Commercial banks’ loans for SMEs both to legal entities and household in national and foreign currencies amounted to GEL 81, 878, 459, 000 during Jan-Nov 2020, up from GEL 70, 922, 879, 000 as of Jan-Nov 2019, up by 15%.
According to the National Bank of Georgia, business loans for SMEs issued by commercial banks to households amounted to GEL 37, 884, 505, 000 out of which GEL 13, 855, 058, 000 has been issued in foreign currency and GEL 24, 029, 447, 000 in national currency. As for legal entities, business loans for SMEs in foreign currencies composed GEL 30, 071, 941, 000 and in national currency – GEL 13, 922, 013, 000.
Business loans for SMEs issued by commercial banks to households amounted to GEL 32, 551, 457, 000 during Jan-Nov 2019, out of which GEL 21, 387, 593, 000 has been issued in national currency and GEL 11, 163, 864, 000 in foreign currencies. As for legal entities, business loans for SMEs in foreign currencies composed GEL 25, 725, 031, 000 and in national currency – GEL 12, 646, 391, 000.
According to ADB, limited access to finance, lack of a database, low research and development (R&D) expenditures, undeveloped sales channels, and a low level of financial inclusion are some of the reasons behind the slow growth of SMEs.
As the report of ADB reads, SMEs face challenges from increased competition, the ability to adapt to rapidly changing market demand, technological change, and capacity constraints relating to knowledge, innovation, and creativity.
For many SMEs, however, their potential is often not fully realized due to factors related to their small scale: lack of resources (finance, technology, skilled labor, market access, and market information); lack of economies of scale and scope; higher transaction costs relative to large enterprises; lack of networks that can contribute to a lack of information, know-how, and experience of domestic and international markets; increased market competition and concentration from large multinational enterprises caused by globalization and economic integration; an inability to compete against larger firms in terms of R&D expenditure and innovation (product, process, and organization); being subject to “churning” and instability; and a lack of entrepreneurial zeal, capacity, and know-how.
