MFO’s do not rule out the increase in interest rates due to the lari’s depreciation.
Malkhaz Dzadzua, Director General of the MFO Crystal, says when the national currency against the dollar depreciates, the company is forced either to increase interest rates or restrict loans issued in the lari. Crystal did not restrict loans issued in lari, but the interest rate on loans of this category may be increased. According to him, in February they had to increase the rate on small consumer loans issued in GEL by 3%, as a result, the annual rate of loans in this category made 28 -30%.
As the lari’s exchange rate didn’t fall below the mark of 2.2, Crystal may increase the cost of loans 2-3%. The organization will take the final decision in this regard in a week.
As for the gains received from conversion operations amid the lari’s depreciation, Malkhaz Dzadzua notes that profit depends on the magnitude of the MFI portfolio structure, Crystal issued 65% of loans in lari, so due to this factor, they received neither a positive nor negative result.
In case of the MFO’s which have recently received huge profits from currency conversion operations, as Malkhaz Dzadzua says, there is another side – clients may face repayment problems. “This is a short-term result and has more negative than positive outcome,” – Crystal CEO notes.
JSC MFO Crystal has been operating in the market since 2007. As of 2014, the company’s loan portfolio is concentrated in rural areas is almost 65%, while the number of loans issued in Tbilisi makes only 3%. The organization has 25 branch offices.
According to George Naskidashvili, CEO of the MFO Georgian Credit, the organization issues almost 100% of loans in lari due to the national currency’s depreciation and is not going to increase the cost of loans.
He says that the devaluation of GEL raised systemic risks in the microfinance business.
As for the restructuring of loans issued in the US dollars of which several Georgian banks made loud statements, Naskidashvili notes that restructuring has always been carried out and will be carried out, and this is nothing new, especially when clients may have loan payment problems, consequently, the restructuring is a natural phenomenon for financial institutions,”- says Naskidashvili.
As for the gains from currency conversion operations, Naskidashvili explains that as a result of buying and selling operations, margin is the same regardless of the exchange rate.
MFO Georgian Credit was founded in 2006 and was the first Georgian microfinance organization with license from National Bank of Georgia. The company plans to open additional 10 branches by the end of 2015, which will be focused on agriculture business lending.