Access to Green Finance for SMEs in Georgia by OECD

Author:OECD
Language: eng
Format: epub
Tags: industry/finance/regions/trade/environment
Publisher: OECD Publishing
Published: 2019-12-19T00:00:00+00:00

Figure 4.1. Growth in credit vs GDP growth in Georgian banks, share per annum, 2012-18

Source: (NBG, 2019[5]).

Loan growth (both real and adjusted for the exchange rate) is generally higher than economic growth. There is an ongoing availability and volume of credit relative to GDP. Aggregate demand is the driving force for credit expansion with no evidence of a credit crunch (sharp reduction in credit availability).

Retail credit is one of the main drivers of loan growth (with a 20% year-on-year increase). The National Bank of Georgia (NBG) is addressing emerging risks to complement its dedollarisation strategy (e.g. limits on loan-to-value ratios). Retail credit penetration (32% of GDP) is relatively high. While concerns exist around rapid growth, safeguards appear to be in place. Retail loans represent 55% of credit in 2017, compared to 49% in 2014.

SME lending and access to finance has been flagged as the third most important obstacle to business (EBRD/World Bank Group, 2015[6]). However, the share of SMEs identifying this barrier is similar to other countries. SME credit as a share of overall corporate credit has been increasing over the last two years. Retail access to credit is also in line with other countries. The main issues relating to access to finance appear to be low levels of SME wealth/assets and existing indebtedness rather than bank lending policies per se.

There have been significant declines in interest rates on loans denominated in both GEL and foreign currencies, as well as in the loan-deposit spreads for both. Despite high levels of return on equity, banks do appear to be passing through economic gains into more competitive loan pricing. At present, GEL-USD interest rate spreads are the main driver of dollarisation. In the meantime, many SMEs have been happy to access foreign currency loans at lower interest rates, despite the currency exposure this can bring.

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