2011 MicroFinancialOrganization December 2011
LTD MFO Capital Credit Content Business Plan 1. Index of tables and figures 1.1.Georgia........................................................................ 2 1.2.Summary and key economic figures................................................ 2 1.3.Georgian economy key points................................................... 3 1.4.The need of micro financial organizations in Georgia................................. 4 1.5.MFO Market Overview.......................................................... 5 2. MFO Capital Credit 2.1.Business highlights.................................................................. 6 2.2.Branchless service........................................................... 7 2.3.Legal form......................................................................... 7 2.4.Shareholder........................................................................7 2.5.Supervisory Board and Board of Directors............................................... 8 2.6.Portfolio performance 31.12.2011..................................................... 9 3. Business operations of Capital Credit 3.1.Products and services............................................................ 9 3.2.Credit policy and Decision-making................................................. 11 3.3.Rules and conditions of realization of collateralized property........................... 11 1
1. Index of tables and figures 1.1. Georgia Georgia is one of the fastest growing market economies among post- Soviet countries. It has stable exchange rates, a liberal currency regime, low predicted domestic inflation and an investor friendly investment regime without any restrictions on profit repatriation. The World Bank s Doing Business 2007 Report awarded Georgia the status of the fastest reformer in the world. In the global ranking of World Bank s Easy of Doing Business Georgia is ranked at 12 th place out of 183 economies in 2011 1. Corruption is at one of the lowest levels among the CIS countries. Georgia enjoys rapidly increasing banking intermediation fueled by a fast- growing SME sector, expanding household consumption and developing infrastructure. Dynamism is underpinned by large scale structural reforms, improved tax administration, liberal tax environment with one of lowest tax rates worldwide, robust legal/regulatory reforms and a new wave of privatizations. 1.2. Summary and key economic figures Area 69,700 sq km GDP real growth rate 2011 {7%} Population 4,46 million GDP per capita 2011 (PPP) US$ 3,215 1 http://www.doingbusiness.org/~/media/fpdkm/doing%20business/documents/profiles/country/db11/geo.pdf 2
Life expectancy 73.57 years Inflation rate (e- o- p) 2011-2.1% Official language Georgian Literacy rate 100% Unemployment rate 16.3% (2010) Capital city Tbilisi Currency (code) - Lari (GEL) Exchange Rate USD/GEL 1.6703 2011) (December GDP (2011) US$14.36 billion 1.3. Georgian economy key points The Rose Revolution in November 2003 brought political stability and economic transformation, paving the way for rapid consumption-driven economic expansion and increased demand for banking services. From 2003 to 2007 the GDP growth rate on average was 8.0 %. It had a sharp fall in 2008 due to the war with Russia and dropped further in 2009 due to the global financial crisis. In 2011 International monetary fund expects a GDP growth of 5.5 %. Credit ratings by leading agencies: Standard and Poors - B +. 2 2 http://geostat.ge/ 3
The number of taxes was cut from 21 to 7 with taken to eliminate exemptions as well as to broaden VAT and profit tax. In 2007 The World bank assessed Georgia as a top reformer, improving in 6 out of 10 areas studied by Doing Business. Georgia has improved its performance by scoring 18 th place in 2008 and 11 th place in 2009. According to the Heritage Foundation`s Index of Economic Freedom, Georgia jumped from 105 th place in 2005 to 32th in 2009. After the short war of 2008 and the loss of two ethnic regions supported by Russian Federation last year the political relations with Russia remain nearly unchanged, but the political situation itself is stable in Georgia. The IMF reports that irrespective of the tensions with Russia, Georgia`s economy maintains strong economic growth trends. Favorable macroeconomic conditions and sound government policies have positively impacted on the banking sector, which is set to experience sustained growth. It remains underdeveloped by CIS standards but is growing fast. The regulatory environment under the management of the National Bank of Georgia is rather strict but favorable for foreign investors. Local banking institutions have already set up a centralized Credit Bureau. Georgia has a consolidated property registration system allowing users to obtain a title in as little as one day. Foreclosure was complicated, as it required a court order and a public sale of the collateral; however, the Georgian Parliament has passed a law targeted at simplifying foreclosure practices. Technical assistance provided by the NBG, equity investments and credit lines from International Financial Institutions such as International Finance Corporation, Deutsche Entwicklungsgesellschaft, World Bank and European Bank for Reconstruction and Development, has improved confidence and facilitated further institutional development in the sector. 