Financial Sector Deepening and Inclusion in Georgia

Project Development Objective (PDO)

This program aims to deepen and diversify the financial sector through the implementation of reforms in the Pensions, Capital Markets, Insurance sectors, and improvement of credit infrastructure (Secured Transactions and Credit Bureau) and consumer protection.


While Georgia has achieved significant progress in a number of fundamental first generation business environment reforms, significant challenges remain in the financial sector to support Georgia’s economic growth and job creation, and thus require robust second generation reforms. The program is focused on addressing the following challenges:

1.  Lack of pension reform raises severe concerns of pension payments sustainability, financial and social protection of the elderly.

2.  Underdevelopment and weak capital position of the insurance sector hampers economic development and undermines financial sector stability.

3.  Capital markets reforms in Georgia is necessitated by the pension reforms and the need to ensure safe investment of pension funds in the local market, with a sound regulation and investor protection framework, better developed state debt market as a prerequisite for private debt market development, investments mobilization and diversification of investment instruments.

4.  Access to finance is continuously defined as one of the major constraints for business growth in Georgia, especially for SMEs.

Activities / Output

The expected activities include the following:

Component 1: Pension reform 

1. Assist the Ministry of Economy and Sustainable Development (MOESD) Pension Reform Unit and the Pension Reform working group with drafting of legislation to support the pension reform strategy 

2. Assist the Pension Regulatory/Supervisory Authority (to be designated in the Pension Law) with drafting of implementing regulations to support the new contributory pension savings pillar 

3. Provide capacity building for the Pension Regulatory/Supervisory Authority (designated in the Pension Law) 

Component 2: Capital markets 

1. Assisted self-assessment against IOSCO principles by National Bank of Georgia (NBG), Gap analysis of the capital market legal and regulatory framework in support of the capital market strategy; MOESD, NBG capacity building. 

2. Advice on enhancing practices and building stronger legal, regulatory and supervisory framework aimed at enhancing consumer protection and market transparency, and creating enabling framework for development of state and corporate debt securities market. 

3. Streamlining the state debt securities market and creating the enabling framework for corporate debt securities market development

Component 3: Insurance

1. Assistance with the development and implementation of legislation and regulations in line with EU Solvency I Directive, including capital adequacy regulations on reserving, insurance companies’ liabilities, reinsurance and reporting.

2. Assistance to Insurance State Supervision Service of Georgia (ISSSG) in building its on-site and off-site supervisory capacity and in market development through preparation of the market development road map and supporting it insurance regulations for new product classes. 

Component 4: Credit Infrastructure and Responsible Financial Inclusion

4. A. Secured Transactions

1. Amendments based on the project-supported gap analysis of the legal and regulatory framework for the secured transactions in order to facilitate financial access for MSMEs at banks and non-bank lenders

2. Enhancement of the Institutional Framework for Registry of Public notices of secured interests in movable assets 

3. Enhancement of the capacity of the registry staff and end users 

4. B. Credit Bureau

1. Credit bureau legislative/regulatory reform to enable compliance with international practices, increase market transparency and protect the interests of consumers, including stakeholder consultations

4. C.  Responsible financial access and Consumer Protection    

1. Advice on non-bank lending regulation and legislation, responsible lending practices and consumer protection (NBG) 

2. Enhance the legal, regulatory and supervisory framework for Consumer Protection to increase financial inclusion and consumer/investor protection 

Expected Outcomes

The expected outcomes of the program are: 

Pension Sector

1. Strong legal/regulatory framework established that allows the introduction of a multi-pillar pension system (e.g., contributory pension savings), and adequate supervision 

2. Supervisory authority has capacity to regulate pension funds and new pension schemes

Capital Markets

1. Adequate legal and regulatory framework that in line with IOSCO Principles 

2. Improved framework for issuance of state debt securities,   developed liquid benchmark yield curve 

3. Mechanism to support market liquidity such as primary dealer established

Insurance Sector

1. Enhanced capital adequacy framework in line with EU Solvency I framework 

2. Improved supervision capacity and adequacy

3. Established road map and developed legal and regulatory framework for new compulsory insurance 

Credit Infrastructure and Responsible Financial Inclusion

1. Strengthened legal framework to incentivize banks to provide movable lending

2. A modernized, real time, on-line Registry operational and supportive to movable lending

3. Enabling legal framework to remove barriers to data usage and access in place

4. Established consumer and data protection framework 

5. Legal/regulatory framework for consumer protection of non-bank consumers in place

6. Household indebtedness survey with recommendations developed