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Number of Insolvent Citizens in Georgia Grows

Quantity of insolvent citizens rapidly grows in Georgia. The tendency has intensified in 2017. Over the past 10 months, the quantity of insolvent citizens rose by 23.5%.

As of January 20, 2017 the Debtor Registry of National Enforcement Bureau registered 186 285 debtors, while currently the registry records 230 223 entries. Thus, in January-October period the list of insolvent citizens has recorded 43 928 new entries.

According to the mentioned statistics, currently, 6.1% of total population of Georgia are insolvent (3.718mln persons live in the country, according to Geostat). It should be also noted that 1.998mln citizens are economically active in Georgia. This signifies 11.5% of active population are insolvent and this signifies this category is ejected from economic processes.

In general, data in the Debtor Registry changes quickly, because entries are removed after debts payment. However, the fact is that over the past years the Debtor Registry records more and more entries. According to economic experts, when the number of entries grows in the Debtor Registry, this signifies the living conditions in the country becomes expensive and the number of insolvent citizens also rises. All these factors signify that economic activity is low and social background remains heavy. To change the situation, at least the economic activity should be intensified.

Even the credit bureau indicators prove the situation is heavy. According to these indicators, more than 0.5mln persons have overdue loans in Georgia and total amount of the overdue loans exceeds 10bln GEL.

«The Credit Bureau indicators show how many people have overdue loans. Regretfully, this is a huge figure. More than 0.5mln persons are recorded in this list. Our goal is to reduce this quantity. Our objective is to protect our population from heavy burden and they have enough incomes to serve their loans. We talk about shaping these mechanisms. If their incomes do not suffice to serve the loans, naturally, a considerable part of our population will be impoverished», NBG vice president Murtaz Kikoria noted.

Akaki Zoidze, head of parliament’s health and social issues committee, names 4 reasons the number of insolvent citizens has increased.

«In general, the number of insolvent citizens grows because of complex issues and it comprises several directions, including loans, especially consumer loans, microfinance organizations, online loans and gambling games. All these factors have brought the current results. Government is working on this direction. The issue with online loans were resolved. Similar organizations had imposed high interest rates and fines and people, who could not cover debts, were included in the list of insolvent people. I reaffirm that now these issues have been resolved.

As to microfinance organizations and financial pyramids, NBG continues active job on this issue and we have submitted a new initiative to the Parliament. We will discuss this initiative and we hope pseudo investment funds and pyramids will be subjected to maximum regulations.

Online games and casinos are in the next category. Regarding this issue a new initiative has been submitted, which is being discussed at this stage. The submitted mechanisms will be very efficient. Larization program will promote the process, which alleviates the threat of turning insolvent as a result of GEL exchange rate devaluation», Akaki Zoidze said.

Along with the growing number of insolvent citizens and growing amount of overdue loans, commercial banks also grow their profits. «Georgia-based commercial banks rank first in terms of profits in Europe and Asia», economic expert Mikheil Dundua said.

«According to International Monetary Fund (IMF), among deposit-banking systems Georgia comes behind of only China’s tiny province of Makao in terms of Return on Equity (ROE). In Georgia the ROE accounts for 22.9%, while in Makao the figure constitutes 23.1%. As to Return on Assets (ROA) Georgia comes behind of only Maldives. In Georgia ROA accounts for 3.1%, while on Maldives ROA is 3.5%. Over the past 34 months, net profits of the banking sector exceeded 1.885bln GEL, up 240mln GEL as compared to total amount of all previous years. The January-October profits of the banking sector exceeded 669mln GEL (259mln USD). For comparison, in 2016 the net profits of the banking sector made up 679mln GEL (257mln USD), Dundua said.

The central and commercial banks jointly with other crediting organizations have accustomed us to the existing reality. Social conditions of our population and their solvency worsens, while profits of commercial banks beat records every year.

Regretfully, neither Government nor National Bank demonstrates readiness to change the situation. Hence, we keep building the country, where the banking sector is the most profitable field, while our population pays a major part of their incomes  and property to commercial banks because of enslaving agreement terms.

By Merab Janiashvili
Economic Analyst
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