EIB, EBRD assess financing opportunities for Georgian business

Georgia Materials 8 December 2021 18:09 (UTC +04:00)
EIB, EBRD assess financing opportunities for Georgian business

BAKU, Azerbaijan, Dec. 8

By Maryana Akhmedova – Trend:

According to the latest EIB-EBRD-WB Enterprise Survey, the access for financing for small and medium enterprises in Georgia continues to be a major obstacle, Trend reports via joint publication by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).

Georgian banks dominate the financial sector with 94 percent of total assets, while dollarisation remains a key feature of the Georgian financial sector, the report said.

As a result, financial intermediation has become increasingly important in Georgia, with net total assets of 50 billion Georgian lari ($16.1 billion) reported in 2019.

According to the report, 56.1 percent of the total amount of loans and 60 percent of total deposits were in foreign currency.

The government securities issued in Georgian lari are mainly held by local banks as collateral for refinancing purposes, the report noted.

"Although these statistics still represent large shares of financial intermediation, they are past the peak of around 2015/2016. This is mainly due to the National Bank of Georgia’s mitigating actions and the implementation of the "larisation" program," the EIB and the EBRD noted.

The National Bank of Georgia has significantly developed and modernized its liquidity management tools since the adoption of its inflation-targeting mandate in 2009, the report said.

"The share of firms with limited credit opportunities was about 31 percent, while applications for loans from a minority of firms were rejected, and, for the most part, firms were simply disappointed and did not even apply for credit lines. Interest rates were still the main discouragement factor," the report said.

The propensity to invest for companies was restrained by credit restrictions, thereby, firms not carrying any loans from the financial sector had a very low investment tendency, the report noted.

Thus, this suggests that further coverage and deepening of the financial sector is required to support small and medium-sized businesses and investments, which will contribute to long-term growth, the EIB and the EBRD concluded.


Follow the author on Twitter: @mariiiakhm