The last few years have been turbulent for Georgia’s national currency, the Lari (GEL), the value of which started to decline in November 2014. While in October 2014 one US dollar traded for GEL 1.75, since February 2015 to date, the exchange rate has fluctuated between GEL 2 and 2.5 per dollar. Needless to say, the depreciation of the Lari has been widely covered by the media, and although it had numerous causes, a number of organizations and people were blamed for the devaluation. With this background in mind, this blog post looks at how reported trust in banks has changed in recent years in Georgia, using CRRC’s Caucasus Barometer (CB) survey data.
In 2015, for the first time since CB started asking the population about their trust in banks, more people in Georgia reported distrusting than trusting them. The decline in trust, however, started well before the GEL began to depreciate. While 27% reported trusting banks in October 2015, 53% did in October 2008.
Note: The original five-point scale was recoded into a three-point scale for this chart. Answer options “Fully trust” and “Trust” were combined into the category ‘Trust,’, while “Fully distrust” and “Distrust” were combined into ‘Distrust.’ “Neither trust nor distrust” was not recoded. The Caucasus Barometer survey was not conducted in 2014.
As is generally the case with trust in social and political institutions in Georgia, the population of rural settlements report less distrust in banks than residents of urban settlements. Nonetheless, since 2008, distrust in the banks in rural settlements has nearly tripled, from 11% in 2008 to 30% in 2015. In the capital, distrust has almost doubled during the same period.
Although there has been a decline in trust in the banks in recent years, this decline started before the devaluation of the Lari began in 2014. While the devaluation likely contributed to the decline in trust, the fact that trust began declining earlier shows that there is more to the story than the devaluation.
Given that the banking system, and trust in it, is crucial to the effective functioning of a country’s economy, the government of Georgia and banks themselves should consider efforts aimed at building trust in the banking sector.
What factors are at play in declining trust in the banks in Georgia? Join the conversation on the CRRC-Georgia Facebook page here, and to explore more data on Georgia and the South Caucasus, visit our online data analysis tool (ODA).