The leading European credit rating agency Scope Ratings evaluates the legal framework for the activities of microbanks in Georgia.
In an article by Alvaro Dominguez Alcalde, a representative of Financial Institutions, Scope Ratings says that Georgia’s microbank framework is designed to enhance financial-sector competitiveness, expand the range of product offerings and services, and support entrepreneurs and the self-employed, driving economic growth.
“The granting of Georgia’s first microbank license to JSC MFO Business Capital (MBC) in December 2024 was an important milestone in the development of country’s financial sector. It also led to a rating upgrade for MBC to B+/Stable from B/Positive,” reads the article.
Scope expects a gradual transition of eligible MFOs that can meet the minimum capital requirements to microbanks, which implies that the residual MFO sector will focus mainly on consumer lending.
Alvaro Dominguez Alcalde remarks that Microbanks will have a funding advantage over microfinance organisations (MFOs) and loan-issuing entities (LIEs) as they will be able to take deposits up to a maximum of GEL 15k (roughly EUR 5k) per customer, reducing their dependence on more expensive funding sources such as commercial banks, international financial institutions, and capital markets.
“While the microbank sector is expected to be smaller than the MFO sector (which stood at GEL 2.3bn as of September 2024), we believe it is set to grow rapidly, as institutions can grant larger loan tickets. Assuming 20% annual growth in lending volumes, the sector could reach GEL 1bn by 2026,” reads the article.
The article notes that the National Bank of Georgia has a strict one-year deadline for making a final decision on granting microbank licences. However, even if an application is rejected, companies can re-apply without limitations. It is important to note that entities other than MFOs can apply for microbank licences.
Scope Ratings is the leading European credit rating agency. It was recognized by the European Central Bank in 2023, thereby making its credit ratings acceptable under the Eurosystem Credit Assessment Framework (ECAF).
