Kovzanadze: We Should Not Have a One-Sided View of the High Interest Rates Issue

The Start-up Finance Reform planned for implementation by the Government of Georgia is indeed a significant project to incentivize the economy - notes MP Irakli Kovzanadze, Fiscal Committee Chair of the Parliament of Georgia in his interview with Commersant. “Plenty of innovative, healthy, potentially profitable and viable business projects exist in the country. Their implementation is hampered by limited access to finance and lack of equity financing,” he adds.

According to the Fiscal Committee Chair, “even in highly developed countries with excess liquidity and very low interest rates, the share of commercial bank loans in start-up financing is marginal due to the high risk ratio.”

“The government initiative is truly interesting. Let us wait until the idea is elaborated on paper and turns into a document; until specific mechanisms get implemented and details presented. Nevertheless, being a financier with practical experience of over 25 years, I can say one thing at the outset: there is nothing free in this world. Furthermore, there is no concept of free financial resources. Money may be readily available for an individual start-upper or individual businessman; however, somebody else undoubtedly pays the cost. In this case, the State, i.e. the taxpayer and each individual citizen of the country bears the cost. Therefore, let us wait to see the concept paper of the project before discussing it further,” the MP states.

When asked by Commersant whether he shares the position of Mamuka Bakhtadze, Minister of Finance of Georgia, on the banking system of the country hampering the development of the economy, MP Irakli Kovzanadze states the following:

“Let us see the issue through the numbers. Overall, the shareholding capital of the commercial banking sector in the country is around 4.6 billion GEL, of which 90% is contribution from overseas. The domestic banking system has credited the national economy with about 21 billion GEL so far, i.e. the volume of bank financing in the construction, trade, industry, agriculture, healthcare and education sectors exceeds one half of the GDP in Georgia. Loans are drawn both by individuals and corporations. It is thanks to bank financing that hundreds of thousands of jobs are created. The banking system alone employs over 25,000 people, thus supporting this many households. This is the bare reality,” states MP Kovzanadze, going on to note that, “assessments made by the International Monetary Fund, World Bank and other international organizations indicate that the Georgian banking system is among the most solid and successful of all post-soviet countries, all the way through Eastern Europe.”

“Interest rates on bank loans have been declining in recent years. They remain high, which is quite customary for emerging economies. In contrast with Europe and the USA, Georgia offers high interest rates on loans; however, risks and profit margins are also high. Costly loans are a complex issue, and we should not have a one-sided view of the problem,” he concludes.

16 April 2018 18:15