Theme 2: Assessment of credit unions in Georgia: results and lessons

As financial institutions, credit unions (CUs) have their unique advantages of being user-owned, being “close” to people they serve and able to serve rural poor efficiently due to relatively low costs. But how successfully can credit unions use these advantages? The paper studies whether donor project supported credit unions have been effective in making financial services available to the underserved population in rural areas of Georgia. The paper answers following questions:Who are the main target group for the researched credit unions? What prospects are there for the genuine sustainability of credit unions?

Research on macro- (policy), meso- (CUs) and micro- (clients) dimensions was conducted with the use of following tools: FGDs and interviews with CUs clients and non-clients, staff, governance and management; Interviews with representatives of the project, Government of Georgia, National Bank, donors, banks and MFIs; Analysis of the portfolio, operational/financial self-sufficiency, productivity, cost structure and efficiency of the CUs; and Study of literature and documents.

The conclusions include:

  • The best performing village-based credit unions eventually start seeking their clientele over areas wider than a single village, with gradually stronger inclusion of non-poor and non-rural population
  • Availability of relatively easily accessible funds can undercut motivation of CUs to work towards saving mobilization and can undermine their long-term stability and compliance to regulatory standards
  • Pro-active building of saving culture should be on the agenda of credit unions’ management
  • Ambiguity of monitoring agency, acting both as TA provider and lender, can lead to biased, subjective lending decisions and neglect of prudential standards.

The findings might be useful to develop environment and policies, improve donor interventions, and develop apex-type organizations and credit unions in transition settings of NIS and CEE countries.

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