1.4. The need of micro financial organizations in Georgia Georgia is a small post soviet country with a population of 4, 4 million and a GDP per capita 3.22. A citizen`s wealth or poverty mainly hinges on the possibility of being able to borrow money in Georgia. Borrowing from banks is often problematic. Georgian banks operate compared to Western industrialized nations under a rigorous monitoring regime and observe strict lending restrictions from the National Bank of Georgia. Poor people and the people, who can t prove source of revenue, typically have collateral and therefore no chances to take out a loan. Many Georgian citizens especially people with low education levels and from the low-income bracket cannot meet the requirements of the banks and therefore have no access to credit. Micro-finance organizations build a bridge to credit and wealth. While under the supervision of the NBG, they have no strict lending guidelines. Thus, the micro-finance organizations can 4
hand out private loans to budding entrepreneurs and corporate loans to companies that are new on the market or have no audited accounts. 1.5. MFO Market Overview The micro finance market in Georgia The micro-finance market is one of the most stable sectors in Georgia. The short war between Georgia and Russia in August 2008 had a negative impact on almost all sectors, including the banking sector. The micro finance sector in one of few which continued to grow despite the war and the financial market crisis is growing. From Q2 2010 to Q3 2011 the microfinance sectors grow by 56% (Pr). And Asset growth rate is 47%. At the moment there are 61 registered micro financial organizations in Georgia, most of them are solely operating in Tbilisi. To become a Micro Financial Organization registered under the National Bank of Georgia, the organizations have to fulfill requirements in accounting and restrictions in services. Many small MFOs simply provide Lombard loans or consumer loans. At the end of 2011 (1Q) Total assets of MFO was 316 mln Gel. 5
2. MFO Capital Credit 2.1. Business highlights Microfinance organization Capital Credit LTD is a non-deposit, financial company, whose major objective is micro-crediting, according to the Law of Georgia On Microfinance Organizations. Objective is to offer the varied credit products to small and medium entrepreneurs at most rapidly and transparently. Capital Credit`s credit products are dedicated for especially micro-segment, in order that the small entrepreneurs were able to improve their financial state. Capital Credit offers the clients loans, money transfers and micro insurances. Capital Credit will be able to serve to the small entrepreneurs fully and to provide them with consultation for management of their own business. Slogan of company is Joint Favor, which at first expresses the will of achievement of the success together with customers. Our corporate philosophy consists of six basic principles: Transparency and trust: We strictly follow the principle of providing transparent information to our clients, to the public and to our employees. Transparency is basic prerequisite trust. Open communication: We are open, fair and constructive in our communication with customers and each other. If problems arise, we search in a professional manner and in partnership for the causes and solutions. Social responsibility: We provide our customers with sound advice on economic and financial situations. Their potential and abilities must be assessed so that they benefit from our products. Furthermore, the promotion of a sustainable corporate culture with economic and environmental savings is important for us. Tolerance: We are committed to treat all customers and employees with respect and fairness, regardless of their origin, gender and religious. Service orientation: Every client is served in a friendly, professional and courteous manner. Our employees are committed to a best possible service to all clients independent of their origin, size of company and the extent to which they use our services. High professional standards: Every employee takes responsibility for the quality of his/her work and strives to improve her/his work continuously in the interests of our clients. We are aware of dealing with sensitive data, maintain a high level of confidentiality and set high standards in the prevention of corruption. 6
2.2. Branchless service Our vision is to acquire a leading position in Georgian microfinance sector and to be renowned for our financial services and social responsibility all over Georgia and to increase market share of Capital Credit each year and the services of Capital Credit shall be available in more cities of Georgia in the near future. It is our aim, to develop new products, increase our profitability and to be always up-to-date in the global microfinance sector and to establish a leading microfinance company, which will offer economically active but income-earning population a fast and high-quality financial service and establish long-term partnership with them. We feel that future of microfinance will be online service, so we don t have branches and service points. All our products are reachable through our web site. We also use banking technologies to service our customers. If you are our customer you don t need to come in our office for credit application. LTD MFO Capital credit and JSC investbank agreed on issuing Visa classic co brand debit cards. This card gives possibility to receive and repay Loan without visiting service points. On May 2011 LTD MFO Capital credit and Utiba LTD has signed Memorandum of understanding. Utiba is leading company from Singapore which provides mobile payments and various communication solutions. 2.3. Legal form In accordance with the Law of Georgia on Microfinance Institutions, the National Bank of Georgia registered Capital Credit LTD on October 27nd 2010 under the number 461010 (Decree of Head of non bank supervision department of National Bank of Georgia, October 27, 2010, No 1016) 2.4. Shareholders Mr. Fuad Bakhishev (Azerbaijan) 100 % 7
