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National Bank: Banning Taking Small Loans in USD Would Not Increase Interest Rate

Low dollarization interests everyone, including population, government, investors, commercial banks and other players of financial sector, Vice President of National Bank of Georgia, Archil Mestvirishvili said.

We have worked out 10-point plan, which focuses on three main directions: First is increasing Lari lending affordability which implies long term loans, and as many of you know in recent years long term GEL mortgage loans have appeared on the market. Second direction is adequate distribution of currency risks throughout the country. After legislative changes, small loan lending will only be allowed with national currency, and this won’t provoke interest rate growth. Rates did not hike, when we increased reserve demands in summer, in long term this will decrease interest rates and risks. 

Due to the fact that assessing and managing risks is costly for small borrower, this event could increase dollarization on large scale loans, however big companies have considerably more opportunities and resources to manage financial risks and exchange rates.