During the year, a volume of bank lending in Georgia increased by 22%, including consumer loans issued to individuals – by 35%.
At the same time, almost 50% of the population is in debt to the banks, microfinance institutions and private moneylenders – it clearly demonstrates that the majority of the citizens of Georgia have the financial problems they are struggling to cope.
According to the National Bank of Georgia (NBG), loans w in the amount of GEL11 151 743 were issued in January-September 2014 in Georgia which is 22% more than in the same period of 2013 – GEL 9, 14 billion.
During the year, a volume of consumer loans increased by 35% and amounted to GEL 2 billion, whereas in the same period of 2013 – GEL 1.5 billion.
Experts believe such a growth of consumer credit is dangerous and indicates that the country’s economy is not growing and the citizens still have no savings even at a minimal level. And buying the necessary items on credit people, as a rule, are getting poorer.
According to the expert Vazha Kapanadze, credit growth in Georgia is directly related to the difficult economic situation of citizens.
“The fact that consumer lending has grown so dramatically shows that the economy is not growing at the required rate, and consequently, poverty is still prevalent in the country. However, Georgia still has a high level of unemployment, and people are forced to buy the most necessary things on credit. Population will have money only when the pace of economic growth increases and becomes more pronounced. While this trend is not observed,”- Kapanadze notes.
The expert Lia Eliava considers lending growth positive when it comes to business loans, however, focus on consumer lending raises concerns.
“The growth of consumer lending shows that a credit boom is recorded in the country and 35% is a very sharp rise in such a short period of time. If such growth was in business lending, the country would have blossomed, but unfortunately the commercial banks in Georgia are not focused on lending to the real sector. The growth trend in consumer credit is due to several factors – primarily it can be explained by the fact that commercial banks have reduced the study of risk factors and provide loans even to those who may not be able to pay their debts. The second factor is an intense competition in the financial market. The demand for consumer loans has always been high despite the low growth rate of income. This is due to the natural desire of people to live well not tomorrow but today. Ordinary citizens, who, unfortunately, badly can count, cannot calculate their solvency. In addition, consumer loan does not require collateral, and is simple from a procedural point of view. It is this factor that caused the growth of consumer lending. But in fact, this process is very negative for the banking system, for citizens, and ultimately for the country as a whole. For banks because it impairs the loan portfolio, as the population is poor and this leads to an increase in the number of problem loans that in turn can lead to a banking crisis. For the population because thanks to the debt on loans, poverty is growing and people have to pay more on loans. And it is bad for the state because eventually a negative social fund is growing and the received amounts basically go on providing import and the country does not develop, “- she says.
The expert Mikheil Tokmazishvili doesn’t consider growth of consumer lending dangerous, as in his opinion, it will not reach a level that will create serious problems in the country.
“Overall share of loans in respect of money in circulation is still insignificant. Consumer credit helps business sell products. Though, of course, the risk exists – for the banks as they give a loan without collateral, for business because it depends on the state of the banking system. In general, the growth of consumer lending suggests that the population has almost no savings, ” – the expert adds.