JEL Classifications: G21; G23
MODERN CONDITION AND ROLE OF MICROFINANCE ORGANIZATIONS (ON THE EXAMPLE OF GEORGIA) Author: Medea Chelidze, Tamari Beridze, Bella Goderdzishvili
| Published: 2020-12-28
| Pages: 252 - 256
For Citation: Chelidze M., Beridze T., GoderdziSvili B. (2020). Modern Condition and Role of Microfinance Organizations (On The Example Of Georgia). Globalization and Business, 10, 252-256. https://doi.org/10.35945/gb.2020.10.033
The financial companies have hold an important position in the Georgian financial industry, and for this reason, their regulation is an essential issue, which should continue at least in the same manner.
In the developed countries the non-bank sector plays an important role in the development of financial sector as well as the whole economy, which we cannot say about Georgia, due to the obvious dominance of commercial banks in the country.
The aim of our study is to identify the role of microfinance organizations in the financial system of Georgia, and also to show the current state of this market segment. The article is based on the newest references and rich factual materials. The object of the research is microfinance organizations and the degree of their regulation by the state.
The National Bank of Georgia has a full authority to supervise the work of commercial banks, non-bank deposit institutions, microfinance organizations and other organizations, envisaged by the law. The majority of the institutions with microfinance organization status, registered at the National Bank of Georgia, are consumer finance companies with their content. Their work is absolutely legitimate, however, the issuance of the loans are based not on the customer’s finance analysis, but the evaluation of a subject or property, presented for the loan insurance, and the funds are not directed to finance the business, but for the customer’s needs.
The financial companies have hold important position in the Georgian financial industry, and for this reason, their regulation is an essential issue, which should continue at least in the same manner.
It is problematic that currently many financial companies, pawnshops, internet-lenders or private individuals that are left beyond regulations. There is no guarantee the customers' rights will be protected when the work of the financial intermediaries is not regulated. Such circumstances create a threat to the spread of predatory lending practices in the market, the victim of which becomes the unaware customer.
The results show that it is important to take more active steps on the part of supervisory organizations to develop the segment of microfinance organizations, so as not to reduce their role and importance in the financial system.
Microfinance Organization, Joint Stock Company, Non-Bank Deposit Institution, Low-Income Citizen, Commercial Bank
Lee, S. (2017), Introduction to Microfinance Institutions (MFIs), Part I. Medium Calvert Impact Capital, Inc., available at: https://www.calvertimpactcapital.org/blog/683-intro-to-mfis (Accessed 22.02.2019).
Members of the Georgian Microfinance Association, available at: www.microfinance.ge/members-of-association/ (Accessed 02.03.2019)
Mosiashvili, V., Chelidze, M. and Khidirbegishvili, N. (2017), Financial Institutions and Markets. Dani, Tbilisi, 461
National Bank of Georgia, List and coordinates of non-banking institutions registered in Georgia, available at: www.nbg.gov.ge/index.php?m=529 (Accessed 03.03.2019)
National Bank of Georgia, Summary financial indicators of non-banking institutions in Georgia, available at: www.nbg.gov.ge/index.php?m=703 (Accessed 05.03.2019)
Parliament of Georgia (2006), Law of Georgia „On the Microfinance Organizations“, Tbilisi.
Parliament of Georgia (2009), Organic Law of Georgia „On the National Bank of Georgia“, Tbilisi.
Guntz, S. (2011), Sustainability and profitability of microfinance institutions. University of Applied Sciences Nuremberg. Research Paper 4/2011.
The Georgian Microfinance Association, Activities, available at: www.microfinance.ge/activities/ (Accessed 28.02.2019)
The Georgian Microfinance Association (2009), Charter, available at: www.microfinance.ge/wp-content/uploads/%E1%83%AC%E1%83%94%E1%83%A1%E1%83%93%E1%83%94%E1%83%91%E1%83%902.pdf (Accessed 01.03.2019)
The National Bank of Georgia (2012), Order, On approval of the rules and conditions for registration of the microfinance organization in the National Bank of Georgia, N33/04, Tbilisi.
UFA2020 Overview: Universal Financial Access by 2020 (2018), available at: https://www.worldbank.org/en/topic/financialinclusion/brief/achieving-universal-financial-access-by-2020 (Accessed 02.03.2019)