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Total amount of loans issued by Georgian MFIs down

Finance Materials 26 April 2021 10:12 (UTC +04:00)
Total amount of loans issued by Georgian MFIs down

BAKU, Azerbaijan, Apr.26

By Tamilla Mammadova – Trend:

The total amount of loans issued by Georgian Microfinance Institutions (both to individuals and legal entities) amounted to 4.58 billion lari ($1.3 billion) in 2020, Trend reports via the Policy and Management Consulting Group (PMCG).

As reported, the number of loans issued amounted to 2.71 million loans, which is a 4 percent and 26 percent decrease, respectively, compared to 2018.

In 2018-2020, a significant decrease in online loans and custom loans (by 12.4 and 5.2 percentage points, respectively) was recorded. As a result, pawnshop loans emerged as a popular alternative, with their share rising by 16.3 percentage points over the same period. Moreover, trade and service loans and agricultural loans did not encounter noteworthy changes in this period (1 percentage point and 0.8 percentage points increases, respectively).

According to the IMF, the microfinance sector in Georgia currently faces several challenges, stating in particular that there is a mismatch between foreign currency borrowing and local currency lending. MFIs are obliged to lend to individuals and connected parties not more than 100,000 lari ($28,985) and all loans up to that level must be in lari.

Moreover, funding from commercial banks is mostly denominated in foreign currency, which increases costs for MFIs (with regard to interest rate costs), when they need to exchange foreign currencies to lari.

In addition, the 50 percent interest rate cap is considered too low by a number of MFIs which usually follow a strategy of providing risky microcredits to individuals.

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