IMF praises efforts of Georgia's central bank to enhance resilience of non-banking sector

The International Monetary Fund has praised the measures adopted by the National Bank of Georgia (NBG) in the past two years aiming to strengthen the non-banking sector’s financial regulation, supervision and oversight in Georgia.

Currently, the non-banking sector of Georgia consists of micro financial institutions (MFIs) and loan issuing entities (LIEs). In reforming the sector, the NBG has:

• Amended laws and issued new and revised regulations on registration, capital, and liquidity requirements for MFIs
• Expanded supervisory powers and authorities and increased supervisory resources for the nonbank sector
• Registered 200 LIEs 
• Put in place consumer protection and responsibility lending rules

These new measures have helped to enhance the resilience of the non-banking sector, weed out those that are non-viable, and improved the reputation of the MFI brand", reads the technical assistance report of the IMF. 

The IMF says that Georgia's central bank is interested in further strengthening the oversight of the non-banking lending sector and further promoting financial inclusion on both the asset and liability sides. The IMF says that it supports the NBG’s proposed new structure in the micro lending sector.

Under the proposed new structure, the top tier would be micro-banks, which would gradually be allowed to take deposits, have deposit insurance, like banks, and have access to GEL [Georgian national currency] from the NBG. Existing qualified MFIs would be allowed to apply to be licensed as micro-banks. The licensed micro-banks would have a clear mandate to function as a lender to underserved individuals, SMEs, and agri-businesses. In addition, they would be required to implement capital and liquidity requirements per the Basel framework with proportionality, be subject to enhanced supervision, and put in place risk management and corporate governance frameworks", reads the report.

The IMF says that these measures would help to promote SME lending and reduce funding cost for the micro-banks, as well as achieving better safety and soundness of the financial system.