A small Georgian agribusiness gets financing for its organic products from TBC Bank, backed by an EU financial guarantee.

In the plains of the Aspindza region in southern Georgia, agro-entrepreneurs Levan Shanava and Tornike Mzhavanadze, prepare for the harvest.

Five years ago, Shanava, a former doctor, and Mzhavanadze, a lawyer, founded Green Republic, an agribusiness with plantations in Toki, a remote and ancient village 1 700 metres above sea level that’s inhabited by just ten families. The region is plagued by unemployment, but the two of them are determined to bring life back to Toki—by cultivating strawberries.   

 “With the right technology, in this subalpine zone, our strawberries are distinguished by a special taste,” says Shanava. “They also last well during transport.”

How the EU boosts the Georgian economy

To launch this endeavour, the company took a loan from TBC Bank, one of Georgia’s leading banks. Small and medium-sized enterprises (SMEs) are often considered risky by banks, because they may lack a track record or collateral. But a guarantee instrument operated by the European Investment Fund acts as collateral for the local bank, offsetting the risk.

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© Green Republic

Sharing the risk means transferring the benefit to the customer through lower interest rates,” says Maia Kacharava, financial manager at TBC Bank. “It improves lending processes and allows us to increase our portfolio with interesting projects that might otherwise be refused.”

The guarantee is one of three segments of the Deep and Comprehensive Free Trade Area (DCFTA) Initiative East that aims to encourage economic growth in partner countries like Georgia.

“The DCFTA guarantee is strong, covering 70% of losses,” says Martins Jansons, head of the Competence Centre for Regional Development at the European Investment Fund. “It’s a great achievement for the Georgian market and for us, as we feel it’s important to support the countries on the EU’s borders.”

The European Investment Fund manages the InnovFin guarantee facility, too, with TBC Bank among the beneficiary banks. This guarantee provides flexible financing conditions for SMEs and mid-caps specialising in research and innovation.

“This guarantee offers capital relief to the banks, encouraging them to lend to riskier companies that want to innovate and digitalise” says Zvonimir Ratkovski, structured finance analyst at the European Investment Fund. “The COVID-19 pandemic has further restricted access to finance, so the eligibility criteria have been relaxed.”

More EU support for Georgia

TBC Bank has also signed loans with the European Investment Bank for €81 million since 2018. That includes the latest top-up—€25 million signed in December 2020—under the EU’s Team Europe and EU4Business initiatives, as part of the emergency SME response to COVID-19.

Funding for these loans and guarantees comes from the European Commission under the EU External Lending Mandate, a framework agreement covering most of the EIB Group’s operations in Georgia.

“The DCFTA and InnovFin guarantee instruments can be transformative for the Georgian economy,” says Andreas Berkhoff, a senior loan officer at the European Investment Bank and client manager for TBC Bank. “They are the result of a joint effort. As the EU bank, our Group works very closely with the Delegation of the European Union to Georgia and the European Commission”.

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© Green Republic

The rebirth of a Georgian village

Green Republic is the only large-scale strawberry producer in the high mountainous area. With four permanent staff, it takes on more than 30 seasonal employees and aims to create additional jobs in the future. The business has sparked interest from the agro-tourism sector and may also expand further in 2021 to export its products.

Apart from strawberries, Green Republic sells seasonal wild asparagus that holds a bio-certificate. It produces vegetables by traditional and organic farming. Its organic products are inspected according to European standards by a Georgian accreditation agency.

“We are proud that people are hoping for a better future through our example,” says Shanava, “proud to play a modest role in returning the unique Georgian villages their old glory.”