Financing SMEs and Entrepreneurs 2020

16. Georgia

Key facts on SME financing

In 2016, pursuant to the National Strategy of SME Development, the Georgian National Statistics office introduced a new methodology and new definitions to gather statistics on the country’s SMEs. According to the new methodology, as of 2018, 99.70% of active enterprises in Georgia are SMEs. In total, SMEs account for 63.3% of total private employment and contribute to 53.0% of total business sector turnover and 59.1% (GEL 24.1 million) of value of all production in the business sector (GEL 40.9 million).

In line with the recent economic expansion, credit to SMEs rose significantly year over year, amounting to a staggering 242.1% increase from GEL 938 million in 2010 to GEL 3 211 million in 2018.1 Throughout this period, total business loans grew more than 176%, and the proportion of SME loans as a percentage of total business loans grew from 36.4% to 45.1%, the highest point over the period.

The average interest rate charged to SMEs in Georgia is high by OECD standards, but has significantly declined over the decade, from 16.5% in 2010 to 12.3% in 2018. However, the interest rate charged to SMEs has been increasing over the last two years, from 9.7% in 2016, to 10.36% in 2017, and finally to 12.3% this year. As a result, the interest rate spread between large enterprises and SMEs grew to 3%, from 1.06% in 2017.

Although precise data on the availability and use of alternative financial instruments is lacking, available evidence strongly suggests that Georgian SMEs are very dependent on the banking sector for meeting their financing needs and that non-bank instruments still play a very marginal role. However, the rapid growth of micro-financing organisations should not be neglected.

According to the World Bank Group's Doing Business indicator, Georgia improved its “ease of doing business” rank to 9th in 2018, and to 6th in 2019. The Ease of Doing Business 2019 report shows that by allowing voluntary value added tax registration at the time of business registration, Georgia reduced its relative gap to the best regulatory performance the most in 2017/18. Previously, entrepreneurs had to make a separate visit to the Revenue Service for value added tax registration after company registration. Georgia also enhanced its existing one-stop shop for business incorporation, allowing entrepreneurs to start a company through a single procedure. Currently, the country has the lowest number of procedures required to start a business and to register a property. In addition to the business registration procedures, Georgia simplified the tax system, and the enforcement of contracts. Paying taxes was made easier by levying income tax on distributed profits rather than on taxable profits.

Georgia facilitated the enforcement of contracts by introducing random and automatic assignment of cases to judges across courts. Most notably, the country improved its insolvency framework by making insolvency proceedings more accessible for debtors and creditors, improving provisions on the treatment of contracts during insolvency, and granting creditors greater participation in important decisions during the proceedings. According to the information from the Public Registry Agency, after a 28% growth in the number of liquidation procedures in 2017, the indicator saw a 47.78% decrease in 2018, reaching 153 cases total.

In 2018, the overall volume of non-performing SME loans exceeded GEL 407 million, the highest level since 2010, and the share of non-performing SMEs loans is now at 6.1%. The lowest level was reached in 2014 when the share of non-performing SMEs loans was 4.2%. Over the past year, the volume of non-performing SME loans increased by 84%, amounting to a 1.8% increase in the share of all SME loans.

Georgia ranks 48th among the 129 economies featured in the Global Innovation Index 2019. Georgia ranks 3rd among the 26 lower middle-income economies and 4th among the 19 economies in Northern Africa and Western Asia. Between 2018 and 2019, the rank increase for Georgia is a mix of improved performance and new availability of innovation-related data. Its most notable gains this year include indicators such as Patent families in two or more offices, High-technology imports, Exports of Information and communication (ICT) services, and Industrial designs by origin.

Government of Georgia has prioritised SME development as the main source of private sector growth, jobs creation and innovation. Among the successful reforms Georgian Government has conducted are the Innovation and Entrepreneurship Policy. Through the budgetary support, in 2014, the Ministry of Economy and Sustainable Development of Georgia established two sister agencies, Georgia’s Innovation and Technology Agency (GITA) and Enterprise Georgia, with the main aim of promoting SME development and strengthening SME competitiveness. Both agencies provide financial support to SMEs, as well as a broader range of services that includes access to special infrastructure, mentoring, trainings and various advisory services. In addition to the establishment of these two agencies, the government of Georgia has introduced several private sector development programmes, which include financial and technical assistance components to support small and medium-sized enterprises at different stages of development.

