“Devalued GEL reduced the microfinance market," said Goga Khishtovani, director of the PMC Research Center.
Khishtovani explains that the fluctuation of GEL exchange rate in recent years has created additional problems for microfinance organizations. The point is that they attract funds in foreign currency, while loans are issued in GEL, correspondingly, they cannot actually make a profit due to the exchange rate difference.
"In the last 5 years, GEL to USD exchange rate has shown a tendency of depreciation excluding the coronavirus pandemic and it severely reduced profitability of market players. GEL depreciation re-weights total profit. The MFOs must be formed into banks or micro banks and use all the benefits that banks have. I mean the ability of banks to attract funds in GEL, otherwise they will have to leave the market," Goga Khishtovani, director of the PMC Research Center declares.
In 2019, as a result of the changes on the financial market, the number of microfinance organizations is down from 67 to 40.
As for the loan portfolio of microfinance organizations, it amounted to 1.13 billion GEL in Q4,2020, while the sector has a total of 648 thousand borrowers. For comparison, the volume of loan portfolio increased by 2.7% comparing to Q3 2019, while the number of individual loans is 11% down, which is related to the exit of online borrowers from the market.
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