A leading position driven by innovation

Mature microfinance markets

Georgia – a mountainous country in the Caucasus bordering on the Black Sea, Russia, Turkey, Armenia and Azerbaijan – has a widely developed and highly professional microfinance sector. The market leader Credo relies on innovation to operate successfully in this fiercely competitive market.

The story of microfinance in Georgia began in 1997: Following the collapse of the Soviet Union, this republic in the Caucasus went into serious economic decline. Thanks to the financial support provided by Western aid organisations, small institutions started operating to give internally displaced people, micro-entrepreneurs and the rural population access to financing in the form of microloans to rebuild the economy.

Microfinance is today one of the fastest growing sectors of Georgia’s economy. According to the National Bank of Georgia, assets under management increased by 2,600% between 2006 and 2013. With a solid regulatory framework, reliable credit information providers and highly professional companies, it is now possible for almost everyone in Georgia to obtain access to credit – a great achievement considering that more than one-third of the population lives on less than USD 2 per day.

Fiercely competitive market
These fertile market conditions in a country with only 4.5 million inhabitants have led to strong competition between Georgia’s 21 banks and 15 mature microfinance institutions – including Credo, which serves 180,000 or 50% of all Georgian microfinance borrowers. Credo has 1,500 employees, 52 branches and a unique distribution network in the villages – just one of the innovative approaches that have enabled the company to emerge as market leader.

Credo CEO Zaza Pirtskhelava explains how his organisation has been able to establish such a dense presence across rural parts of Georgia. “After the conflict with Russia in 2008, we decided to focus on rural areas and on serving the needs of farmers,” states Zaza. “We never had much growth capital at our disposal so we had to be inventive.”

One of Credo’s innovations was the idea of appointing ‘village counsels’. Zaza explains: “We put up signs in the villages, inviting people to attend an event at which we explained what Credo can offer clients. We then asked the villagers to appoint one individual from their midst as a representative to liaise with us.” This person – often the mayor or tax administrator – was then hired to work for Credo. “These individuals have influence in a very conservative population that is wary about debt and has yet to learn that borrowing can lead to greater prosperity, says Zaza.


Zaza Pirtskherala"We never had much growth capital at out disposal, so we had to be inventive."

Credo CEO Zaza Pirtskherala


A proximity to clients
A total of 2,500 village counsels have so far been appointed. They each know the inhabitants of their village and have an insight into how they live and manage their money. Based on this knowledge, they make sure that no unreasonable loan applications are submitted – while, at the same time, encouraging those entrepreneurs who can afford to expand their businesses to make use of this service. At a local visit in Tsinandali, Otari Berdzenishvili – an engineer, winegrower, cattle breeder and large client with a loan of USD 6,000 over 11 months – explains: “I work with Credo because I have absolute confidence that it considers what is in my best interests. The loans give me the opportunity to buy additional cattle and to put money aside for my children.”

Nikoloz Kutateladze, Head of Marketing & Sales, explains how Credo systematically uses modern technology to make it as easy as possible for the rural population to work with Credo. “Clients only need to make a single visit to one of our 52 branches in order to register,” states Nikoloz. “All other transactions can be carried out directly in their village, whether they want to take out money, obtain a type of credit card or make repayments. Clients can use one of the ATMs available in every village or they can carry out the transaction via the village counsel. Follow-on loans can also be granted in this way – which is especially important if you consider that it can often take a good three hours and cost USD 6-8 for a client to travel to and from a branch.”

Broadening its product range in conjunction with partners
The continued expansion of Credo’s product range is another example of its innovative approach. Credo is not authorised to offer savings products in view of its status as a microfinance institution. The company has therefore repeatedly merged with other providers to enable them to jointly supply new products to the rural population.

Four years ago, Credo began selling insurance products via its distribution network for a partner company in return for a fee. These products include loan life insurance policies to protect the borrower’s dependants against demands for repayment in the event of his or her death, as well as crop insurance.

Further partnerships have been concluded since 2014. “We have joined forces with a distributor of household appliances on the one hand, and with a seller of fertilisers and agricultural equipment on the other,” explains Zaza. “We travel together to different villages. Our village counsel informs the local inhabitants of our visit in advance. We then park the truck there and set up the tents containing our mobile Credo offices. People visit the mobile shop and can then go next door to our office in order to apply for a loan to purchase the products. Thanks to excellent online credit information services, the process only takes half an hour. The clients take the appliances or bags of fertiliser with them, and the products are paid for by Credo – benefiting everyone.” This sales model is a resounding success. “Our partner that sells household appliances has generated a turnover of GEL 10 million (USD 4.3 million) with 16,000 clients in the space of just three months. It was the first time that 11,000 of these clients had taken out a loan with Credo.”

Institutionalised innovation
These are just a few examples of how Credo is driving forward the expansion of its business, which grew by 36% in 2014 alone. The company uses clear processes to foster innovation – thus ensuring that it won’t run out of ideas in the future. “All our branches collect suggestions from employees on an ongoing basis and bring them to a quarterly innovation meeting. We look at the topics and carry out pilot tests to evaluate promising proposals. Many of them turn out to be impractical but an astonishing number of suggestions prove effective when put to the test – and are then systematically incorporated into our product range or sales concept. The most successful employees are rewarded. One example is Otari Berdzenishvili’s loan advisor Davit Kirvalidze, aged 27, who once worked as a tax administrator in his village and later became a Credo village counsel. He explains: “Credo took me on a week-long trip to Paris. It is something I will never forget.”

Shepherds in the rural Kakheti

Shepherds in the rural Kakheti region of Georgia.

Credo customer

Credo customer Otari Berdezenshvili at work in his vineyard.

ine-growing regions

Kakheti province is one of the oldest wine-growing regions in the world.

Georgia is responsAbility’s fifth-largest investment market. Through various investment vehicles, the asset manager holds more than USD 100 million of fixed-income investments in three leading Georgian microfinance institutions, two banks and one leasing company. These investees jointly represent 70% of the market.

Credo is the leading microfinance company in Georgia in terms of growth, returns and portfolio quality. Since 2008, responsAbility funds have provided fixed-rate loans to Credo and are its most important financing partner. In addition, one responsAbility investment vehicle has held a 20% stake in Credo since October 2014 and responsAbility has a seat on its Board of Directors.