Over-indebtedness is one of the key factors of poverty growth, Minister of Finance Mamuka Bakhtadze told the news conference, where he overviewed details of the coming reform in the banking and finance sector. Excessive debts lower incomes of our citizens, he said.
“Today we see that citizens who suffer from excessive debts have been ejected from active economic life. Today, about 30% of economically active population are recorded in the so-called Black List. This is a lost resource for economic development. Excessive debts frustrate economic growth. We already see results – about 630 000 persons cannot become valuable workforce. Reduced manageable incomes lower economic activity, savings decline. The existing crediting models create no added value in economy, especially high interest rate loans, which are not guaranteed by borrowers incomes”, the Minister of Finance said.
Excessive debts create heavy problems in terms of macroeconomic aspects and represent an important risk factor for financial stability, he said.
“It is important that excessive indebtedness is a result of violation of consumer rights. Problem of excessive debts arose, when interest rate was 500-600% and the principle of responsible lending was violated. There were asymmetric regulations for organizations unregulated by NBG”, the Minster of Finance noted.
New fair rule will play considerable role in resolving excessive indebtedness, he said.