The Global Competitiveness Report 2018 ranks Georgia at 66th place out of 140 economies. Venture capital availability, lack of workforce diversity and low quality of vocational training remain as problematic factors for the Georgian economy. Despite the low global ranking, Georgia tops Eastern Partnership countries in terms of SME access to finance according to the 2016 SME Policy Development Index Dimensions, and is increasing government efforts in this regard. Government initiatives have thus far focused on decreasing entry barriers to SMEs by simplifying business registration, reducing taxes for small businesses and introducing robust regulatory initiatives.

Table 16.1. Scoreboard for Georgia

Indicators	Units		2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Business loans, SME		GEL million	..	1 400	1 548	1 738	2 051	2 422	3 621	3 992	5 176	6 620
Business loans, total		GEL million	3 097	3 843	4 501	4 989	5 663	6 715	8 433	10 500	12 000	14 687
Business loans, SMEs		% of total business loans	..	36.4	34.4	34.8	36.2	36.1	42.9	38.0	43.1	45.1
Non-Performing Loans, total		GEL million	926	784	667	810	791	988	1 200	1 380	1 337	1 480
Non-performing loans, SMEs		GEL million	..	144	134	111	102	101	161	206	221	407
Non-performing loans, total		% of all business loans	..	16.1	11.5	12.2	10.7	10.6	9.8	10.1	7.7	6.6
Non-performing loans, SMEs		% of total SME loans	..	10.3	8.7	6.4	5	4.2	4.4	5.2	4.3	6.1
Interest rate, SME		%	..	16.50	15.50	14.50	11.60	10.70	12.70	9.70	10.36	12.3
Interest rate, large firms		%	..	13.60	14.10	12.80	11.20	10.00	11.40	9.90	9.30	9.3
Interest rate spread			..	2.90	1.40	1.70	0.40	0.70	1.30	-0.20	1.06	3.0
Collateral, SMEs		%	..	..	..	..	95.6	..	..	..	..	..
Rejection rate		%	..	..	..	..	4.6	..	..	..	..	..
Utilization rate		%	..	..	..	..	95.4	..	..	..	..	..
Procedures of enterprises' liquidation (incl. bankruptcy)		Number	52	2 094	3 176	2 524	1 775	1 785	1 560	229	293	153
Procedures of enterprises' liquidation (incl. bankruptcy)		Year-on-year growth rate (%)	-14.75	3 926.92	51.67	-20.53	-29.68	0.56	-12.61	-85.3	28	-47.78

Source: see Table 16.8.

SMEs in the national economy

In 2016, pursuant to the National SME Development Strategy 2016-2020, the National Statistics Office of Georgia introduced a new methodology and definitions to calculate statistics on the country’s SMEs. According to the new methodology, as of 2018, 99.70% of active enterprises in Georgia are SMEs. In total, SMEs account for 63.3% of total private employment and contribute to 53.0% of total business sector turnover (which is 3.1 percentage points lower than in 2018) and 59.1% (GEL 24.1 million) of value of all production in the business sector (GEL 40.9 million).

In 2018, the number of active enterprises in Georgia increased by 1.8%. 16 large firms and 2 237 small firms emerged on the market, bringing the share of large active enterprises to 0.3% and that of small firms to 98.34%. The number of medium enterprises declined by 21.

Table 16.2. Distribution of firms in Georgia, 2018 by firm size, as a percentage

Size	Number of enterprises*	%
Large	384	0.3
Medium	1 735	1.36
Small	125 100	98.34
Total	127 219	100.00

Note: *Preliminary data.

Source: National Statistics Office of Georgia (Geostat).

Table 16.3. Distribution of firms in Georgia, 2018

By firm size, annual growth rate

Size	2017	2018*	Year-on-year growth rate, %
Large	368	384	4.4
Medium	1 756	1 735	-1.1
Small	122 858	125 100	1.8
Total	124 982	127 219	1.8

Note: *Preliminary data.

Source: National Statistics Office of Georgia (Geostat).

SME lending

Building on its solid track record as a top reformer, Georgia has made considerable progress since the 2012 SME Policy Index assessment and has adopted a more proactive approach to SME development through targeted initiatives. Since the beginning of 2016, the government of Georgia has been implementing its National SME Development Strategy 2016-2020. One of the core dimensions of this strategy is to ease SME lending.

