Preferential Business Sectors for Commercial Banks

Preferential Business Sectors for Commercial Banks December 9, 2017Leave a comment

Bank sector is of crucial importance for economic and financial stability of the us. Commercial banks represent functional mediators between those saving money and borrowers.

Owners of excessive money resources offer their resources to financial mediators, even though the latter chain offers these money resources to potential investors. Various physical and legal entities need money resources. In the instance of business loans, we are able to claim that every loan creates more benefits. Therefore, depositors receive yields, banks receive commission fees, investors get money to get more savings by investing money removed from banks. Should a financial mediator is ejected from that scheme, both money-owners and borrowers will bear losses.

Naturally, banking sector creates wealth for that society in Georgia, yet it\’s interesting which sectors and why commercial banks credit more. As we analyze loans from commercial banks since 2003, we will see that commercial banks have issued 35 billion GEL loans in national currency and 48 billion GEL in foreign money.

Ratio of GEL-denominated loans because of sectors is as follows: commerce C 35%, financial mediation C 26%, industry C 17%, housing sector C 8%. In respect of forex denominated loans, the situation is the examples below: commerce C 46%, industry C 22%, housing sector C 8%. Ratio from the latter three sectors makes up about 76% and that is an incredible ratio. We percieve that in Georgia on the Modern, commercial banks credit commerce sector, mostly, along with industry and housing sectors. In respect of financial mediation, this sector occupies a smallish ratio in fx.

This situation hasn\’t changed in practice since 2003. Commercial banks, like all other businesses, are oriented on profits C they target connecting the above-mentioned two kinds of society to take delivery of maximal profits. Consequently, its entirely logical to emerge from risks and issue loans to less-risky businesses. The mentioned 76% of three main sectors signify that commercial banks cannot take perils associated with crediting hardly foreseeable businesses.

That\’s why access to cash is bound for? a variety of fields. Namely, undeveloped business sector has less access to finances at the same time frame, those businesses by using a less usage of financial resources, are not coded in due manner. As a result, we get a certain closed chain, however, problem has deeper routes, in truth.? The reality is that a considerable component of business sector has limited having access to cash.

Leave a Reply

Your email address will not be published. Required fields are marked *