MICROCAPITAL STORY: Microfinance Institutions Lazika Capital, Alliance Group, CREDO, Crystal, FinAgro, Finca and Constanta Bank of Georgia Receive Grants from the United Nations Development Program (UNDP) and European Union (EU); Total Project cost $2.6m

Six microfinance institutions (MFIs), Lazika Capital, Alliance Group, CREDO, Crystal, FinAgro and Finca, and Constanta Bank have been selected to receive grants from a joint project funded by the United Nations Development Program (UNDP) and European Union (EU). The seven organizations were selected based on their current loan portfolios, experience in the target region and reporting to the MIX Market, the microfinance information clearinghouse. Each organization will receive USD 99,000 in the first tranche of funding. The total cost of the project is USD 2.6 million and is part of the UNDP early recovery program for Georgia which received EUR 4.4 million (USD 6.1 million) in funding from the EU.  

There have been several requirements placed on the grants made to the seven organizations. The microfinance loans to entrepreneurs must range from between GEL 200 (USD 120) and GEL 10,000 (USD 6,000) and 75 percent of these loans must be granted to village populations with 45 percent to women. Borrowers will not be required to use property as collateral; however the terms of the microfinance loans, such as interest rates, will be set on an individual basis. Finally, the microfinance loans will only be made available to people living in the Shida Kartli, Samegrelo-Zemo Svaneti and Mtskheta-Mtianeti regions of Georgia, recently affected by the August 2008 war.

According to the National Bank of Georgia, the central bank of Georgia, there are 32 microfinance lenders in Georgia with Total Assets of GEL 146 million (USD 87.9 million) at the end of the first quarter 2009, an increase of GEL 85 million (USD 51.1 million) over 2008. The total loan portfolio also grew from GEL 52 million (USD 31.3 million) to GEL 113 million (USD 68 million) compared to the same quarter last year.

Constanta bank was a former MFI and transitioned to a bank in July 2008, operating under the name JSC Constanta Bank. Since inception in 1997 it has provided microfinance services to micro and small businesses. Currently it has 21 branches throughout Georgia and had over 11,500 active borrowers of which 47 percent were women at the end of December 2008.  Total Assets for the same period were USD 42 million with a Return on Assets of -5.33 percent.  The Gross Loan portfolio was USD 34.7 million and Return on Equity was -27.67 percent. The latest rating information available on the MIX Market was from December 2006 and the Planet rating company gave Constanta a B+ rating with a ‘positive’ outlook.

Lazika Capital reports to the MIX Market where the following data and information has been derived. It originated as an Oxfam credit project in 2000 and in 2007 was converted into a commercial entity. At the end of December 2008 it had 6,624 borrowers with an average loan balance of USD 752. Total Assets stood at USD 5 million and the Gross Loan Portfolio was USD 4.7 million for the same period. The Return on Assets was 10.94 percent with a Return on Equity of 23.26 percent.

Alliance Group finances individuals, small and medium enterprises in Georgia and was established in 2005. Total Assets as at 31 December 2007 was USD 4.4 million and the Gross Loan Portfolio was USD 4.4 million. Alliance had a Return on Assets of 13.29 percent with a corresponding Return on Equity of 82.93 percent for the same period. The number of borrowers was 1,356 and 32 percent were women.

CREDO grew out of a World Vision project in 1997 and has since been licensed as an MFI in Georgia.  It is owned by Vision Fund International a US based private company which is wholly owned by World Vision International.  In a 2007 rating report CREDO received a BBB. As at the end of 2008 CREDO had 21,857 active borrowers and a Gross Loan Portfolio of USD 25.9 million. For the same period it had Total Assets of USD 29.9 million with a Return on Assets of 4.31 percent and a Return on Equity of 33.54 percent. A recent MicroCapital Story details how CREDO has signed up for the PayBox System to collect loan repayments from clients.

The MFI Crystal started in Western Georgia in 1998 and became a commercial MFI in 2007. It has over 4,000 borrowers with half of these women. As at the end of December 2008 its Gross Loan Portfolio was USD 4.9 million and Total Assets were USD 5.6 million. Crystal had a Return on Assets of 8.22 percent and a Return on Equity of 34.56 percent for the same period. No recent rating information was available.

FinAgro was established in 2006 and had 594 borrowers at the end of December 2008. All loans were above USD 300 with an average loan of USD 3,504. The Gross Loan Portfolio for the same period was USD 2 million and Total Assets were USD 2.5 million. The Return on Assets was 1.44 percent and Return on Equity was 1.47 percent. FinAgro received a B+ rating from MicroRating International in November 2008 and a ‘positive’ outlook.

The final MFI to receive a grant from this program is FINCA Georgia, part of the wider FINCA (Foundation for International Community Assistance) International network.  A MicroCapital Story about FINCA can be found here. FINCA Georgia has reached over 20,500 borrowers since inception in 1998. As at the end of 2008 its Gross Loan Portfolio was USD 17.3 million and Total Assets were USD 21.4 million. Return on Assets and Return on Equity were 1.12 percent and 2.76 percent respectively. No rating information was made available to the MIX Market.

By Sally Levy, Research Assistant

Additional Resources:

Georgian Business Week: Microfinance organizations get more funding to provide loans

United Nations Development Program: From crisis to development – micro-credits in the regions affected by the August 2008 war

MIX Market Georgia: Constanta Bank, Lazika Capital, Alliance Group, CREDO,

MicroCapital Story: World Vision’s CREDO Signs Up for PayBox System in Georgia

MicroCapital Who’s Who in Microfinance: The Foundation for International Community Assistance (FINCA)

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