The high cost of funding remains one of the main challenges facing microfinance organisations in Georgia, according to the Microfinance Association. Association Chairwoman Nino Devdariani told BMG’s Business Course that funding costs are the only key sector indicator that has deteriorated compared to last year.
Devdariani said the effective cost of borrowed funds increased by approximately 0.5 percentage points, from 10.7% last year. She explained that around 80% of funding currently comes directly or indirectly from local commercial banks, creating relatively high financing costs and putting microfinance institutions in competition with the same banks.
The shift of two major microfinance organisations into the microbanking sector has also reduced the share of funding obtained from international financial institutions, which had previously been an important financing source for these organisations.
According to Devdariani, diversifying funding sources and strengthening cooperation with international financial institutions are essential to addressing the challenge. However, attracting international financing requires meeting certain conditions and establishing the necessary criteria to make microfinance organisations more attractive to potential lenders.
