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Private Georgian banks gain access to EBRD financing
To increase access to longer-term finance for Georgia's growing private sector, the European Bank for Reconstruction and Development (EBRD) is providing a US$ 10 million (ECU 9.2 million) loan and equity investment package to United Georgian Bank (UGB), the largest of Georgia's banks. In a separate transaction and as part of a US$ 12 million (ECU 9.6 million) SME credit line signed in December 1996, the EBRD has also extended a US$ 2 million (ECU 2.5 million) medium-term loan to Intellect Bank (IB) established in August 1993.
At the signing ceremony in Tbilisi, Pierre Mellinger, Co-Director of the EBRD's Financial Institutions team, said: "By taking a significant investment in a leading Georgian bank the EBRD aims to stimulate interest among the international banking community in developing business with Georgian banks and their clients."
He added: "By making long-term financing available to several Georgian banks, the EBRD is encouraging competition. This will also allow the EBRD indirectly to finance viable small and medium-sized projects which are too small for direct financing by the Bank."
The EBRD is providing a five-year US$ 7.5 million (ECU 6.9 million) credit line to UGB and subscribing to 18 per cent of UGB's enlarged capital. Apart from increasing UGB's capital, the EBRD intends to assist its institutional development through enhanced corporate governance and a comprehensive technical assistance programme. The credit line will allow UGB to offer medium-term funds to its clients at a time when this form of financing is scarce in Georgia, thereby enhancing UGB's offering of banking services to the local small and medium-sized enterprises (SME) sector.
UGB was formed in April 1995 following the merger of three former state banks: Industry Bank, Eximbank and New Georgian Bank. Organised as a joint-stock company, UGB has a full banking licence and is supervised by the National Bank of Georgia. Total assets at mid 1997 were US$ 43 million. UGB has 1,000 employees and 29 branches throughout the country.
Over the past two years, the EBRD has developed a good working relationship with UGB by virtue of UGB's 29 per cent stake in the International Black Sea Commercial Bank, in which the EBRD holds 20 per cent together with Commercial Bank of Greece (51 per cent).
The loan to Intellect Bank, signed on 10 November 1997, will be used to enlarge IB's customer and borrower base as well as to provide medium-term finance for investment, working capital and the trade finance needs of small and medium-sized enterprises. IB received a licence to conduct foreign currency operations within Georgia in October 1993. It has just merged with Royal Bank of Georgia, which had a branch network that IB lacked.
Since the SME Line of Credit became effective in June 1997, disbursements of US$ 3.5 million have been made to participating banks, which include TBC Bank, Tbilcombank, Tbilcredit Bank, and Tbiluniversalbank. The banks have made a total of 28 loans to SMEs in Tbilisi, Kutaisi, Zestaphoni, Poti, Borjomi, Rustavi and Lagodekhi.
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