Attitudes towards the new banking regulations

The share of the public with loans from formal financial institutions doubled from 2011 to 2016 according to World Bank Group’s analysis based on Integrated Household Survey in Georgia. The July 2019 CRRC/NDI survey data suggests that about half of the population has a loan. To address perceived over-indebtedness, on 1 January, 2019 the National Bank of Georgia introduced new regulations, restricting lending without more extensive analysis of a consumer’s solvency. The analysis includes looking at an individual’s income, expenses and total obligations, and determination of debtors’ capacity to service their loans without significant financial difficulties.

But, what does the public think about the new regulations?

Almost half of the population approves of the new regulations, a third disapproves, and the remainder are uncertain or did not respond to the question. Considering that the Georgian Dream introduced the regulation it is unsurprising that Georgian Dream supporters have a more favorable view of the legislation than people who identify with the United National Movement (UNM). People who identify with liberal parties or support no party at all are less likely to approve of the new regulations compared to GD supporters. Apart from party support there are no significant differences between different social and demographic groups. Nor is there any significant difference in approval between people who have and do not have loans.





Although every second person in Georgia has a loan, the data suggests that having a loan is not associated with approval of the new regulations. However, support for different parties is. Those who identify with UNM, liberal parties or no party are less likely to approve the regulations compared to ruling party’s supporters.

Note: This blog post is based on a binary logistic regression analysis. The analysis includes having a loan or not, age group, settlement type, education level, party support, and employment status. The party support variable is coded as follows. The category “No party” consists of individuals that responded none or don’t know when asked which party was closest to them. The liberal group consists of New Rights, Bakradze-Ugulava - European Georgia, the Republican Party, the Free Democrats, the New Political Center – Girchi, the Movement State for the People, Political Platform - New Georgia, European Democrats, and Development Movement. The other grouping consists of the Alliance of Patriots of Georgia, Free Georgia, Democratic Movement – United Georgia, Left Alliance, Industry will save Georgia/Industrialists, the Georgian Conservative Party, the Georgian Labor Party, the Unity of Georgian Traditionalists, Tamaz Mechiauri for United Georgia, and Georgian Troupe. The data this blog post is based on is available here. The replication code for the above analysis is available here.

Debt in Georgia: People living in worse-off households report having personal debt more often

According to CRRC’s 2017 Caucasus Barometer (CB) survey, 46% of the population of Georgia report having personal debt. Although having debt is not necessarily a bad thing, since it can enable investment to help improve a person’s economic conditions, a close look at the CB 2017 data suggests that many people in Georgia take on debt to cover basic expenses.

In addition to the question about personal debt, CB 2017 asked whether households borrowed money to buy food and to pay for utilities in the past six months. Those who reported their household borrowed money to buy food reported having personal debt more often. The same is true of people who reported their household borrowed money to pay for utilities in the past six months. Importantly, the comparison of variables measuring personal-level and household-level information has methodological limitations and the results should thus be treated with caution.

Note: Answer options to the questions “In the past 6 months, how often has your household borrowed money to buy food / to pay for utilities?” were recoded for this chart. Options “Each week”, “Each month”, and “Every other month” were combined into the category “At least every other month”. For all questions, answer options “Don’t know” and “Refuse to answer” (less than 3% if combined) are not shown on the charts in this blog post. 

Another CB question asked respondents to place their household on an imaginary 10-step ladder reflecting the economic standing of all households in the country. Similar to the above, those who indicated lower rungs reported having personal debt more often. Interestingly, approximately a third of those reporting better economic conditions of their households also reported having personal debt.



Note: A 10-point scale was used for the question, “Let’s imagine there is a 10-step ladder reflecting the economic standing of all households in Georgia today. The first rung of this ladder corresponds to the lowest economic position in society, while the 10th rung corresponds to the highest position. On which rung of this ladder do you think your household currently stands?” For this chart, the original scale was recoded into a 3-point scale, with codes ‘1’, ‘2’, ‘3’, and ‘4’ combined into the category “Low”; codes ‘5’ and ‘6’ combined into the category ”Middle”; and codes ‘7’, ‘ 8’, ‘9’, and ‘10’ combined into the category “High”. 

People living in worse-off households report having personal debt more often than those living in better-off households. However, people living in better-off households are not debt-free either.

To have a closer look at CRRC’s Caucasus Barometer data, visit our Online Data Analysis portal.

Debts and Loans in Georgia (Part 2)

The first part of this blog post showed that people who report being in a worse economic situation are more likely to have debts in Georgia. In the second part of this blog post, a new variable is added to the analysis, “Does anyone owe you any money?”

While 46% of the population of Georgia report having debt, only 20% report that someone owes them money. In the latter, group, there are no differences by gender and settlement type, but there are differences by age. People between 36 and 55 years of age are more likely to say that someone owes them money. As seen in the first part of this blog post, people in this age group are also most likely to report they have personal debts.

The cross tabulation of the questions about having debt and being owed money shows that people who are owed money are slightly more likely to have debts.

A new variable, “Debts and Loans,” was created to group people into four categories based on the two CB questions discussed above.

Forty four percent of the population of Georgia are part of the largest group who report neither having debts nor being owed any money. These people are neither better off nor worse off compared to the population on average. The second largest group has debts but no one owes them money. They appear to be in the worst economic situation, with the greatest share of people saying they do not have enough money for food and for clothes in comparison to other groups. The two smallest groups are people who say someone owes them money. The two groups who have no debts appear to be in a relatively good economic situation, with the largest shares of people saying they can afford expensive durables.

Based on the findings presented in both parts of this blog post, debts are approximately twice as common in Georgia as being owed money. Yet, the largest share of the population of the country are those who report neither having debts, nor being owed money.

To look at these issues in more detail, explore the Caucasus Barometer data at CRRC’s Online Data Analysis platform.

Debts and Loans in Georgia (Part 1)

In Georgia, where, according to the World Bank, a third of the population live on under USD 2.5 per day, poverty and unemployment are consistently considered the most important issues facing the country. For those who are struggling financially, borrowing is a widespread coping mechanism. While access to credit can have benefits, debt can also have psychological costs, such as increased stress and anxiety. CRRC’s 2015 Caucasus Barometer (CB) data show interesting patterns about having personal debts in Georgia. The first part of this blog post focuses on the characteristics of those who report having personal debts in Georgia, while the second part looks at the money lending patterns, as well as reported well-being of people who are owed money or who borrow it.

In response to the question, “Do you currently have any personal debts?” which asks about all types of debt a person may have, 46% of the population report having debts and 53% say they do not have any. There are no large differences by settlement type. People between 36 and 55 years of age report having debts more frequently than people in other age groups. Men report they have debts slightly more often than women.

Note: The charts in this blog post do not include answer options “Don’t know” and “Refuse to answer,” which constituted 1% of responses.

People reporting a more difficult economic situation in their household are more likely to say they have debts. While 55% of people who state they do not have enough money for food report having debts, 28% of people who have enough money for durables report the same.

Note: Answer options “We can afford to buy some expensive durables like a refrigerator or washing machine” and “We can afford to buy anything we need” were combined into the category “Can afford to buy expensive durables” on the chart above.

In the second part of this blog post, which will be published on Monday, patterns of both borrowing and lending money will be discussed.

To have a closer look at the Caucasus Barometer data, visit CRRC’s Online Data Analysis platform.