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Microfinance organizations are in trouble

Microfinance organizations are in trouble

An effective upper limit for interest rate set by the National Bank of Georgia has proven to be painful for Microfinance organizations - said Lasha Eredeli, Director of Microfinance organization 4 Finance (vivus.ge). According to him the regulations set by the National Bank  during the last year and a half hit the market.  The Microfinance sector showed loss for the first half of 2019.

"We've cut the staff and closed branches, we are paused right now. I think that free market principles are the main starting point. Competition creates the best conditions. Strong players always stay in the game and weak ones leave the market. Regulations do not create good conditions for our citizens "- said Lasha Eredeli.

According to Lasha Eredeli Georgian regulations are far from European standards and are much stricter than those in developed countries.

"Interest rates are particularly high, even in developed countries, a person can get a loan in comparison to its possibilities. We can have European regulations but not in this particular manner "the company Head said.

According to him, Microfinance organizations are trying to adapt to reality. Businesses are trying to develop a sustainable model for regulations.

"We are working on a new model that can be adaptable to current regulations, but we are not operating now. We had to take a pause and stop lending money in Tbilisi. I think that the National Bank of Georgia set given regulations without thinking of the consequences. We have been advocating for RIA project for the long time, because it is necessary to study the effect of regulation on the financial market. I strongly disagree with the position of the National Bank of Georgia that the financial system is healthier today."

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