According to the OECD’s SME Policy Index for Eastern Partner Countries 2016 (OECD et al., 2015[1]) Georgia has improved access to finance for SMEs since 2012 by strengthening its legal and regulatory framework. Overall, Georgian SMEs can access financing opportunities relatively easily at the regional level, and annual SME credit has accelerated in recent years due to declining interest rates on commercial bank loans and private sector development programs introduced by the government. Nonetheless, the overall share of SME lending remains low and access to finance is still considered a key obstacle to SME development. In 2018, outstanding business loans to SMEs rose significantly (by 28%, reaching GEL 6.6 billion) and the overall share of SMEs’ business portfolio increased by 2 percentage points to 45.1%, its highest level since 2010.

Despite this good performance compared with other Eastern partnership countries, access to finance remains a chronic problem for Georgian SMEs. Financial literacy levels are still limited compared to OECD countries, and the enforcement of creditors’ rights can be improved. The promotion of greater competitiveness in the banking sector is also necessary to facilitate more sustainable access to finance for SMEs.

Credit conditions

The average interest rate charged to SMEs in Georgia is high by OECD standards, but has declined since 2012. Nevertheless, according to the National Bank statistics, in 2017, the average interest rate to SMEs increased to 10.36%, from 9.7% in 2016, and then jumped to 12.3% in 2018. This increase resulted in the growth of the interest rate spread between large enterprises and SMEs in Georgia to 1.06% in 2017, and then to 3% in 2018.

At the same time, collateral requirements remain high. The effects of high collateral requirements are further exacerbated by the relatively low acceptance of movable collateral. Loan dollarization also continues to be high, although it has decreased due to a number of measures from the National Bank and the government of Georgia to encourage local currency lending. De-dollarization is important for economic stability as it reduces foreign exchange risk and renders the country's economy more resistant to external shocks. De-dollarization also promotes the effectiveness of monetary policy, which is a necessary condition for a stable economy. Hence, according to the National Bank of Georgia, one of its main tasks is to ensure de-dollarization in the country and to do so without administrative measures.

Alternative sources of SME financing

As of the fourth quarter of 2018, there were 67 micro-finance organisations registered in Georgia and supervised by the National Bank. The supervisory policy of the National Bank aims to ensure the steady functioning of these organisations. The micro-organisations have over 383 branches and more than 4 387 employees throughout Georgia. Since 2010, microfinance lending to SMEs has grown steadily. By the end of 2018, the total amount of loans to SMEs in the portfolios of microfinance organisation amounted to GEL 21.2 million. The main clients of microfinance institutions in Georgia are non-bankable micro and small enterprises. In addition, the volume of loans to individuals is almost 50 times the volume of loans to legal entities.

Table 16.4. Loans provided by micro-finance organisations in Georgia, 2010-18

		2010	2011	2012	2013	2014	2015	2016	2017	2018
Loans to enterprises	Number	87	168	354	269	349	355	410	562	878
Loan amount	GEL Million	1.7	2.7	2.9	3.5	5.1	6.1	7.7	11.4	21.3

Source: National Bank of Georgia.

Although exact data on the availability and use of alternative financial instruments is lacking, available evidence strongly suggests that Georgian SMEs are very dependent on the banking sector to meet their financing needs and that non-bank instruments play a very marginal role. However, the 86.8% increase in the volume of loans since 2017 is notable. The trend suggests that micro-finance organisations are growing at a very fast pace.

Georgian SMEs can also benefit from better access to finance thanks to the InnovFin SME Guarantee programme existing in Georgian banks (Procredit bank, TBC bank, Credo Bank).

The European Investment Bank (EIB) and the European Investment Fund (EIF) – jointly the EIB Group – signed guarantee agreements with the banks in Georgia to support Georgian SMEs. Thanks to the existing agreements, banks can provide loans to innovative companies with the support of a guarantee provided by the EIF and backed by Horizon 2020, the EU Framework Programme for Research and Innovation.

The EIB also signed agreement with Credo Bank to support Georgian micro and small enterprises’ (MSEs – business with less than ten employees) projects, particularly in rural areas.

Other indicators

In 2017, new legislation was introduced which allowed individual entrepreneurs to initiate the procedures. In addition, improvements in resolving insolvency were introduced, making insolvency proceedings more accessible for debtors and creditors by improving provisions on the treatment of contracts during insolvency, and by granting creditors greater participation in important decisions during the proceedings. In 2017, enterprise liquidation and bankruptcy procedures increased by more than 28% year-on-year and reached 293, in large part because of these changes in the regulatory framework. Yet in 2018, the number dropped by 47%, to 153.

