ProCredit Bank’s 20 years of challenges and successes in Georgia and what it means to be a responsible bank
05 August, 2019
“The bank’s 20-year long presence in Georgia was marked by many challenges and success stories. During these 20 years, the bank has been focused on development of small and medium sized businesses, as we think these businesses are the backbone of the country’s economic development,” - Alex Matua, General Director of ProCredit Bank told the Georgian Journal.

In his interview with the Georgian Journal, Mr. Matua summed up the 20-year history of the German bank in Georgia
and discussed future plans and new projects.

Mr. Matua, ProCredit Bank, to our knowledge, the only bank in the Georgian banking sector with a 100% German capital, has been around for 20 years. Looking back, how would you assess the bank’s overall performance?

That’s right, ProCredit Bank has been operating in Georgia since 1999. We have witnessed many significant changes both in the country and in the bank. These 20 years have been full of challenges and success stories.

It is worth noting that ProCredit Bank, being a German investment, appeared in Georgia when the country’s economy and access to financing was underdeveloped, which affected business climate of our country in the late 90s. ProCredit Bank gave businesses a unique access to funding: we financed very small businesses across the country, all regions included. Offering financing and quality services to such companies, in its turn, significantly contributed to economic development, which played a critical role in the growth of the Georgian financial market. It should also be noted that in addition to financial support, the bank’s priority has been to have an open and transparent relationship with customers at every stage of communication, which is one of the most important criteria for a long-term business partnership.

What do you mean by an open and transparent relationship with customers?

An open and transparent relationship implies provision of transparent information to customers. This approach was especially relevant in 2004-2009 - the period of highly competitive banking climate in Georgia. Under such circumstances, our bank’s practice of communicating open and transparent information helped build customer trust.

In addition to the culture of open communication, our priority has always been responsible banking, which meant that we did not encourage irresponsible lending. Overindebtedness is an obstacle for economy, while responsible lending supports healthy and steady economic growth. It was in fact the abundance of consumer and mortgage loans that resulted in the crisis of 2006-2008.

As overindebtedness plagued the country, we responded to it by launching a financial education campaign about responsible lending, aimed at improving public awareness of banking services. Back then, we had internal regulations that are now mandatory for the entire financial sector, for example, we have used the solvency ratio ever since we entered the market. We welcome any development towards reasonable lending in the financial market.
Alex Matua, General Director of ProCredit Bank

Speaking of overindebtedness, how would you assess the ongoing changes and regulations in the banking sector, how did the newly introduced responsible lending practice affect the bank’s operations, considering that one of the presumed reasons for introducing this practice was fight with overindebtedness?

We need to be careful when discussing responsible lending and fight with overindebtedness so as not to see it as a responsibility of just one party. It is everyone’s responsibility, we think the banking sector must be the first to step up and assume this responsibility.

The idea of responsible lending is to finance a business or an individual through a technology or based on a principle that will not lead the borrower to insolvency. In the long run, this affects the banking sector, including the share of overdue loans. Since 1999, our non-performing loan ratio has been one of the lowest. ProCredit Bank has had a healthy credit portfolio and consistent profitability, even in times of financial crisis. Our return on investment is 14-15%. By lending responsibly, we are rewarded with steady earnings, which is a prerequisite for long-term development.

We have seen increased competition in the financial sector compared to when you first started operation in Georgia. What is ProCredit Bank’s vision and what makes it stand out in the Georgian financial sector?

In these twenty years, ProCredit Bank has been consistently focused on the development of small and medium sized businesses because we believe that these businesses are the cornerstone of economic growth. ProCredit Bank’s German shareholders are committed to supporting economic development, employment and progress, which would be impossible without developing small and medium sized businesses first. Lending to individuals accounts for over 50% of the local banking sector’s credit portfolio, while in our case - 90% of ProCredit Bank’s credit portfolio consists of business loans, which demonstrates ProCredit Bank’s niche – financing SME businesses. In addition to financial support, we are distinguished in the banking sector by our tech-savvy approach and environmental efforts.

For example, we were the first to introduce an electronic signature back in 2011, transparent branches and online transactions. Since 2014, we have offered our customers 24/7 zones equipped with multifunctional devices, and so on and so forth…

Let’s delve deeper into the social aspects of ProCredit Bank’s operation and support of green financing. What exactly does it mean?

One of the aspects of responsible lending is taking care of the environment. This can be manifested in different ways. Firstly, we should look at an organization’s environmental efforts. In ProCredit Bank, we have a special unit that works incessantly to raise employee awareness of environmental issues. We have annual trainings, we implement projects, because if you are calling for environmental friendliness you should be the one setting an example. As of now, 30% of our car park is electric vehicles and every new car that we purchase will be an electric car.

We also have a new project of solar panels and hope that this year we will already be able to generate all the electricity used by the Head Office from a renewable solar energy. Each of our office is energy efficient. Besides, we do our best to encourage our customers to be more environmentally friendly and direct the financing we provide towards green projects. 16% of the projects we finance are energy efficiency projects with a favorable impact on environment. Each proposed project is, among others, assessed from the environmental perspective. We offer preferential terms to the projects with a positive impact on environment.

Access to finance is still seen as a challenge today. The Government has even developed a project towards solution of this problem – a credit-guarantee scheme that became effective on the 1st of April and aims to enhance lending to the business sector. Do you intend to be involved in the scheme?

Guarantee projects are no doubt important for enhancing access to finance. We have been an important part of this project since its initiation due to our experience with the European Investment Fund. Two years ago, we received guarantee funds of 50 million euros from the European Investment Fund to finance innovative projects. This experience has helped us provide recommendations while the credit-guarantee scheme was being developed. At the moment, thanks to the joint support of the European Investment Fund and ProCredit Group, we will be able to support many more innovative businesses. In general, we welcome any project that is designed to improve access to business financing.

When it comes to lending to individuals, what do you have to offer to customers?

In recent years, our strategy has included introducing high quality online services to better serve private individuals. Two years ago, we offered our customers an online platform, ProCredit Direct, allowing them to carry out all kinds of transactions quickly, effectively and, more importantly, safely. This approach is already broadly practiced in Europe and we believe that in Georgia we have the average size customer segment that would find this service convenient. We keep working and plan to offer our customers more innovative services soon.

Security has been a hotly debated issue recently, especially the cases of cyber fraud and personal information security breach. Just how protected should your customers feel?

Any high-quality service offered to customers must be secure. We place top priority on the safety of transactions, and when we introduce a new product or a new service, it is tested for every possible breach of security. Therefore, I am proud to say that our projects and services are accompanied by strong security systems. To prevent or respond to such cases, if any, ProCredit Bank has high-level security systems in place.

What are ProCredit Bank’s current and future priorities and plans?

ProCredit Bank’s current and future projects are generally implemented in two directions: we continue supporting small and medium sized businesses and introduce services that rely on latest technologies for both private individuals and SME businesses.

Author: Mariam Titvinidze

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