We are currently running our first Mi-fi Module in Georgia, where we are collaborating together with the MFI Crystal. Two of our Mi-fi members, Noah and Stepanka are in and around Kutaisi, to work together with the local Microcredit provider. Our visit has two main goals – the first is to present some basic research and inputs on extension services and value chain finance. The second lies in an analysis and feedback on workflows and processes on the different products and services offered by Crystal.
Handwritten copies of the 12th century medieval Georgian book Vepkhis T’q’aosani, The Knight in the Tigerskin, by Shota Rustaveli, used to be a traditional wedding gift from the bride’s family to the groom. It is about Awthandil, an Arabian noblemen in love with a princess, who is sent out to find her father’s murderer – a mysterious knight, clothed in the fur of a tiger.
The writer Shota Rustaveli was a very forward thinking character of his time. He did not differentiate between nations, religions, men or women, rich and poor. According to him virtue can be found everywhere and in everyone. Manuchar Chitaishvili, Crystal’s head of innovation is fascinated by the very modern ideas that originated in Georgia’s Golden Age in the 11th and 12th century. Crystal as an organisation is very much influenced by the ideas within this old saga. Not only is the staff gender-balanced and many women occupy leading positions, but also debtors are treated as equals by the local Crystal executives.
The Crucial Role of Risk Assessment
We were able to experience this when we were invited to a local branch of the MFI in the town of Sestaponi. At one of the offices on the busy main square of the town, Miss Lomidze, invited us to her office and explained to us the risk assessment process at Crystal. A proper risk assessment is one the most crucial steps of keeping Microfinance sustainable. Currently this is still mainly accomplished through elaborate excel-files, completed based on information from the customer. Microfinance in Georgia has not as good a reputation as one might expect. Many people distrust MFIs and would never lend money from this type of institution. The reason is that in Georgia, a country with around 3.5 Million inhabitants, about 70 MFIs compete for the customer base, with only Crystal and about a handful of others, focusing on a high degree of social responsibility. In many cases, the drive for profits leads to confiscated land and property due to customer’s defaults.
Crystal assesses the people’s financial situation before granting them a loan. If clients do not have a good credit history or an income that is too low, the loan is refused. One of the metrics Crystal uses, is that at least 30% of the client’s salary has to be left after they pay their monthly interest. However, Crystal tries not to only make their decisions based on excel files filled with numbers. Credit agents are expected to visit the loan applicants at their homes and businesses to see how they treat their family and co-workers – the goal is to see beyond the numbers and keep a close connection to the clients.
Sestaponi – Visiting Clients
Shorena Lomidze, the local branch manager, emphasized that she tried to visit every one of the 1’500 clients in Sestaponi. She has a lot of passion for her job, which she describes as very rewarding. One can begin to understand the positive feeling from seeing how a client’s business grows over time. It boosts peoples’ self-consciousness and confidence. We have the opportunity to accompany her to five successful clients; a market woman, a manufacturer of mosaic doorsteps, a poultry farmer, a factory of window frames and a dentist. We are warmheartedly welcomed at all the stops we make and are always offered coffee, tea and pastry. Even a patient while sitting in the dentist’s chair invites us to his place while joking in Russian and hindering the young doctor from continuing the dental procedure.
Equality to opportunity
Rustaveli, the 12th Century Georgian writer, may have set the basis to the right mind-set when it comes to Microfinance in Georgia. Rather than blaming the poor themselves for their situation, they have to be treated as equals. They can be active business partners with great ideas and dreams, but often simply lack the tools to accomplish their goals. Shorena Lomidze, the branch manager from Sestaponi, embodies exactly this view. However Microfinance is no miracle cure and, as we have heard, faces some scepticism also among the population of Georgia. Until now, there is no governmental regulation of the sector and each microlender, no matter how shady can call itself MFI. In order to improve its image and increase its impact, more MFIs like Crystal are needed, aware of their important role in society, must work on improving Microfinance.