In 2018, the overall volume of non-performing SME loans exceeded GEL 407 million, the highest level since 2010, bringing the share of non-performing SMEs loans in total SME loans to 6.1%. It is notable that the volume of non-performing SME loans has grown by 84% since 2017.

Government policy response

Legal and institutional framework for SMEs

Reforms currently ongoing and already implemented by the Georgian Government in recent years have significantly reduced administrative barriers and streamlined public services. Reforms have included a more liberal tax regime, a simplification of customs procedures and quicker VAT returns (5-7) days. In addition, there have been several efforts to modernise public administration, which have resulted in a new system for licenses and permits and the provision of e-government services. The current government agenda includes actions to further streamline and decrease taxes, strengthen the judiciary system and reform the framework for insolvency.

In 2015, the government of Georgia started developing the National SME Development Strategy 2016-20 with support from the OECD. The Strategy was adopted in 2018. The Ministry of Economy and Sustainable Development of Georgia is the main coordinator of the strategy’s implementation.

The below chart provides the new definition of SMEs in Georgia, introduced by the National Statistics Office of Georgia, pursuant to the national SMEs development strategy. The new definitions are better aligned with the EU definition, which allows for benchmarking Georgian SME performance with OECD and EU countries.

Table 16.5. Definition of SMEs in Georgia

Size	Criteria
Medium	Number of employees in a range of 50 – 250, and annual turnover between GEL 12 million to GEL 60 million.
Small	Number of employees is not more than 50, and annual turnover is not more than GEL 12 million.

Source: National Statistics Office of Georgia.

Taxation of small businesses

From 1 July 2018, the statutory limit for businesses to qualify for small business status will be increased from GEL 100 000 to GEL 500 000. Furthermore, compulsory registration as a VAT payer does not nullify small business status. Incomes of persons with small business status are taxed at 1%, instead of previous 5% and enterprises with gross income of less than GEL 30 000 are exempt from income tax.

According to the Tax Code of Georgia, business turnover that does not exceed GEL 100 000 during a fiscal year will be exempt from VAT. In addition, the supply of primary agricultural products are be subject to VAT.

Corporate Income Tax (CIT)

Amendments and an addendum to Georgia’s tax code, which were adopted by the Parliament and signed into law by the President, have fundamentally reformed the corporate income tax regime for Georgian companies. Under the current tax code, profit tax will have to be paid by companies only if corporate profits are distributed.

IFRS Standards

The government of Georgia has launched an accounting reform to increase transparency and financial accountability and enhance the protection of stakeholders’ rights. This reform requires the private sector to adhere to International Financial Reporting Standards (IFRS). IFRS require companies to publish financial reports each year until the end of October in accordance with specific guidelines. Under the reform, companies were separated into categories, one of them being small and medium-sized enterprises. Each category must submit its own unique forms at uniquely specified deadlines.

Bankruptcy: Second chance

The Georgian Law on Insolvency Proceedings provides procedures for insolvency, as well as for the reorganisation of enterprises. According to the World Bank Group's Doing Business 2018 report, Georgia has improved its performance by 7 positions over the previous year, moving from the 16th to the 9th position. In the 2019 report, Georgia has advanced to the 6th place. Doing Business finds that Georgia implemented substantive changes in the local regulatory framework in three main areas during the 2016-17 period. Enforcing contracts was made easier by introducing random and automatic assignment of cases to judges throughout the courts. Most notably, the country improved its performance resolving insolvencies, by making insolvency proceedings more accessible for debtors and creditors, improving provisions on the treatment of contracts during insolvency, and granting creditors greater participation in important decisions during the proceedings. Despite these measures, however, Georgia demoted 3 ranks to 60th out of 190 countries in this category and debtors still face challenges related to insolvency proceedings. Enterprises in Georgia have difficulties closing their businesses, mainly due to bottlenecks in implementation procedures, and therefore often remain in business registries even when their activity has come to a halt. In order to re-start operations and/ or shift operations toward a new business, it is usually easier to establish a new business rather than go through formal closing procedures. This situation also causes incompatibility between the number of registered businesses and the number of actually operating businesses. Moreover, despite some improvements, the business recovery rate is still low (40.2 cents on the dollar in 2019, up from 27.5 in 2007), compared to OECD countries (71.9 cents on the dollar).

