Allowing microbanks in Georgia to issue loans in foreign currencies could reduce their hedging and currency risk management costs, potentially making loans cheaper for borrowers, according to Nino Devdariani, head of the Microfinance Organizations Association.
Proposed amendments to the Law on Microbanks would allow institutions, which currently issue loans only in Georgian lari, to provide financing in foreign currencies. The changes would also double the maximum lending limit for a single borrower or a group of related borrowers from GEL 1 million to GEL 2 million.
Devdariani explained that microbanks currently face additional costs when their foreign currency liabilities are used to finance loans issued in lari. Allowing them to better balance their assets and liabilities by currency would reduce these expenses and create opportunities to lower lending rates.
She added that increasing the lending limit would give microbanks greater flexibility to provide foreign currency loans. However, the changes are expected to affect the market gradually, rather than lead to an immediate increase in large-scale GEL 2 million loans.
