Micro banks to be established in Georgia to finance small entrepreneurs

The Georgian Government has decided to create micro banks in the country in an effort to offer “increased opportunities” for financing small entrepreneurs and allocate new “credit opportunities” in the field of agriculture, Lasha Khutishvili, the Georgian Finance Minister, announced on Monday. 

Khutsishvili said the bill on the creation of new financial institutions in Georgia “should necessarily have an impact” on interest rates due to the emergence of the “relatively cheap resource” of the micro banks and “increased competition” driving rates down in the sector.

The micro banks will operate in sectors where the interest of commercial banks is “relatively low” due to high operating costs, the Government has explained.

The mandate of the micro bank, as defined by law, will be to provide credit to the entrepreneurial and agricultural sectors, thereby increasing the population's access to financial resources - particularly in the regions [outside major cities]”, the statement also said. 

Khutsishvili pointed out the “very important function” of the new financial institutions for the development of the country and added the micro banks would be a “constituent part” of the banking sector, have a “relatively different” regulatory framework, and be supervised by the National Bank of Georgia. Photo: Georgian Finance Ministry

He also noted various supervisory functions would be “relatively simplified” for the micro institutions compared to conventional banks, adding the existing microfinance organisations and those registering for the announced profile in the future would have the opportunity to receive the micro bank status following the adoption of the bill by the Parliament. 

Developed by the Finance Ministry and the National Bank of Georgia, the bill was reviewed during a Governmental session earlier today.