SME Institutions

National Institutions

To promote SMEs’ development and support their competitive growth, the Ministry of Economy and Sustainable Development of Georgia (MoESD) established Enterprise Georgia and Georgia’s Innovation and Technology Agency.

Enterprise Georgia was established in February 2014 (Government Decree 173; 19.02.2014) and is the only institution in Georgia responsible for coordinating the implementation of SME support policies and programmes. The main goals of Enterprise Georgia are to improve private sector competitiveness, support start-up businesses, facilitate the establishment of a modern entrepreneurial culture, support the diversification of exports in goods and services, as well as support FDI attraction and aftercare. Enterprise Georgia’s main functions are:

• To support businesses as they adapt to the Deep and Comprehensive Free Trade Area DCFTA requirements with the European Union Enterprise Georgia provides consulting services and technical assistance on DCFTA requirements to SMEs and helps them adapt to these requirements through capacity building initiatives, given that sufficient knowledge regarding EU policies and norms among Georgian SMEs remains low;

• To provide consulting services in different areas;

• To collect and deliver information to SMEs on demand and specific requirements of export markets, as well as on demand of local markets;

• To assist SMEs in business planning and development, growth of competitiveness and productivity and entrepreneurial learning;

• To attract, promote and develop foreign direct investments in Georgia;

• To assist in cooperation with donor and financial institutions;

• To provide finance via special schemes;

• To support the marketing of exportable goods and services on international markets.

GITA (Georgia’s Innovations and Technology Agency) was established in February 2014 under the supervision of the Ministry of Economy and Sustainable Development of Georgia.

The main goals of GITA are:

• To create an innovation ecosystem and coordinate its development;

• To support innovative start-ups and SMEs with their increase in competitiveness;

• To support the development of innovations and export-oriented ICT;

• To support the absorption of innovations and technology, and commercialisation of R&D.

• To facilitate cooperation between the representatives of scientists and businesses.

The main functions of GITA are:

• To facilitate and finance knowledge-based initiatives, innovative projects and products;

• To implement programmes that stimulate R&D in the business sector;

• To attract FDI in ICT;

• To support the development of internet spaces, as well as internalisation and digitalisation processes in SMEs.

Institutional strengthening of Enterprise Georgia and GITA remains important to address SMEs’ needs and challenges and to provide target-oriented services.

In addition to these government agencies, there are a number of organisations providing assistance to Georgian SMEs, the most active of which are the Georgian Chamber of Commerce and Industry and the Georgian Employers’ Association:

The Georgian Chamber of Commerce and Industry (GCCI) was established as an independent public agency and has several regional offices through which it provides services. The main functions of GCCI are to provide information and consultancy services for businesses, support the improvement of business skills and business planning, promote exports, and support the internationalisation of enterprises. GCCI membership is voluntary. Currently, the Chamber has 1 700 members of which more than 90% are SMEs. Membership fees vary from free of charge to GEL 10 000 and depend on the services provided. SMEs are exempt from membership fee.

The Georgian Employers’ Association (GEA) is an independent non-profit organisation, unifying more than 1 000 large companies and SMEs. GEA provides consultancy services to SMEs and carries out different programmes related to entrepreneurial learning and business skills development. GEA membership is fee-based and varies from USD 600 up to USD 2 000 according to the size of the enterprise.

The Georgian Small and Medium Enterprises Association (GSMEA) is a non-political and non-profit organisation founded in accordance with Georgian legislation on 10 September 2010. The association aims to protect the interests of small and medium businesses, promote the creation of healthy and competitive conditions in the country, and establish active communications between SMEs and public agencies, financial institutions and international organisations. The Association has 3 527 members, out of which 70% of businesses are small, and 30% are medium-sized enterprises.

The Export Development Association (EDA) was founded in 2012. Its mission is to help Georgian enterprises grow and diversify their exports through advocacy, advice and promotion. EDA is a member-driven association uniting up to 100 Georgian export-oriented producers and service providers. EDA supports Georgian exporters through capacity-building initiatives, the development of export marketing plans, export management services, selection of target export markets and the diminution of barriers to trade. Most EDA members are in the production sector, but EDA also affiliates tourism industry representatives.

