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Focusing on SME Development: Zurab Masurashvili, Bank of Georgia

Today we talk with Zurab Masurashvili, Head of Micro and SME Banking Department at Bank of Georgia.

Olena Gryniuk: Zurab, how was the year of 2016 for the Bank’s SME Business? What are top five achievements? (products, sales, staff, etc.)

Zurab Masurashvili: The year was very productive. We have had the biggest growth ever of Micro and SME loan portfolio, 50.5%, which includes ProCredit Bank’s loan portfolio acquisition. We had 94.4% growth in number of MSME borrowers, while in new businesses, we grew by 14%.

We totally re-started the micro lending process. Now, the loan officer is able to perform financial analysis, approve loan, register client and product package on-site in a just one interaction with the client. In a few minutes loan amount is on the clients card account. And do all these in just 30 minutes. Existing client can get credit and package without signature on the paper and new client signs only one page.

First, new concept branch is opened. We are changing the way we work with the clients.

Very useful, first in Georgia, Cash Card, has been introduced in 2016. Cash Card allows small businesses to access their current account 24 hours a day via ATMs and POS terminals worldwide.

Bank of Georgia was the pioneer in some new initiatives. We launched, first in the country, start-up program for Women Entrepreneurs. We already have financed tens of new business ideas, delivered training – How to start business. We support women entrepreneurs and deliver one-year free transactions to the new businesses.

Under DCFTA, we launched very attractive loan product and organized several events to increase general awareness of DCFTA.

We started several important projects, which will be launched in 2017. We are proud of our achievements!

OG: By the way, how many SME customers do you have at the moment?

ZM: About 200,000 businesses are registered in Georgia and we have 135,000 MSME customers. Two out of every three new businesses open account in Bank of Georgia.

OG: A quite large number! So you need to meet the expectations of customers from different industries and of different sizes. How do you manage to do it?

ZM: We have the largest client base with different type of customers, starting from Micro, more products oriented, to large SMEs with personal relationship requirements and more complex businesses.

I would say this is the main challenge for us to meet the expectations of clients. In 2017 we will finish transformation of branches to new service model, which allows us to differentiate sales and operations. Now clients can get all banking products from one dedicated person. We introduced different service models to different types of businesses. Large SMEs, which are about 5% of total clients, we cover with Personal Business Bankers and smaller businesses with Business Bankers, using advanced lending technologies. MSMEs are happy with new model and so are we!

OG: As we know, there is an intense competition on the market. You have 33.4% market share (in total assets). What is your Unique Selling Proposition to small businesses which differ you from the competitors?

ZM: We are fast and technological. Bank of Georgia is very strong brand, our staff is very well trained and motivated, we have super effective procedures and fast decision making process. We have a broad range of products, we are partner and advisor to businesses. We have very clear KPIs at all management levels. All these make us different from the competitors.

OG: In your opinion, what size of businesses is easy to manage now in Georgia: corporates, medium, small, micro- or startups?

ZM: It’s very easy to start and run business in Georgia. You can register company and open an account in a minute. Access to financing is not an issue. In general, government’s effort to support businesses has a good impact. Thus, state Programs – Preferential agro lending program, Produce in Georgia, Host in Georgia, Start-up Georgia inspires businesses for further development. If you look at WB Doing Business ranking, you will find out that Georgia is 16th in overall rank. In some indexes, like Getting Credit, Georgia is 7th. Doing business in Georgia is easy for every kind of businesses.

OG: And what type of business (industry) are more in favor now?

ZM: Georgia was several times named as the best tourist destination by different publishers or popular sites. We see how tourism is growing in general. A lot of new hotels, cafes and restaurants are opened in Tbilisi and regions. Georgia is becoming touristic hub in the region. Second is agro business. After signing DCFTA, many new agro businesses are opened and we see how their potential is growing. Every day, new and new companies start exporting Georgian agro Production in Europe. Government does a lot to support these and other industries. This makes us happy.

OG: During each visit to Georgia we see that new buildings are appearing, new constructions, and new businesses. Are local players investing much in it or these are international ones? And what is the role of banks in it?

ZM: Investments are both, local and international.  Few years ago, Georgia was dependent to only foreign investments, but today we see that many locals are investing. Successful businesses diversify their businesses investing in the different sectors. The role of the banks is essential in developing of new businesses. Only Bank of Georgia has invested GEL 1.4 billion in Micro and SME businesses.

OG: Sometimes, we hear Georgia is the small country, and exporting is the only way your local businesses can grow. Is it true?

ZM: True is that, Georgia is the small country and export is the key way for businesses expansion. We also see the trend, how Georgian businesses export their production in Europe, China and other big markets. Georgia has unique chance to grow its exporting potential via DCFTA. I think, that the biggest opportunity in Georgia is to replace import with high quality Georgian production.

OG: How BoG helps local exporters and to those who would like to enter foreign markets?

