REGION RISK CREDITING PROBLEMS (SUMMARY)

Gia Lomidze

Determination of region risks is one of important elements of commercial banks’ business. Commercial bank uses estimation of region risks in order to outride market in economic indices and to occupy particular positions in the market.

If bank estimation of risk turns out to be more exact, damage of bank becomes less and therefore it controls expected results accordingly. Compared with commercial bank risks, the difficulty in estimating region risks means that the estimation can not be reduced to the analysis of balance-sheets and to some main correlations. Another difficulty is constant neccessity for the estimation of region risks. This leads us to the high cost of estimation.
Region risk for the one and the same region changes in accordance with the term of credit payment, type of loan recepient and purpose of credits. Thus, regions should not be classified as the ones with good or bad risks. Estimation of different risks is important for the crediting selection and risk management. Unforeseen events can strongly change the notion of region risks often within the shortest time. It is not enought to estimate risks for most important regions only once a year. They should permanently be kept under observation and estimated anew as soon as there are any unforeseen events or in case it becomes obvious that earlier proposed risk proposals turned out to be mistaken.
Possibilities for the management of region crediting risks determine investment attraction of a region. Investment attraction of Georgian regions is determined by entrepreneurial environment, especially by its elements such as political stability, fiscal policy, corruption level, transport and communication infrastructure. Of no less importance is also geographical location of regions, natural and human resources of the country and their cost as well as volume of local market and large-scale economic projects in district borders.
One of the handicaps in the crediting of Georgian regions is low volume of internal market stipulated not only by low number of population, but rather by its low purchasing ability.