Since banking regulations were launched, the number
of pawnshops has decreased from 600 to 137, while the interest rates have increased, the
financier Irakli Berdzenidze says summarizing the regulations enacted by the
National Bank four months ago.
According to Berdzenidze, as a result of the new regulations, most pawns are facing financial defaults, which actually led to a reduction in their number.
In Berdzenidze’s words, the requirements for registration of loan issuer were so numerous that even before the regulations were launched, everyone had known that all this would force many subjects to leave the market.
He also mentions the requirements set by the regulator for small and medium pawn shops. By doing so, the pawn shops’ expenditures have increased that puts at risk their profits. Berdzenidze believes that hard regulations which radically reduced the number of pawn shops did not leave the pawn shop business a chance to survive:many of them had to sell their loan portfolio under onerous conditions.
It’s worth mentioning that the pawn shop business had no negative social effect. Moreover, it was an ideal way to get access to cash resources. Due to big competition, the interest rates were lower than the interest rate on bank loans.
“Four months have passed and the launch of the regulations led to disastrous results: only 137 subjects managed to register, the pawn shop portfolio went into the hands of large financial institutions and put the existence of the pawn shop business is question, - Berdzenidze says.
He adds if this trend continues, the country will have the non-bank financial market without competition, with small players and increased interest rates that will deprive the user to have a variety of alternatives.