Georgia needs comprehensive development of financial sector
By Jamila Babayeva
Georgia needs a comprehensive strategy for developing its financial sector, a statement from the International Monetary Fund (IMF) and the World Bank (WB) reads.
IMF and WB statement is focused mainly on the results of the works conducted by a joint mission for assessment of Georgia's financial sector under the Financial Sector Assessment Program (FSAP).
"Considerable steps have been taken to strengthen banking regulation and supervision with regards to meeting international standards," the statement said.
IMF and WB said Georgia's National Bank has adopted a conservative approach, aimed at detecting risks at an early stage and allocating supervisory resources in the most efficient and effective manner.
Despite this, IMF and WB believe that further strengthening of the regulatory framework is warranted.
"Financial sector in Georgia will need to play a central role in promoting investment, employment and economic growth," the statement further noted. "While the banking sector plays an important role in providing finance to the private sector, a more comprehensive financial sector strategy and timely actions are needed to chart the development of a more balanced financial system structure, which is more supportive of investment and longer-term savings."
IMF and WB also said the non-bank financial sector lacks the scale and financial capacity that are essential for its role to bridging the gap in small- and medium-sized enterprises (SME).
IMF and WB mission also welcomed the Georgian authorities interested in developing a comprehensive financial sector and adopting development reforms and action plans. These elements are mainly aimed to expand non-bank financial sector, to encourage competition among bank financing sector for the lower segment of SME lending and to foster the development of the insurance sector and market security.
"The authorities have taken steps to improve the Anti-Money Laundering (AML) law and changed the institutional placements of the Financial Monitoring Service (FMS). It will be important to ensure the operational independence and effectiveness of the FMS, to address risks," the mission said.
IMF and WB joint mission was in Georgia between May 20 and June 3, 2014.