Micro, small and medium sized enterprises in Georgia impacted by the COVID-19 pandemic are to benefit from EUR 85 million in financing support, approved today by the World Bank’s Board of Executive Directors, reports the World Bank.
The Bank says a new Relief and Recovery for Micro, Small and Medium Enterprises (MSMEs) project aims to help businesses and create jobs by expanding and strengthening programs that support MSMEs and by promoting digitalization of Georgia’s economy.
“Through this latest support package, the World Bank will boost job creation and support firms that are the backbone of Georgia’s economy and key to a resilient recovery,” said Sebastian Molineus, World Bank Regional Director for the South Caucasus. “This includes helping firms gain easier access to finance and funding investments in financial infrastructure that will promote technology adoption and the use of digital financial services.”
The press release reads that the project will support at least 6,000 MSMEs across the country, increasing businesses’ chances of survival, preserving productive assets, and helping firms adjust to the new economic and public health challenges.
“The global pandemic has severely affected the private sector, especially micro and medium enterprises in Georgia, so to support them is vital, as well as to encourage the creation of new enterprises that will enable the country to accelerate economic growth,” said Lasha Khutsishvili, Minister of Finance of Georgia. “Once again, I would like to thank the World Bank for the support in fighting the pandemic, as well as in developing the country’s economy.”
“The project aims at alleviating the financial constraints of firms and helping them adjust their business to a post-COVID-19 scenario. One component of the project will strengthen and expand MSME support programs implemented by Enterprise Georgia (EG). The direct support for micro and small firms will come in the form of grants offered by EG’s Micro and Small Entrepreneurship support program. Small and medium sized enterprises (SMEs), on the other hand, will be eligible for support through co-financing of interest payments under EG’s Produce in Georgia program, which will reduce their borrowing costs and address immediate liquidity constraints. SMEs will also benefit from access to partial credit guarantees through financial institutions, which are designed to address high collateral requirements and heightened risk aversion of financial institutions.
“Development of small and medium enterprises is a priority for the Government of Georgia, as it is a precondition for private sector growth, the creation of new jobs and the strengthening of the entrepreneurial culture in the country,” said Natia Turnava, Minister of Economy and Sustainable Development of Georgia. “In this regard, the support of the World Bank and the allocation of EUR 85 million to help Georgia’s small and medium-sized enterprises in the post-pandemic period is invaluable.”
The project will also help strengthen the country’s financial infrastructure and increase the use of digital financial services. This includes support for upgrading the payment systems infrastructure by introducing a new instant payment system (IPS), rollout of a digital know-your-customer (KYC) registry, and strengthening the secured transactions framework, aimed at broadening access to finance through increasing the use of movable collateral, such as vehicles, equipment, and intellectual property.
“The instant payment system, under the project by the World Bank, will facilitate instant access to funds for payees, including MSMEs, enabling better cash management, and helping firms manage day-to-day liquidity,” said Koba Gvenetadze, Governor of the National Bank of Georgia. “Furthermore, financial institutions and Fintech companies will be able to implement different payment initiation channels and offer them to end users in a cost-efficient way.”
As a special consideration for the effects of the pandemic on firms, the project will also support the design and provision of technical assistance to firms to adjust to the new normal, via the adoption of relevant managerial, digital and other COVID-proofing practices. The focus will be directed at identification of key skills needed to facilitate digitalization and COVID-proofing in key economic sectors, with particular focus on the needs of female entrepreneurs, climate change and the green economy.
This project is part of the World Bank’s broader support for the people of Georgia and is the third lending operation to the country directed at mitigating the social and economic impacts of the pandemic”, – reads the information.