Survey of the Legal and Regulatory Environment for Microfinance Institutions in the Republic of Georgia

This survey outlines the legal and regulatory environment for microfinance institutions (MFIs) in the Republic of Georgia. It discusses the various aspects of:

• Non-profit legal forms;
• Commercial companies;
• Savings and credit cooperatives;
• Commercial banks;
• Financial sector laws and regulations;
• Lending activities and collateral;
• Taxation and accounting.

The survey offers the following summary conclusions:

• Ambiguities in the wordings of the laws and regulations have led to misunderstandings between NGO MFIs that are involved in micro lending activities and governmental authorities;
• Rural, agricultural savings and credit cooperatives engaged in micro lending face lack of effective regulation and supervision;
• There are no commercial companies presently operating as finance company MFIs;
• All forms of legal entities that presently exist or appear feasible face unsatisfactory tax and tax accounting treatments;
• There is a lot of ambiguity surrounding the issue of which activities require a banking license.

The authors recommend that:

• Existing regulation needs to be clarified to enable NGO MFIs to operate without hindrance;
• The ambiguities surrounding the regulation of finance company MFIs need to be removed;
• Savings and credit cooperatives need an appropriate, enabling legal environment to conduct their activities;
• A variety of changes need to be made to the broader legal and regulatory operating environment for existing MFIs in Georgia to become sustainable in the longer term.