Cheap credit programme shrinking

There have been more than 300 applications for cheap credit under the highly advertised President Saakashvili programme. But it looks as if they will all be in vain, as the Government has changed its mind about this project.

The Government has dismissed from the project Basis Bank, VTB Bank and Peoples Bank and begun to administer the cheap credit funds itself. Of the GEL 20 million allotted to provide these credits GEL 13.2 million has already been redirected into two state companies: Rtveli 2008 (7.5 million) and Akura (5.7 million). Newspaper Economic Palitra suggests that this will be spent on processing this year’s wine vintage. Only slightly more than GEL 4 million is left for the cheap credit programme and it has been decided that this amount too will be distributed by the Ministry of Economy and Agriculture directly without the assistance of the banks.

The Government says that the high interest rate, asked by the banks has prompted it to take these steps. The banks disbursed the cheap loans at a 12% interest rate after getting the money from the Government at 7-8%. However it should be borne in mind that banks take risks and have to receive a profit.

The population does not care about the mechanism for administering money. It cares about the results. Cheap loans = more jobs = more cheap products.