Issue 1, 2015. February-March



ProCredit Bank Georgia has left the microcredit business to focus on the SME sector. In November, it decided to sell its 39.3 million lari microloan profile to TBC Bank. spoke with Asmus Rotne, general manager at ProCredit Bank Georgia, and Nikoloz Kurdiani, a deputy CEO at TBC Bank, about the deal and its implications for the banks' strategies moving forward.

A Reflection of developing economy

On January 27, TBC Bank announced that agreement between ProCredit Bank and TBC Bank was signed, where 39.3 million microloan portfolio of ProCredit bank was sold to TBC. The deal, which had been in the works since November, signaled ProCredit Bank Georgia's exit from the microcredit sector, Asmus Rotne, the bank's general manager, told

The move, he said, reflects the changing needs of the Georgian economy. When the bank was founded, nearly 16 years ago, micro businesses were seen as a driver for the economy. Today, however, small and medium businesses are leading growth, Rotne explained.

"We entered this segment very much from a development perspective, that this could be the segment that Georgia's economic development could come from. And, to a large extent, that really did happen," he said.

"And today we think that economic development is going to come from the small businesses, the medium-size businesses."

A chance to expand

ProCredit Bank Georgia's decision to change its strategy dovetailed with TBC Bank's acquisition of Constanta Bank, a major microfinancing institution, and its plans to expand in the area of small loans - credit from 1,000 lari to 10,000 euros (approximately 23,000 lari), noted Nikoloz Kurdiani, a deputy CEO at TBC Bank who manages the Constanta Bank operations.

Kurdiani said the deal, which will add about 5,000 customers to Constanta Bank's microloan portfolio, provided the bank with the opportunity to grow in communities around the country.

"We bought it because it adds exactly the segment we want to add to Constanta - micro business customers," he said.

After the deal, for example, TBC Bank Constanta will have 130 percent more customers in Telavi - a development that will be duplicated in cities and towns through Georgia.

That growth will help the bank as it expands its business and its outreach, Kurdiani said.

TBC Bank Constanta sees microfinance as "a good place to be", he noted.

"It is a segment in rural areas where the only source of income is their own household business or their agro business," Kurdiani said. "It is a good place to be, quite unpenetrated...and also much less competition."

For ProCredit Bank Georgia, TBC Bank Constanta was the perfect option to take over the portfolio, Rotne said.

"We did not want to sell this portfolio to just anybody. It was not just a question of getting rid of it, because these are clients who have been with us for 10 or 15 years, and we wanted to send them somewhere where they could be taken well care of," he said, noting that these clients make up just five percent of the bank's total loan portfolio.

"I think TBC Bank, after the acquisition of Constanta, is really in the position to also provide proper servicing and continous financing. It is important for us that they are taken care of."

Looking forward

While the SME business segment is competitive for Georgian banks, Rotne said ProCredit Bank Georgia is up for the challenge.

"I feel very confident. It is not an entirely new sector for us; we have always been in SMEs and I think we have several competitive advantages. One is our people, our staff. We have always been investing dramatically more than other banks in the development of our staff," he said.

"The second thing is that we have a very low cost of funds. I think depositors recognize that ProCredit Bank is a kind of safe haven in a way."

The deal is a harbinger of larger possibilities in products and services for clients at both financial institutions, according to the bankers.

TBC Bank Constanta, which will open its 65th branch in March, is working to find innovative ways of introducing - and educating - people about small loans and financing.

The bank is also considering special financial education classes in all its branches.

ProCredit Bank Georgia is focusing its energy on providing even better service for small and medium business clients, Rotne said, adding that changes to internet banking and pay boxes will help SME clients make better use of the bank's technology and services. The bank is also continuing to develop its distance services, like business client advisers who come to the client.

Kurdiani said the bank's new mobile agent program, which provides loan agents with special Samsung Galaxy tablets so they can approve loans and distribute funds to debit cards on site at clients' businesses, is already making an impact.

"We serve you on your premises; we do not waste your time. We keep your emotion up because you are proud to be doing business in your business," he said.