interest rates in the national currency. After this there was an increase till May 2014’s numbers; the percentage of the increase was 4.9%.

In the case of interest rates in a foreign currency for individuals, the lowest interest rate was in May 2014 - 13.2%. The highest interest rate was in May 2013, with data taken for the whole year. The interest rate was 16.7%; the decrease from May 2013 to May 2014 was 21%.

The percentage of interest rates in a foreign currency for individuals is 14.9% higher than for legal entities.

For example if an individual took out a loan of GEL 1,000 for 1 year, from June 2013 till May 2014, for June 2013 the interest rate was 23.9%, and supposing that it wouldn’t be affected by changes over 1 year, means that it wouldn’t increase or decrease. An individual in May 2014 would pay GEL 1,239, GEL 239 higher than the amount they had taken out from the bank.

On the other hand if an individual took out a loan of USD 603.9 in June 2013 which was the equivalent to GEL 1,000, with an exchange rate of 1.6559 USD/GEL, the interest rate was 16.6%. The interest rate is not supposed to be affected by changes over the year. Yet in May 2014 the individual would be paying USD 704.2, which is USD 100.2 higher than the amount they had taken out from the bank. If we convert the amount USD 704.2 with May’s exchange rate, which was on average 1.7633, we would have GEL 1241.62; GEL 2.62 higher than if the loan had been taken out in GEL.

But if we take for example data from December 2012 till November 2013, if an individual were to take out a loan of GEL 1,000 in December 2012 for one year, with no changes, with a 26.7% interest rate, he would in November 2013 be paying GEL 1,267; GEL 267 higher than the amount taken out from the bank.

In terms of foreign currency if one were to take out USD 602.4, with an exchange rate of 1.6599 USD/GEL which was equivalent to GEL 1,000 for December 2012, with no changes in the interest rate of 18% for loans in a foreign currency, the individual would be paying USD 710.8 in November 2013. With an exchange rate in November 2013 of 1.6784 USD/GEL, they would have GEL 1,193.1. The number is GEL 73.9 lower than in the event of taking out a loan in the national currency.

The interest rates were higher for loans in December 2012 than in June 2013, but the fact that exchange rates were lower was due to the fact that in was more profitable to take out a loan in a foreign currency than in the national currency.

 

Author: Temur Tatishvili

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