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.
An office in the Middle of Nowhere
We approach a small shed on the dusty main square of the small village of Chkhoni in the region of Samegreli. The structure is painted pink – the colour of the MFI Crystal. It is one of eight prototypes, developed by Manuchar Chitashvili’s department of innovation and started operating a couple of months ago. Chkhoni is one of the bank’s first “boutiques”, a basic version of the normal office, suitable for rural and remote areas where no other banks are present. The employees of the boutique, the so-called “Avatars”, can autonomously decide on loans smaller than 3’000 Lari (around 1’000 Euros). For larger quantities (up to 5’000 Lari) they have to consult the headquarters’ credit committee. This autonomy makes the loan disbursement very fast fast and efficient.
Crystal is the first MFI to locate officially to these areas, but the idea is not completely new. Although other banks do not operate offices in small villages, Mister Chitaishvili tells us that they collaborate with local “consuls”, influential community members who work unofficially for the banks and advice their neighbors when in need of money. Crystal chooses a different recruitment strategy for their Avatars. They are mostly young locals without extensive financial education. Since the analytical work for big loans is done in Kutaisi, it is more important that the employees are communicative, motivated, have a talent for selling and are trusted members of their local community. The three Avatars we meet in Chkhoni just began their work in December.
A Risky Project
The eight boutiques have been open since last winter and up to now have proven to be successful. There is a big demand for loans in villages like Chkhoni and there have not been any major problems with slow payments or defaulting debtors yet. Mister Chitaishvili admits that his department had identified several possible risks and there had been skepticism among the villagers. As we wrote in our previous article, there is general scepticism towards Microfinance in Georgia because of some MFI’s irresponsible behavior. The people were initially suspicious about Crystal investing so much money into bringing a small lending facility to their village. Moreover, Mister Chitaishvili told us, that it wasn’t clear whether the villagers would place confidence in the young credit agents, with now or little experience. However, many of the worries were uncalled for and Crystal managed to attract a substantial amount of new customers.
One example is a local shopkeeper selling a diverse range of goods and products. She started her business with a loan by Credo, a different microloan lender, but switched to Crystal after the boutique had opened on her street. Many of the debtors are not for businesses, but rather farmers mostly producing nuts, which the region is famous for. Accompanied by one of the Avatars, we visit two of the farmers, living remotely in the surrounding hills. The Avatars know all of their clients personally, which builds trust. Irakli, one of the Avatars even visited the farmers during the winter, when there was half a meter of snow and the farms were only accessible by foot.
Competition among MFI
The market for MFIs in Georgia is highly competitive and a company like Crystal, one of the oldest players, constantly needs to come up with new ideas in order not to lose market share. The boutiques in remote areas are the newest initiative in the constant quest to make Microfinance accessible for those who need it most. Moreover, Mister Chitashvili tells us, the boutiques are the place where Crystal has no competition and can therefore concentrate on its core business of lending money, without spending time and efforts on advertisement and other necessities, all elements of a saturated market.