As with GITA and Enterprise Georgia, the above-mentioned associations require assistance to strengthen their capacities regarding EU policies and DCFTA requirements, so that they can better support SMEs. In addition, closer cooperation with the business sector, as well as between SME institutions is needed to provide target-oriented services and avoid overlap.

State-led, private sector development programmes (access to finance)

State programme “Produce in Georgia”

The state programme “Produce in Georgia” was launched in May 2014 as part of the state strategy to support the development of the private sector, and SMEs in particular through provision of technical assistance and co-financed loans. The programme aims to facilitate the development of the production industries, establish new enterprises and extend/upgrade existing ones.

Initially, the programme focused on two sectors: manufacturing and agro-processing, and was supervised by the Ministry of Economy and Sustainable Development of Georgia (implementing agencies: Enterprise Georgia, National Agency of State Property (NASP), and the Ministry Environmental Protection and Agriculture of Georgia (implementing agency: Agricultural and Rural Development Agency (ARDA)). In 2016, new hotel and film components were added to the programme.

The agency Enterprise Georgia, within its industrial component, covers 10% of bank interest on commercial bank loans for 2 years for SMEs in the following sectors: building materials, paper and paperboard products, wood processing plants, metal products, chemical manufacturing, mechanical engineering, textile production, electric equipment, mineral water, bitumen products, rubber and plastics, pharmaceutical goods, food products and mineral products. Enterprise Georgia also administers the “Host in Georgia” project, which offers to cover 10% of commercial bank loan interest for 2 years to small and medium-sized hotels.

In 2015, pursuant to the “Produce in Georgia” framework, the government introduced a new sub-programme, aimed at developing micro and small-scale enterprises via the provision of financial assistance mechanisms (co-matching grants with a beneficiary contribution of at least 20% in capital spending) and consulting services. Assistance is intended to provide beneficiaries with necessary knowledge on modern business practices. The programme covers all regions of the country, except for the capital city of Tbilisi. Trained and selected project owners receive co-matching grants of up to GEL 5 000 from the government (with three person maximum per project and a limit of GEL 15 000).

In accordance with the “Produce in Georgia” state programme, the government reported the following results* for all sectors of the economy (up to July 2019):

Table 16.6. “Produce in Georgia” state programme

Produce in Georgia	Number of Projects	Investment Volume (GEL Million)	Employment (number)
Industrial	317	687	12 060
Agro-processing	30	88.5	NA
Hotel	107	282.3	2 850
Film	28	99.8	13 400
Micro Grants	6 212	61	>11 000
State Properties Transferred	109	164	6 030

Notes: Investment volume - includes loans issues by commercial banks and additional investments made by beneficiaries. Employment – People employed and those who will be employed. Data includes information since the launching of the state programme “Produce in Georgia” May 2014 up to July 2019.

Source: Enterprise Georgia.

In 2019, Enterprise Georgia partnered with 14 largest Georgian banks and launched a Credit Guarantee Scheme. The main purpose of the Credit Guarantee Scheme is to improve access to financing for small and medium-sized enterprises which fail to meet the requirements of the loan provision. According to the scheme, the agency provides 70% of loan security on loans ranging from GEL 50 000 to GEL 2 000 000, with a maximum maturity of 10 years. Priority directions for this programme are production and processing, hotel industry, electricity generation, educational activities, training centres, export of wide range of services, and research and development.

Access to finance tools for innovative start-ups (managed by GITA)

The MINI grants programme which runs on a total budget of GEL of 500 000 was launched in 2019. It aims to promote market demanded innovative projects. Grant recipients are non-profit institutions and individuals. In total, GITA financed 70 applications, which include grants for traveling, prototyping and organising events.

GITA announced the Calls for Proposals for Start-up Matching Grants Programs. The objective of the program is to stimulate innovation and creation of innovative enterprises in Georgian economy through development/adoption and commercialisation of innovative products and services with the potential for internationalization. The financing to be awarded by GITA through Start-up Matching Grants could cover a maximum of 90 percent up to GEL 100 000 of the total approved Applicant’s project budget for a one-year project.

37 beneficiaries were financed within the announced two – GEL 100 000 matching grants programs.

In addition, there are open calls for GEL 100 000 Start-up Matching Grants program and GEL 650 000 Innovation Matching Grants program.

