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Credit story with a sad ending2012-12-29 14:02
The ease of business registration and small number of taxes has long been an example of success of "Saakashvili's reforms" in Georgia. It is really very easy to register a business in Georgia, much easier than in any other former Soviet republic. And an outside observer often does not understand why the majority of Georgia's population lives in poverty.
And really, why? You can easily go to the House of Justice, register a company, and do business, feeding your family. The more that "official" corruption is defeated ...
The reality, however, is more prosaic and unattractive. Indeed, you can easily register any business - and what's the point? In the area of retailing in Georgia, as well as throughout the world, there is the process of concentration: retailers and supermarkets are rapidly replacing small business. The same happens in catering: the market is saturated; the big "network" structures have the advantage here. So, if you see "a niche" in the market and it seems that you can open a store or a coffee shop - you should have no illusions. In this area the potential customers are poor and won't ensure large income to the owner.
The hotel business remains. Former authorities actively encouraged to develop it, promising to make Georgia a tourist mecca. Alas, for many Georgian citizens the situation here is the same as in the retailing and catering - many private hotels were empty in the past, and before last seasons. Despite all conditions, even in the most sought in terms of tourists and vacationers coastal regions of Adjara the accommodation and hospitality services commensurate with demand in August - at all other times it exceeds the demand.
The apparent ease of having own businesses and receiving bank credit for its development has played a cruel joke with many Georgian citizens. Commercial banks are willing to lend the public and small business under mortgages. As a result, thousands of people in Georgia who want to try their luck in a given area, took out a bank loan against their homes and apartments.
For credit money many people have made repairs and equipped "mini-hotels" in their homes in the resort areas of Batumi, Kobuleti, Gonio. However, despite victorious statistical reports on the growth of tourist flows, the rate of the tourism business for many has turned into a complete ruin. Mass expulsion of debtors from their homes in Kobuleti even caused public reaction this spring. There were speeches, meetings, and appeals to the authorities - but in the end hard principle works: either you pay on the loan, or you're homeless. In this case, any delay in the payments turns hefty fines for borrowers. Bank of Georgia for the first nine months of 2012 gained about 28 million GEL from fines and penalties, while net profit for the same period was 206 million lari (about 13% of bank profits obtained through fines).
Kobuleti resident David tells about his friends: "Many have taken credits, mortgaged their house and now cannot pay. At the same time, their neighbors' things go well, and each season they get money from the guests, and they do not need credits. Why does this happen? People think they will have clients; while the tourists need just turn to another street to find a mini-hotel or a coffee shop. Even the advertise is not helping. And the bank needs you to pay on time, repay the loan and pay interest. Interest is very high - 15-20% per annum, plus fines, and they accumulate regardless of whether it is winter or summer, you have income or you don't".