The development of loan and banking relationship in Georgia has a multi-century history (“Ortaks” – in the 13th century), but the development of independent commercial banks structure takes roots in the 19th century by establishing the estate bank in Tbilisi.
For establishing the central bank in independent Democratic Republic of Georgia (1918-1921) were under consideration the German, French, Russian and other models which ended in 1919 by creating “The Georgian State Bank”, though it was not liberated from the government pressure, was not formed two-tier bank system; the bank was not able to gain the right to pursue a monetary policy exclusively and so on. However, these principles were reflected in the independent bank system of post- Soviet Georgia which was formed in the middle period of the 90-es in the 20th century. That time there was adopted the law on the activities of commercial banks and the State National Bank that laid the foundation for completing the formation of two-tier independent bank system in Georgia.
The modern bank system of post-Soviet Georgia developed significantly; the commercial banks practically function by participation of foreign capital, though 3-4 banks dominate in credit market that sustains cartel deals – maintenance of high interest rates and development of other negative phenomena over the years.
Overall, the growth rates of the Georgian bank system in the post-Soviet period greatly exceed the growth rates of the country’s economy, but for the development of economy’s real sector it didn’t turn out to be the stimulating effects due to extremely high interest rates. The share of agriculture and industry in the structure of commercial credits is insignificant, and the share of trade in it is high. Moreover, non-bank microfinance institutions didn’t fulfill the effective role in the reduction of bank credits interest rates.