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Changes in Legislation regarding Money Lending

Published: July 22, 2013 | 8:42 am
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Is it possible to control a money-lender’s loan rate? The Ministry of Justice has come up with an initiative to control private mortgage lenders. The Ministry will enlist the help of the notaries in this issue. The changes in legislation regarding loans and mortgages will be passed on to the government for approval in August. The Chairman of the Association of the Microfinance Organisations has told TV3 that private mortgage lenders and limited companies have a negative effect on the banks’ and microfinance organisations’ image. According to him, customers frequently mistake the names of the limited companies for microfinance organisations, and get misled. The changes in the legislation will open the market up, and the banks and the microfinance organisation will see an increase in their clientele.

According to a spokesman for the Association of Georgian Banks, it is still unclear how it will be legally possible to fix loan rates for the money-lenders and the banks separately. The Association expects the changes to have a positive effect on the banks’ and the microfinance organisations’ reputation.

The head of the microfinance organisation Rico Express Lasha Nikolaishvili sees certain dangers in the Justice Ministry’s initiative regarding legislative changes. According to him, it is necessary for the Parliament to not only fix the upper loan rate percentage limit, but to fix an effective loan rate limit. Mr. Nikolaishvili considers it to be a mistake for the government to increase the role of the notaries in this matter, since the notaries themselves constitute the largest group of money-lenders.

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