To Sweep Votes Georgian President Reprimands Banks
21 June, 2012
To Sweep Votes Georgian President Reprimands Banks

The President of Georgia reprimanded Georgian commercial banks for impoverishing a big group of people and warned them about likely formation of anti-banking attitude in the public. Georgian experts find the presidential approach incorrect and view it as a part of pre-election campaign.

“I meet people in the street who had 2-3 apartments that banks seized and left them in the street. We get quite a big group of people whom you made poor and who are at the brim

of poverty now and don’t tell me that they made their choice; do not create a class of starving, impoverished people,” Mikheil Saakashvili, said on June 15, 2012 at the opening ceremony of new Cash Center of the National Bank of Georgia (NBG).
He warned the heads of Georgian banks who were gathered at the opening ceremony that this kind of practice can bring an anti-bank feelings in the society and admonished them not to make money at the expense of impoverishing other people.
Having planted seeds of Christian moral among the bankers, Saakashvili reminded the congregation of high rates/profit and that they should work mutually to make credits accessible to small and medium business. Actually this was a follow up of his previous criticism made on May 27 during meeting with businessmen in Rustavi [Tbilisi adjacent city] when Saakashvili accentuated that credits are expensive and should get cheaper.
That Georgian banking system enjoys high profit margin is an open secret and a subject of permanent criticism of financial market analysts but they find reprimands of Georgian President incorrect for it smells by political pressure and populism. On the other hand it looks like a frank admission of guilt made by the head of the state that business environment in the country is not as correct as trumpeted.
Experts agree that high interest rates is a result of lack of market competition when against the backdrop of 19 banks operating in Georgia five biggest banks make 80% of  the total assets; lack of risk insurance systems and overestimation of risks by banks. High risk does really exist for example lingering real estate market that  acts as major collaterals to loans can be dangerous to banks but not as much as to fix risk rate at about 10% and even higher, experts say.  
Credit rates can be cut down but if macroeconomic stability will be more perceptible and foreign credit resources more available to banks but both are jeopardized at the moment by upcoming elections and eurozone crisis threats. Therefore credits are scarcely expected to get cheaper in the near future and political pressure on banks cannot bring positive results.
Experts hail government to work with the NBG to implement proper monetary policy to ease the credit problem rather than push on banking sector by political statements to sweep votes by parliamentary elections this fall.
“If it were some oppositionist political leader I would understand that criticism, but when a head of the state makes statements like this it is incorrect. Did the President discover only yesterday that credits are expensive? And is not Georgian banking sector the very field he has been exemplifying as a success story during his entire presidency term?” Ditrikh Mulle, a financial analyst with Georgian Investment Group, wonders. “I believe the presidential statement is nothing more than PR campaign to sweep votes for elections”. 
According to the World Bank’s data, only seven countries fix interest rates higher than Georgia where the cumulative yield on credits averages 24.2%. Georgian experts assure banks work on unreasonably high profit margin thanks to which the sector grew by 20% in 2011 with the net profit accounted for GEL 323 million while economic growth of the country was 6%. Association of Young Financiers and Businessmen came to the conclusion that Georgian banking sector grew on the expense of other sectors of economy for it seized real estate of other sectors through past-due loans. 
According to official NBG statistics, GEL 200 million makes the past-due loans portfolio totally. According to Soso Archvadze, an economic analyst, the market price of this GEL 200 million property exceeds half billion in fact for banks underestimate the property collaterals as a rule when disbursing loans and banks may face problems if do not shift focus from property-taking on economy-financing.
“The NBG together with the state should work to make banks increase financing to the economy and not to be interested in taking over the real estate. Otherwise they may face problems similar to American banks that fell in crisis due to excess of past-due mortgages,” Archvadze said in the interview with Georgian Journal.
He believes no anti-banking attitude is supposed to be created in the society as people do know that not only banks are the reason for their problems but the state also does partake in it. 
“Actually banks are not interested to get real estate for the unpaid loans, it is not easy to sell them out when the real estate market is low at the moment, they just have no other way out,” he said.
Muller believes banks prefer to take real estate because they have surplus in liquidity as they find financing economy risky at the moment, while real estate are factual assets and can bring profit sooner or later. But this path leads to a deadlock and the state should assist the NBG to implement proper policy to solve the issue.
“It creates a vicious circle: entrepreneurs lack money, banks fix high yields and continue taking their property. OK, but what are they supposed to do after that?” He asks.  “Business-friendly environment is not only easier registration of business. First and foremost it is easy credit access that enables business to be developed. And once credits are not affordable to business that bespeaks of problems in business environment and government is responsible for that, the NBG cannot solve it alone. ”

Print
Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
19.09.2018
20.09.2018
USD
1
USD
2.6188
2.6188
EUR
1
EUR
3.0593
3.0593
GBP
1
GBP
3.4414
3.4414
RUB
100
RUB
3.8673
3.8673
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6188
EUR
1
EUR
3.0593
GBP
1
GBP
3.4414
RUB
100
RUB
3.8673
September 2018
Mon Tue Wed Thu Fri Sat Sun
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30