It is the first time in the last decade that Georgian farmers will be able to obtain credit directly from a bank in support of the agricultural sector. The People’s Bank has taken the

initiative in developing this

opportunity. It is expected that the current program will now be

available for the entire Kakheti region, East Georgia. Crop loans are to be made against the anticipated grape harvest and both the crop and real estate can be used as

collateral. Thanks can be given to Petre Tsiskarishvili, Governor of Kakheti, who can lay claim for

having first envisioned the credit program for the region’s farmers

in dealing with rural poverty.

Zaza Tchiaberashvili who resides in the village of Giorgitsimnda, Sagarejo region, is one farmer that took a credit from the People’s Bank. The amount was small but will be enough to provide the agronomic materials that are needed to keep his one-hectare of grapes from being lost and to make the difference between a “good crop” and a “crop failure.” Moreover, the People’s Bank helped will help him sell the harvest and hedge against unforeseen risks and circumstances.

“This bank helped me when I was in real trouble. I call this bank ‘the bank of friendship,’” explained Zaza Tchiaberashvili

The People’s Bank is the first commercial bank in Georgia that started granting revolving credits to farmers. The first test-stage was realized last year in the Sagarejo region and the credit lines were provided to 160 small farmers. The bank’s management claims that it provides credits to both legal entities and individual farmers … that “the money is mainly provided for the purchase of fertilizers, agricultural chemicals and other input, which can extend to credits for the farms for initial financing and enterprise development, which includes ‘consulting service-selling,’” – this is how the Head of the Credit Department of the Bank, Gigi Gigineishvili, explained the farm finance project to locals and governmental leadership of the rayon at a recently held meeting at the regional administration building. Micro loans will only be issued for developing the winegrowing sector at this stage of agricultural lending. The bank’s management justifies only providing loans to wine producers based on that there is a ready market for their product and attention is given to Georgian wines as having the greatest potential. When the level of experienced by the bank is increased with working with farmers, then we expect that other agricultural enterprises will be considered for loans,“ stated Gigi Ghlonti, the bank’s director, to 24 Saati (Hours).

The credits will be issued to the legal entities according to the following mechanism: Small working groups of 3-4 individuals will be specially created and the members of these groups will take responsibility to control each other, in order to avoid misunderstandings, and that the loans will be repaid. The peasants will have to pay interests rates (APR) to the bank of 20% per annum. Meanwhile the village landholder will have to put the land plot that he has as his vineyard under a lease agreement.

“In case if the winegrower is able to pay off the loan ahead of the date of maturity, then the paid back credit with interest will be adjusted accordingly. Loans are written for 365 days,” said Gigi Gigineishvili.

It is also important that the bank offers its clients another innovation. The bank is ensuring the land plots of its customers take out crop insurance with a partner insurance company as a hedge to a bad harvest or unforeseen circumstances. “Last year vine factory of Sagarejo became a partner of the People’s Bank, the harvested grapes of our creditors was received by this winery. We hope to establish such relations with additional regional factories. As for the crop insurance, in the unfortunate event that the harvest is damaged by natural disaster, the insurance company is urged to pay the grower the amount that crop was to yield,” says Gigineishvili

As for the credits, which will be given by the People’s Bank, according to loan and production data of the last season: minimal amount of credit was 200 GEL, and the maximum limit that bank could approve was 6,600 GEL. As for the credits granting periods throughout the year, the exact amounts will be fixed only upon when creditors appeared in other regions as well. “I hope the program of the People’s Bank will be a successful one. Such an innovative program was necessary in order to effectively deal with the credit crisis, and to address poverty issues in rural Georgian villages,” mentioned Petre Tsiskarishvili, the Presidential Envoy in Kakheti, who is one of the initiators of this program, and who is the lead person in having requested that the Gamgebelis [local governmental leaders] make lists of those who might be willing to obtain rural credit in the nearest future.