Innovation Matching Grants Program aims stimulate innovation and the creation of innovative enterprises in the Georgian economy. The programme will promote product, technological or business process innovation by Georgian MSMEs with a preference to innovation that introduces innovation on a global scale with a clear Georgian nexus and operations headquartered in Georgia.

Agricultural and Rural Development Agency (within the Ministry of Environmental Protection and Agriculture of Georgia)

Currently, the agency manages seven different programmes within the agriculture and agro-processing industry. These programmes include government financial support (subsides, grants and guarantees), and are united under the government’s United Agro Project.

In April 2019, the government reported following results regarding the 8 different programmes:

Table 16.7. Agricultural and Rural Development Agency’s (ARDA) programme report

ARDA	Year	Project (number)	Investment volume (GEL million)	Co-financed volume (GEL million)
Preferential Agro Credit Project	2013-5/2019	36 314	1 978.5	267.7
Co-financing of Agro Processing and Storage Enterprises	2014 – 6/2019	66	98.9	34.7
Georgian Tea Plantation Rehabilitation Programme	2016 – 6/2019	49	2.5	1.8
Agro insurance	2014 – 5/2019	90 897	643.3	38.4
Plant the Future	2015 – 6/2019	1 216	75.6	41.8
Agro production promotion	2016 – 6/2019	528	26.4	10.4
Young Entrepreneurs	2018 – 6/2019	178	18.9	7.4
Co-financing the purchasing of agricultural machinery	2019-6/2019	102	14.3	6.7

Source: Agricultural and Rural Development Agency (ARDA).

In 2018, the government introduced a programme for young entrepreneurs in villages – “Young Entrepreneurs”, which is designed for young, aspiring entrepreneurs who are residents of Georgia. The program is financed by a donor organisation – Denmark International Development Agency (DANIDA).

In 2019, the government announced another new program of co-financing the purchasing of agricultural machinery.

Figure 16.1. Trends in SME and entrepreneurship finance in Georgia

Note: A change in regulation in 2009-10 caused a large increase in bankruptcies.

Source: See Table 16.8.

Statlink

Table 16.8. Definitions and sources of indicators for Georgia’s scoreboard

Indicators	Definition	Source
Business loans, SMEs	Bank loans to SMEs, amount outstanding (stocks) at the end of period.	National Bank of Georgia
Business loans, total	Bank loans to all non-financial enterprises, including SMEs loans, amount outstanding (stocks) at the end of period.	National Bank of Georgia
Non-performing loans, total	Substandard loans together with doubtful and loss loans, including interbank loans.	National Bank of Georgia
Non-performing loans, SMEs	Substandard loans together with doubtful and loss loans, including interbank loans.	National Bank of Georgia
Interest rate, SMEs	Annual Weighted Average Interest Rates on loans (stocks) to SMEs	National Bank of Georgia
Interest rate, large firms	Annual Weighted Average Interest Rates on loans (stocks) to all non-financial enterprises	National Bank of Georgia
Collateral, SMEs	Percentage of SMEs that were required to provide collateral on latest bank loan	National Bank of Georgia
Rejection rate	Percent of firms whose recent loan application was rejected	National Bank of Georgia
Bankruptcies, total	The number of bankruptcy proceedings that are actually initiated and registered in the Public Registry Agency of Georgia during the reference period.	Public Registry Agency

References

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National Bank of Georgia, Statistical data – https://www.nbg.gov.ge/index.php?m=304&lng=eng

Revenue Service (under the Ministry of Finance of Georgia) – Georgian Tax Code http://www.rs.ge/Default.aspx?sec_id=4846&lang=2&newsid=2693

National Agency of Public Registry (under the Ministry of Justice of Georgia) https://napr.gov.ge/

Investing in SMEs in the Eastern Partnership 2017, country profile Georgia, http://www.eu4business.eu/files/community/pdf/country_report_georgia.pdf

The Global Competitiveness Index Report 2016-2017 https://www.jetro.go.jp/ext_images/switzerland/pdf/TheGlobalCompetitivenessReport2016-2017_FINAL.pdf

Georgia – Neighbourhood SME financing – February 2016 http://www.eib.org/attachments/efs/economic_report_neighbourhood_sme_financing_georgia_en.pdf

Enterprise Georgia, SME support agency of the Ministry of Economy and Sustainable Development of Georgia http://www.enterprisegeorgia.gov.ge/en/home

Note

← 1.  Figures are inflation-adjusted with 2007 as the base year.