Microfinance and the Efficiency Challenge — BFC sponsor Uniglobal at the 9th Global Microfinance Forum in Vienna

“Microfinance deserves the credit for opening up financial services to millions of excluded people, for introducing services that satisfy unserved demand. However, despite (or because) of the industry’s progress, microfinance has mostly failed to bring costs down. In many regions microfinance remains an expensive to produce and an expensive to buy service, as a result of operating under unchanged and outdated business models. It is these models that need to change first, especially in maturing markets, to push costs down more rapidly.”

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How banks feast while clients ail

The profit of Georgian banking sector increased in proportion with the growth of the blacklisted clientele during last five years. Some sector analysts suspect that banks have been spreading nets out to trap and impoverish clients. Others think the key reason is loose regulation, inadequate risk management and gaps in consumer rights’ protection.

The tripled profit figure Georgian banking sector enjoyed in 2007–2011 alongside the similarly increasing list of defaulting clients at Creditinfo Georgia, a private company compiling credit histories, sends a signal of alert that the crisis-affected consumer needs a help.

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Georgian banking sector recoils

Georgian banking sector is shrinking insignificantly but steadily in the post-election period thus bespeaking of economic slowdown in the country.

By November 1, 2012, total assets of Georgian commercial banks incorporating 19 banks, decreased by 0.5% compared to the previous month, while loans and deposit portfolios sagged by 0.1% and 0.5% respectively. In September assets shrunk by 1.6% and deposits reduced by 4.1% while loans grew by 1.8%. As of November 1st, 2012, total assets decreased by GEL 71.3 million (by 0.5 percent) and constituted 1 GEL 4 billion. The banking sectors own funds (equity capital) equal to GEL 2.3 billion which makes up 16.4 percent of commercial banks’ total assets. In October 2012, the banking sector finished with the net loss of GEL 36.8 million.

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