Kurzexposé zur Promotion von Ia Eradze
From the Decade of Beans to Thrones and Roses: The Development of the Georgian Financial System since the Breakup of the Soviet Union
Georgia has gone through drastic socio-economic changes since the break-up of the Soviet Union. Seventy years in the Soviet Union had a significant influence on the further development of Georgia. The country inherited socio-economic and political problems from the USSR: dependency on other republics, lack of cash, budget deficit, industries that were unable to meet the needs without other markets in the USSR, unemployment, inflation, energy shortages and rising prices. Furthermore, government institutions were not able to address these challenges. All the attempts of Shevardnadze’s government to launch reforms and modernize the country turned out to be a failure. The political and economic crisis in Georgia remained more or less the ‘status quo’ until the Rose Revolution (2003). Saakashvili’s government undertook the responsibility of ‘modernizing’ the country through a number of reforms that have been recognized as a ‘neo-liberal’ take-off. The Rose Revolution government put emphasis on economic growth through privatization and foreign direct investments. Development of financial system was seen as one of the key pillars of the Georgian economy. However, despite economic growth, poverty and income inequality levels remained high and the unprecedented emigration levels have not been decreased either.
The reforms implemented by Saakashvili since 2004 transformed the financial sector in the country led to the emergence of a number of banks and microfinance organizations. Since then the role of banks has been significant in the economic processes in Georgia. The possibility of acquiring ‘easy’ credits turned out to be attractive not only for businesses but also for ordinary citizens. The easy access to credits and the lack of experience in the society regarding credits have led to a number of ‘misunderstandings’ between banks and the citizens, high levels of debt and the loss of housings in worst cases. This has led to growing mistrust and critical perception of banks in the society. In 2013 Georgian Banks even founded an ‘independent’ NGO with the main goal of regaining the trust of Georgian population to banks and changing their negative connotations about the financial system. Therefore, the main goal of the research is to study the emergence of the financial system within the transformation process of a socialist economy to a market economy. The thesis will be based on secondary literature. Furthermore, in - depth interviews with experts, government officials, NGO and bank representatives will be conducted in a framework of fieldwork in Georgia.