Banking

Georgia has seen very strong economic growth in recent years. Since 2003, the average growth rate of Georgian Economy has been 10%. According to 2007 data, the volume of foreign direct investments made in Georgia amounted to 1.681 billion USD, 46.6% more than the same indicator in 2006. The share of FDI in GDP equals 22.4%.

The Georgian government is in the process of privatizing large enterprises, many of which have attracted foreign investors. The privatization process brought in 317 million USD in 2007 alone. In 2007, the share of privatization in FDI was 18.8% (317 million USD) of total FDI (1.681billion USD).

2. Sector Overview

•  High rate of total assets growth (growth rate exceeded 60% for the last 4 years);
•  Credit portfolios grew by 55% for the last 2 years;
•  The loans for development of economy in 2007 increased by 76,2%;
•  Increasing number of commercial banks and doubling the number of branches;
•  The net profit of commercial banks amounts 126 mln. GEL in 2007;
•  In 2007 ROA in the banking sector was 2.4% and ROE - 11.8%;
•  The share of private companies in the total credit portfolio grew in 2007, reaching 98%;
• EBRD, IFC, DEG, KfW, Commertz Bank, Procredit Holding, Austrian Creditanshtaldt, Societe Generale, Vneshtorgbank and others have invested in the Georgian Banking sector.

The financial Sector is one of the most dynamic sectors of the Georgian economy today (average growth in assets was 34% during the last 10 years). The main direction of banking sector development in Georgia is the creation of stable and increasingly capitalized banks with a wide range of services, diversified investment portfolios, and adequate risk management systems. Georgian banks are steadily gaining a high degree of confidence among the population as well as institutional investors. Commercial banks of Georgia have expanded their branch networks and diversified services offered to the clients. They introduced customer service based on modern banking technologies and provide internal settlement in real time. 94 percent of the Financial Sector is represented by banks. There is no government owned commercial bank in Georgia.

Thus, the banking sector has become a major branch of Georgia’s economy, especially during the last three consecutive years. During this period, the average growth rate of the assets exceeded 60%, while deposit growth amounted 55 % for the last two years. This data indicates the public’s increased trust in the Georgian banking sector. Due to such a high volume of growth, share of banking assets amounted 43% in GDP by the end of 2007 and by the end of 2009 it is expected to exceed 60%. Such growth trends will move Georgia closer to the standards of Central and Eastern European countries.

Dynamic growth of the banking sector extended during 2007 as well, and new loans amounted to 1.9 bln. GEL for 2007. By the end of the year, the volume of assets of the overall Georgian banking sector totaled the unprecedented amount of 7.2 bln. GEL. Along with the quantitative increase, the quality of the banking sector developed as well and all banking services are now available in Georgia. Recently, commercial banks operating in Georgia enjoy a high level of trust and reputation not only locally, but also on the international level.

A  high level of profitability in the Georgian banking sector is still maintained. Net profit of the whole sector amounted to 126 mln. GEL in 2007. The previous years level of return on assets and capital is still maintained at the high level that makes the Georgian banking sector attractive for the foreign banks.

The banking services are more available for the broader public, which can be proved by the newly opened 120 branches of the banks and service centers, as well as double the number of ATM machines (increased from 321 to 662) and 60% increase in plastic cards. According to these changes there are 12 bank branches and 15 ATMs for every 100 ths. people, and two out of every five people has plastic card.

The development of the financial sector was largely determined by the country’s sustainable macroeconomic development, foreign debt stability, strong financial position, and decreased country risks, resulting in increased competition and the attraction of foreign investments in the sector. Five new banks were opened in Georgia in 2007 alone and foreign direct investment in the banking sector amounted to 118 mln. USD according to the data of the first three quarters of 2007.

    3. A positive environment for the Banking Sector

The alignment of international best practices and Georgian standards for licensing and regulation of activities in the banking sector helps to improve banking services in the country. It also contributes to the further strengthening, stability and effective functioning of the sector, thus protecting interests of depositors and investors. This in turn provides for a growth of confidence in the banks. As a Member of the Council of Europe, Georgia enforced legislative measures against money laundering which also required revision of the standards established in the sector.

4. Liberal Regulation

Residents and non-residents of Georgia are able to make investments in commercial banks based in Georgia under equal terms and conditions. In recent years, significant foreign investments have been made in Georgia's banking sector. 

5. Foreign Investments and International Recognition