Legislation

Purpose of the present Law shall be legal regulation of activities of Microfinance Organizations operating in Georgia and creation of sound environment for their development.

1. Terms used in the present Law shall have the following meanings:
a) Micro-leasing – leasing, the value of which is determined by the set limit of micro credit;
b) Registration – voluntary registration in a Financial Supervisory Agency of Georgia of a legal entity established in conformity with the Georgian legislation;
c) Financial Supervisory Agency of Georgia (hereinafter the Agency) – a body established under the Organic Law of Georgia on the National Bank of Georgia exercising supervision over the financial sector.
2. Other terms used in the present Law shall have meanings as determined by the legislative acts of Georgia.

1. . Microfinance Organization shall be a legal entity established in a organizational – legal form of limited liability company or joint stock company, which on the basis of its application is registered by the Agency and performs activities provided in the present Law under the Agency supervision.
2. Microfinance Organization shall establish the Supervisory Board to which the regulations set by the Law of Georgia on Entrepreneurs with respect to the Supervisory Board of the joint stock company apply.
3. Only the Microfinance Organization shall be authorized to include the term “Microfinance Organization” or its abbreviation “MISO” in addition to the mark provided for in the Law of Georgia on Entrepreneurs.
4. If the Agency through the examination ascertains that the Microfinance Organization has violated norms set by the Georgian Legislation, it shall warn the Microfinance Organization or make decision on canceling registration of such Microfinance Organization

1.Microfinance Organization shall be authorized to perform only the following activities:
a) Extend micro loans including consumer, collateral, mortgage, unsecured, group and other types of loans (credits) to physical persons and legal entities;
b) Make investments in government and public securities;
c) Implement money remittances;
d) Perform functions of an insurance agent;
e) Render consultation services related with micro lending;
f) Accept loans (credits) from resident and non-resident physical persons and legal entities;
g) Own stake in share capital of legal entity, the total amount of which should not exceed 15% of the share capital of the given Microfinance Organization;
h) Other financial services and operations provided in Georgian legislation, including micro leasing, factoring, foreign exchange and promissory note operations, issuance of bonds, realization, redemption and other related transactions.
2. Microfinance Organization shall be entitled to perform activities provided for in the present Law only after its registration as a Microfinance Organization by the Agency. Procedure and terms of such registration shall be determined by the Agency.
3. Microfinance Organization shall be prohibited to accept deposits from physical persons as well as from legal entities.

1. Micro credit shall be a monetary amount extended by the Microfinance Organization to a borrower or a group of borrowers in conformity with maturity, repayment, price and purpose terms provided in the loan agreement.
2. Maximum total amount of a micro loan extended by the Microfinance Organization to one borrower shall not exceed GEL 50 000 (fifty thousand).

Monetary contribution to the share capital of Microfinance Organization shall not be less than GEL 250 000 (two hundred thousand). Filling of the total share capital set by the charter above such amount, in monetary form or / and in kind, shall be conducted in conformity with the Georgian legislation.

1. Director of Microfinance Organization (member of the Board of Directors) shall not be simultaneously a partner (shareholder), member of the Supervisory Board or / and Board of Directors of any commercial bank, non – bank depository institution – credit union or other Microfinance Organization.
2. Person shall be prohibited to be a Director of the Microfinance Organization if:
a) Such person participated in a transaction, which inflicted significant damages to the commercial bank, non-bank depository institution – credit union or Microfinance Organization, or violated rights of depositors or other creditors of commercial bank or non-bank depository institution – credit union, or caused insolvency or bankruptcy of commercial bank, non-bank depository institution – credit union or other Microfinance Organization;
b) He \ she was an administrator of commercial bank, non-bank depository institution – credit union or Microfinance Organization and as a result of his / her activities such commercial bank, non-bank depository institution – credit union or Microfinance Organization became insolvent;
c) He / she has not met financial liability against any commercial bank, credit union or other Microfinance Organization;
d) He / she has been declared bankrupt or has been convicted for economic crime envisaged in the Criminal Code of Georgia and conviction has not been discharged or cancelled according to the procedure set by the Georgian legislation.
3. Director of Microfinance Organization shall be prohibited to take part in making decision on the issue which represents his / her personal interest.

1.Microfinance Organization shall:
a) Perform transparent financial and tax reporting and observe the principle of publicity;
b) Develop and implement internal control system and procedures;
c) Invite external auditor on an annual basis to perform external audit in conformity with the Georgian legislation;
d) Perform accounting and financial reporting in accordance with the International Accounting Standards (IAS) and Georgian legislation;
e) Submit financial statements to the Agency. Form of financial statements and submission timeframe shall be determined by the normative act of the Agency.
f) Be responsible for reliability of financial statements as well as of information and completeness of statements;
g) Publish financial statements as well as the external audit report at the end of the fiscal year.
2. If the Microfinance Organization does not submit financial statements considered under this Article repeatedly, in the form and with periodicity set by the Agency, the Agency shall be entitled to cancel registration of such Microfinance Organization.
3. Microfinance Organization shall retain the following documents for the period of six years:
a) Accounting books, inventory description, balance sheet, as well as instructions for understanding these documents and other organizational documents;
b) Accounting documents proving the accounting book records.

1. Microfinance Organization and the borrower shall conclude a loan agreement in writing in conformance with the present Law and Civil Code of Georgia.
2. Loan envisaged under this Article can be a loan extended to a group or individual, secured or unsecured. Terms and procedures for extending micro loans shall be set by the Microfinance Organization.
3. Interest rate, commissions and service fees shall be set by the Microfinance Organization.
4. Microfinance Organization may exercise control over purposefulness of the loan use by the borrower, while the borrower shall provide the Microfinance Organization with the opportunity to exercise such control. If the borrower does not meet the liability of purposeful use of the loan, the Microfinance Organization shall be entitled to refuse to meet the agreement requirements with respect to non-disbursed part of the loan and request repayment of the extended loan prior to maturity.

1. Microfinance Organization shall observe confidentiality of information.
2. Information on the borrower filed in the Microfinance Organization may be given only to the borrower, its representatives, the Agency as well as in cases provided under the Law – to the Financial Monitoring Service of Georgia. Such information shall be furnished to other persons only on the basis of respective court decision or preliminary written agreement with the borrower.
3. Judicial and investigative authorities as well as tax bodies shall be prohibited to forward information to other authorities, including mass media, or use such information publicly before decision is reached by the court.

1. Prior effective date of the present Law, in the event of founding limited liability company or joint stock company by Microfinance Organizations registered under the status of non-entrepreneurial legal entities, the authorized bodies defined under the charters of such Microfinance Organizations shall be entitled to set amount of the share capital for limited liability companies and joint stock companies in conformity with the Article 6 of the present Law (define par value of shares for joint stock companies).
2. When making in kind contribution to the share capital before the effective date of the present Law, Microfinance Organizations registered under the status of non-entrepreneurial legal entities shall have audit evaluation of the respective property done prior to November 30, 2007.
3. Authorities determined in the charters of Microfinance Organizations, registered under the status of non-entrepreneurial legal entities, shall be granted the right to dispose of shares in companies founded by the Microfinance Organizations and set disposal procedure thereof.
4. Requirements provided in Article 33 (2) of the Civil Code of Georgia shall not apply to Microfinance Organizations registered under the status of non-entrepreneurial legal entities prior to December 31, 2007.

 This Law shall become effective upon promulgation.