The governor of the National Bank of Georgia, Giorgi Kadagidze, met the managers of banks actively working in the retail lending segment. Meeting was dedicated to the detailed discussion of all problematic issues that exist in the consumer sector. The governor also warned the customers of credit institutions against so called credit traps. Governor of the NBG appealed customers for maximum caution when using  consumer credits, credit cards and similar products.

"Analysis of the latest trends shows us, that retail lending in the consumer sector is growing at significant rates. If we add to this microfinance organizations, pawnshops, instant credits and other representatives of the informal sector, we can see that debt service burden for certain portion of the society is quite high and in case of further growth it can create significant threats.  At the same time in low-income country - and Georgia still is a low income country by European standards - there is no surprise that some portion of the society may have financial problems in terms of debt service and visit the relevant credit institutions to restructure their loans.

Problem and unethical politics is when the credit institution offers new loan, to cover the old one, the old problem. Usually, this is only temporary solution and not a fundamental one; hence we will have adequate reaction to any such case. However at the same time, I would like to address consumers as well and once again, I want to ask, warn, appeal to customers not only to read the contracts attentively before signing, but be extremely careful when using products like credit cards, overdrafts, consumer loans for luxury goods, etc. All these are the most expensive products both in Georgia and in the rest of the world.

Therefore, when consuming such products, we have to be very careful and have to plan our finances well. For covering a problematic loan we may take a new one; it often happens that we take one card, then a second one, a consumer loan, yet another credit product. Then we find out, that debt service burden on such wide range of products is quite high - which is a problem; then we get a large loan, to cover all the previous ones. To take up this large loan we have to put up our real estate as collateral. The process I've just described is called classical "credit trap".

To avoid all this, it is necessary, on one side for the consumer to fully understand risks, connected to the expensive credit products; and on another side for banks evaluate such customers adequately and with maximum responsibility. Accordingly, we are working in two directions: First on the banks' side to ensure maximum conformity of credit policy to the clients' demands. Second, increase awareness and ensure maximum transparency of the aforementioned products. It is very important that consumer realizes all the risks arising from the use of such products"- said at the end of the meeting governor of NBG, Giorgi Kadagidze.