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Devalued lari reduces microfinance market in Georgia

Business Materials 18 January 2021 14:04
Devalued lari reduces microfinance market in Georgia

BAKU, Azerbaijan, Jan. 18

By Tamilla Mammadova – Trend:

Devalued lari reduced the microfinance market in Georgia, said Goga Khishtovani, director of the PMC Research Center, Trend reports via Georgian media.

Khishtovani explains that the fluctuation of the lari exchange rate in recent years has created additional problems for microfinance organizations. The point is that they attract funds in foreign currency, while loans are issued in lari, correspondingly, they cannot actually make a profit due to the exchange rate difference.

"In the last 5 years, lari to USD exchange rate has shown a tendency of depreciation excluding the coronavirus pandemic and it severely reduced profitability of market players. Lari depreciation re-weights total profit. The MFOs must be formed into banks or micro banks and use all the benefits that banks have. I mean the ability of banks to attract funds in lari, otherwise, they will have to leave the market," Khishtovan said.

In 2019, as a result of the changes in the financial market, the number of microfinance organizations is down from 67 to 40.

As for the loan portfolio of microfinance organizations, it amounted to 1.13 billion lari ($344.1 million) in 4Q2020, while the sector has a total of 648,000 borrowers. The volume of the loan portfolio increased by 2.7 percent compared to 3Q2019, while the number of individual loans is 11 percent down, which is related to the exit of online borrowers from the market.

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