2.5. Supervisory Board and Board of Directors The main organ of Capital Credit is Supervisory Board, which fulfills monitoring, and Board of Directors executes operating activities. Issues for the decision of the Supervisory Board are: Appointment of the members of the Board; Determination of their annual salaries as well as other benefits, any; before redefined by the Supervisory Board, if any, the Officers of the Company; Definition of basic principles of the Company s policy; Creation and liquidation of branches of the Company; Approval of organizational structure of the Company; Decision on the salaries and bonuses of directors as well as CEO, COO, CCO, CFO of the Company, if they are not Directors; Mr. Fuad Bakhishev Head of Supervisory Board Mr. Vakhtang Sheliava Director/ member of Supervisory board 8
2.6. Portfolio performance 31.12.2011 Today, Capital Credit is operating with one branch. It has 76 clients with average loan size of 13 841 GEL. It should be noted that, all of our loans are mortgaged, and the market value of total mortgage three times exceeds loan amount. Collateral types are: house, apartment, commercial area, and office, or lend in Tbilisi. Our portfolio is 1 051 914 GEL, 1 046 867 of 1 051 914 is fast loan, and 5 047 GEL - Lombard loan. 3. Business operations of Capital Credit 3.1. Products and Services Credit Products Fast Loan: Fast Loan means to receive the response for a loan application in one day. Fast Loan is achievable for any natural or legal person, whose income is not confirmed. Identification card and extract from the Public Register are enough for approval of loan statement. Fast Business loan: Develop your business with us. Fast Loan is recommended for small entrepreneurs to finance and increase business. Lombard loan: collateralized by gold: duration 3 months, loan min. amount 100 USD. 9
Investment products To achieve our mission we are seeking potential investors who share our desire to establish a leading microfinance company. We are interesting in credit lines to expand our credit portfolio as well as various financial products. Our offer regarding credit lines is very competitive among other financial institutions. More you can see on a table below. Term Month/Currency (GEL/USD) <6 6-12 12-18 18-24 10,000-200,000 12% 14% 16% 18% 200,000-500,000 14% 16% 18% 500,000 > 16% 18% Term Month/Currency (EURO) <6 6-12 12-18 18-24 10,000-200,000 10% 12% 14% 16% 200,000-500,000 12% 14% 15% 500,000 > 14% 15% 10
3.2. Credit policy and Decision- making The decision- making process combines three parts: the front office module, the back office module (decision) and loan-statement. At first, the front office module operated by the desk officer and consists of an application form. The applicant fills the application form. At the same time it is sent as an electronic application to the back office. Depending on what loan amount is, committee gives loan a negative or positive status in 12 hours. In the internal database committee will check whether: 1. The applicant has already been rejected before and whether that reason is no longer present in the current request. 2. The applicant had/has a loan at Capital-Credit and had/has problems in repayment of these loans. 3. The applicant is located in the Credit info internal blacklist. 4. The applicant is a direct or indirect reference to other clients of Capital-Credit and the cumulative loan amount of all persons exceeds GEL 50 000. 11
3.3. Rules and conditions of realization of collateralized property Collateralized properties of borrowers can be seized if the borrower fails to make payments on the loan within more than 30 days. The guarantee will be transferred to public auction. Documents that should be presented to the auction court are: loan and collateral contract, extract from the loan account wherein the delay dates are defined and the extract from the Public Registry of the realizing property. The auction of a property is held in a maximum of three dates. At the first auction date, the market price is called. In the absence of sales in the first auction, a second auction will be scheduled within two weeks. The minimum price of the second date is half the market price. In the absence of sales in the second auction, a third auction will be scheduled within two weeks. At the third auction the lender (Capital Credit) can to take possession of the property instead of an appropriate sale. Contacts: LTD MFO Capital Credit Nutsubidze ST. #1. Business Centre GRECO. Tbilisi Georgia www.capitalcredit.ge e mail : info@capitalcredit.ge Tel: +995 (32) 44 40 00 +995 (32) 44 00 00 12