An interview with General Director of ProCredit Bank Asmus Rotne
“ProCredit Bank” is considered one of the most stable financial institutions in Georgia. What are the main factors predetermining it?
In comparison with the other players in the financial market of the country, our bank is conservative in matters of lending. It’s part of our policy, and I can confidently say that it has justified itself.
If we look at performance of other Georgian banks, after the crisis of 2008 even the strongest banks had very poor financial performance for 2 years, and only “ProCredit Bank” continued to work for profit – it was due to a conservative approach.
We are also very attentive to the choice of priorities. For example, we are gradually and consistently coming out of the microfinance sector in which we started our activity in Georgia. At that time the emphasis on microlending was a conscious choice, because in that period this segment was needed for the development of the economy. We have many examples when our clients started with a small business, developed with our help and today have medium or large business.
Today the competition is at a very different level and damand has changed. Over time, the demand for micro-lending has reduced, so we are leaving this market.
If the demand for micro-lending is reduced, then what caused the boom of online lending and various microfinance institutions whose number is constantly growing?
It’s all very unstable, as people often take expensive microcredits and then cannot pay them, and they face very serious problems. This may continue for a long time, but not forever.
It’s very easy to analyze the situation and come to the conclusion that this instability will sooner or later lead to negative results, especially for the borrowers, and ultimately for the entire microfinance sector.
Consumer loans, installment and credit cards have never been a priority for “ProCredit Bank”. Given that most large Georgian banks are actively working in this direction. How can you explain your position in this regard?
We deal with these types of services, but they do not take a great share in our loan portfolio. And here we follow a conservative approach, as these sectors of lending are associated with greater risk and, accordingly, are not included in the list of the cheap banking products.
It is often said that the “credit trap” is the fault of the debtor, but I do not agree with this approach. The financial institution should not be interested in the client’s crippling debt, as in the event of the first problems, he will take on more debts at higher interest rates, and in the end all will suffer – both a client and financial institutions.
With specific regard to us, we issue consumer loans only to those who have an account in our bank, and in whose solvency we’re sure.
“ProCredit Bank” has a great experience in agro-lending, which despite of a number of governmental programs, still occupies a very small share in the volume of lending. Why is that?
The biggest problem is a large number of small households with a very low profitability, as the cost of products is higher than at large farms. That is why the financial institutions do not have a particular interest in their lending. A process of consolidation of farms should start in villages, as well as the promotion of cooperation, otherwise, modern agricultural technologies will not be introduced, respectively, funding and agricultural insurance will remains problematic.
The main challenge is to create agribusiness lending which would be attractive to financial institutions. Lending to small farms is unprofitable and very inconvenient for the banks. We focus on lending to large and modern agro-complexes.
Currently agri-lending amounts to GEL 45 million that is 8% of the total loan portfolio.
How do you feel about the National Bank’s decision to ban banks to own non-core assets?
Banks should engage in banking activities. If tomorrow we start to build the buildings, open supermarkets, work in insurance, then, of course, we will have less time and opportunity for a proper banking.
The fact that we don’t have non-core assets is our advantage, since customers have more confidence in us because they know that we don’t engage in business. They know that the bank will not be their competitor and they will not create problems associated with this.
So, I think the National Bank’s respond is correct.
“ProCredit Bank” is working in Georgia for many years at different times and in the conditions of different economic reality. How do you assess the situation now?
Quality of Georgia’s economic development gives grounds for optimism. Compared with neighboring Armenia, where the GDP growth is about the same but economy is developed at the expense of several major companies associated with the government while other areas are developing quite weak, in Georgia happens quite the opposite.
And this is certainly a positive fact.
Of course, in Georgia there are also cases when business is associated with government officials, but there is much more space for small and medium businesses here. Nobody prevents entrepreneurs todevelop; no one takes illegal actions against them both administrative and mafia.
I heard that it is unprofitable to create small and medium businesses in Armenia, as it can get in the sphere of interests of big business, then the entrepreneur may lose everything. In Georgia, this could be heard many years ago, and I think that the country will never return to this situation.