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400 mln online credits issued in Georgia

By Gvantsa Gabekhadze
Monday, January 16
The President of Georgia’s Economic advisor, Maya Melikidze, says 400million online credits are issued in Georgia, when the country’s population is just 3.7 million.

She said some regulations were required to regulate the online-credit market in Georgia. However, Melikidze stated there were question marks as to how the Government and the National Bank of Georgia addressed the issues.

Melikidze made the statement in the wake of President Giorgi Margvelashvili’s signing the Government-offered (and Parliament-approved)‘Larisation’ legislative package, which included the obligation to issue loans up to 100,000 GEL in the national currency and that the maximal, upper level for the interest rate for online loans must not be more than 100percent.

Melikidze said the President did not veto the Larisation package, despite the fact he had various questions marks over the move.

“400 million online credits are issued in Georgia, while the country's population is 3.7 million. This means that demand on credits is high in the country. So, our question is how the country will satisfy this demand under the new regulations? Will this demand move to the banking sector, or to the shadowed sector beyond our regulations?”Melikidze said.

Melikidze stated the National Bank of Georgia promised the President that his remarks over the bill would be taken into account.

The President's Economic Adviser forecasts that after new regulations take effect on 16 January, several online-credit organizations will have to leave the market.

United National Movement member Roman Gotsiridze says the Larisation package will provide no positive results, as the country’s key problem is a poor economy. Gotsiridze says the package will create “financial risks”, especially for micro-financial organisations.

“The package prohibits issuing the loan up to 100,000 GEL in a foreign currency. It means that 101,000 GEL loan may be issued in USD. The situation is different in terms of micro-financial organisations, as other laws prohibit them fromissuing more than a 50,000 GEL loan to a single borrower. This means they will have to issue loans in the national currency,” Gotsiridze said, adding that when financial organisations have accumulated their resources in USD and they are forced to issue loans in GEL, it is a “ legal issue” and also creates financial risks.

Analysts are not unanimously agreed over the issue, with some supporting de-dollarization and limited online-credit market and others concerned about the threat of “underground financial organisations” if online loans are limited, as due to the hard economic situation,the demand on online loans remains high in Georgia.