ZM: What banks can do – is to increase general awareness of SMEs through organizing of trainings, events, seminars on DCFTA, Global GAP standards and other topics. Moreover, we attracted special, long term funding from EBRD with 15% cash back to businesses which makes investment in implementing EU standards and quality.

OG: BoG acquired a large SME portfolio from ProCredit Bank. How will it impact on your strategy in the segment for the 2017 year?

ZM: The transaction added 2,400 micro and small business clients and a net value of GEL 120 million loans. Acquisition of the part of ProCredit Bank’s portfolio is in line with the Bank’s strategic target to grow the MSME loan portfolio within the next years.

OG: How does your SME Business Line structure look like? How many people work there?

ZM: Our structure is very effective. We have various types of customers, as I have already mentioned, our department’s structure repeats client segmentation. Each client segment has dedicated manager, in charge of business development and results. We have young team, which consists of 13 members with an average age 31 years.

OG: Do all of the team members have banking experience, or you are looking to bring some cross-industry experience?

ZM: All we are bankers with MSME banking experience and with entrepreneurial spirit :). If you ask, am I an entrepreneur or not, my answer will be – YES, I am! In my opinion, we are entrepreneurs; we manage very large business within the bank.

OG: Tell us about your distribution strategy. As we see on the market banks are investing in new branches’ models a lot. You have 266 branches. Can you share with us about your plans of redefining branch model?

ZM: Georgia is a very small country with 3.7 million populations. Bank of Georgia has more than two million clients totally (58% of population), the largest number in the country and we deliver the highest service quality to our clients. Branch network is one of the main driver for high quality service. Our branches are highly standardized. Micro and SME bankers are represented in only 45 branches. The greatest part of other branches is small format branches, mostly dedicated to perform transactions or simple product issuing.

OG: So you believe in branches. At the same time, there are many talks about digital-only banking and that the branches will die.

ZM: Besides the branches, we have the largest network of ATMs, self-service machines and POS terminals. 350,000 transactions are performed in self-serving machines daily, and it was only 25,000 three years ago.

In Georgia, as well as all around the world, penetration of the internet and mobile banking is increasing. We are always one step ahead and are offering new digital solutions to our clients. Mass lending to individual customers and micro businesses are now paperless and fully moved to internet banking or self-service terminals. Client signs agreement – using SMS one-time codes. In 2016, we introduced new internet bank for retail customers and in 2017 MSMEs will have the opportunity to taste new generation internet bank as well.

Bank has formed new Digital Products Development Unit, under subordination of CEO, and many innovative digital products will be launched soon.

OG: Now banks tend to become a partner for their small business customers to help them grow and scale up. So if the customers grow, the bank will also grow in volumes and profit in this segment. One of the ways to do so is to implement non-financial services (NFS) for SMEs. What do you think about NFS?

ZM: We are doing a lot to be the best partner for businesses, this is the part of our strategic goals. We help businesses to grow and it’s not only NFS, but the way we work with the customers. We work together with the clients to find the best ways for financing, we help to choose proper products and services, which make business more efficient. We advise businesses how to deal with Government preferential programs, and etc.

OG: Do you have some cases of NFS implementation?

ZM: We support businesses and here is some examples how we do this:

As you know, Georgia signed Association Agreement with the European Union, which came into force from 1st July 2016. We are the only bank yet who managed to receive USD 100 million funding to support SMEs, in which 50% funding is for DCFTA to support Georgian SMEs in entering EU market. Bank of Georgia did the priceless work to increase awareness of SMEs through delivering trainings, success stories, etc.

First time in Georgia, we introduced start-up financing and supports of women entrepreneurs. We are delivering free training sessions “How to start business” to the women entrepreneur borrowers.

Bank of Georgia is the first bank, which promotes SMEs in its new style branches. At the specially defined corners, we present products of our clients, helping them to get more contacts and become popular. Besides, we have special co-working spaces to entrepreneurs.

Recently, we created video catalogue of our most successful business customers and showed to 3 million unique users via social network. These activities are performed to make businesses more popular and inspire others to start or grow their businesses.

And finally, in May, we will launch MSME portal (businesshub.ge), where customers can read interesting articles how to start or run business, get inspired by stories of the most successful businesses. The portal will provide financial and business-related advice to entrepreneurs in order to enhance their finance management skills and ensure the sustainable development of their businesses. The portal will contain information on trainings; provide entrepreneurs with knowledge and skills in accounting, legal documents, business development, sales and marketing.

OG: What are your priorities and challenges this year?

ZM: We stay focused to increase a market share, which is the Bank of Georgia’s strategy for next years. We are restarting some processes to make service more comfortable. We did a lot in 2016 and still continue to implement non-financial services strategy to support businesses. We work to launch new internet banking for SMEs with some very interesting features, which will be totally new experience for SMEs.

OG: Thank you for your time and sincere answers. We wish you all the success!

Meet Zurab at #Caucasus17 SME Banking Club Conference in Tbilisi, 24-25 May. Book your place here https://events.smebanking.club/event/caucasus17/