Micro Finance Organisation
As per an estimate close to half the world’s population, have no access to banks or formal financial services. They are not able to open a bank account, neither in a position to negotiate a loan to start a business or buy any insurance term. Access to these financial services can have a fundamental impact on the millions live. One the people have access, same enables them to build their assets gradually, develop micro, small and medium-sized enterprises. Same will also help to improve their income earning capacity, create employment and provide a financial cushion for the future.
Georgia microfinance sector is rapidly expanding. One can see the tremendous 100% growth rate is there in last three years. The government subsidies and support to small business have been grown up which include the small industry and more particularly agro business. Development of this sector is the necessity at the same time it’s crucial for Georgia growth. To safeguard the interest of microfinance industry company has to come with some principals.
While there is still a long way to go to make sure that everyone has access to the financial services for the same provision has been created by the government. The microfinance organisation has proved that low-income populations are bankable and can be offered financial services in a sustainable way. In some markets, microfinance organisation (MFO) have transformed into licensed banks, enabling them (i.e. MFO) to further expand their services to small and medium-sized enterprises or provide mortgages. As the microfinance sector becomes integrated into mainstream financial systems, it also taking care many of the problems faced by industries.
Scope of Work
As a financial service provider, if you are going to start a microfinance organization in Georgia, you should know that your scope of work would be:
- Extend microloans, including personal, collateral, unsecured and group loans (credit) or loans on property;
- Invest in state and public securities;
- Provide money transfer;
- Operate as an insurance agent;
- Provide consultation services in microcredit;
- Receive loans (credit) from resident as well as non-resident legal and real entities;
- Possess the share of the authorized capital of a legal entity, the total amount of which does not exceed 15% of the authorized capital of the microfinance organization.
- Provide other services and operations defined by Georgian legislation including micro leasing, factoring, foreign exchange, issue, realization, refunding bonds and promissory notes and other operations connected with this.
Note: – A microfinance organization shall not receive a deposit from either real or legal entity.
Opening an MFO- Requirements
In case any company wants to open a Micro Finance Organisation (MFO), one should be aware the requirements of the same. Georgia is an upcoming fastest growing economy. The government has set some requirements to open a Micro Finance Organisation (MFO) in the country and for microfinance organization, the following are the requirements.
- The owner of MFO should own minimum capital 250,000 Gel.
- The maximum total amount of microcredit extended by a microfinance organization to a single borrower may not exceed GEL 50,000.
- The company should be registered under Joint Stock Company (JSC) or Limited Liability Company (LLC).
- The owner than should provide the respective certificates from the registry of companies to the National Bank of Georgia (NBG).
- The administration of the company should provide the record of non-conviction.
- The information on the significant shareholder (10% or more) is also required in the process.
Auditing, Accounting, and Reporting- Requirement
A microfinance organization shall be responsible for:
- a) Carrying out transparent financial and tax accounting and applying the principle of publicity;
- b) Developing and implementing procedures of internal control;
- c) Inviting an external audit in compliance with Georgian legislation every year;
- d) Maintenance of accounting and submission of financial statements according to international standards and Georgian legislation;
- e) Reporting to the National Bank of Georgia. The form and the deadlines for submitting a report is stipulated by an administrative act of the National Bank of Georgia;
- f) Guaranteeing the truthfulness and accuracy of the submitted information and financial statement;
- g) Annually publishing a financial statement of the accounting year and a report of the external audit in a periodical.
Note : – In the event that a microfinance organization fails to comply with all the requirements for the submission of financial statements (as stipulated by the National Bank of Georgia) twice in succession, the Bank has the right to cancel the registration of the microfinance organization.