Since January 1 lending regulations have been tightened and primarily hit irresponsible borrowers. Apart from that, the standards for checking
and evaluating the loan portfolio were also tightened that reduces lending,
Beso Shengelia, Chairman of the Board of the Microfinance Organizations Association, says.
According to Shengelia,
due to regulations, the year began hard for the microfinance sector, but the
situation is currently being stabilized.
“The market will improve, the
number of healthy and less risky loans is growing. Unfortunately, many
microfinance organizations closed as they had failed to adapt their business model to new conditions
in a very short time, and were forced to close. The lending area has declined,
competition has grown significantly, and the market leaders showed more
stability and ability to adapt to new conditions, ” Beso Shengelia notes.
In Shengelia’s words, increased
competition cut interest rates on microfinance loans.
“It is very good for the
market and people, but is not good for microfinance
organizations in terms of profitability,” Shengelia believes.