The Microbank: Georgia's New Category Between Microfinance and Banking
Georgia created a new kind of credit institution and the National Bank has issued the first licence. What the category is for, how it differs from a microfinance organisation and from a bank, what an applicant has to demonstrate, and who should not apply.
Between a microfinance organisation and a commercial bank there used to be nothing. A lender that outgrew microfinance powers had one option, a full banking licence, with the capital, governance and supervisory weight that implies. Georgia has now created a category in the gap - the microbank - and the National Bank has issued the first licence under it. That makes this the rare moment when a regulatory category exists before the practice around it does.
New
Institution type
Created by the Law of Georgia on Microbanks
1st
Licence issued
Announced by the National Bank of Georgia
Between
Microfinance and bank
Wider powers than an MFO, without the full banking burden
What a microbank is
A microbank is a licensed credit institution permitted to carry out a broader range of activities than a microfinance organisation - including activities that were previously reserved to banks, within limits the law sets - while being subject to requirements calibrated below those of a commercial bank. The design intent is a bridge: an institution that has genuinely outgrown microfinance, but whose scale and risk profile do not justify treating it as a systemic bank.
A microbank carries out its activities on the basis of a licence issued by the National Bank of Georgia; the licence authorises the activities the Law permits to a microbank, within the quantitative and prudential limits the Law and the National Bank's normative acts establish, and the institution is supervised by the National Bank on a continuing basis.
Where it sits
| Microfinance organisation | Microbank | Commercial bank | |
|---|---|---|---|
| Authorisation | Registration | Licence | Licence |
| Regulator | National Bank of Georgia | National Bank of Georgia | National Bank of Georgia |
| Permitted activities | Lending and defined related services | Broader - includes activities beyond microfinance, within statutory limits | Full banking activity |
| Prudential burden | Lightest | Intermediate, calibrated by the Law | Full Basel-style supervision |
| Realistic applicant | Lender starting out or at moderate scale | Established lender that has outgrown microfinance | Institution with bank-scale capital and governance |
The category was created because the jump from microfinance to bank was too large. Do not treat it as a small banking licence: the assessment tests whether the applicant is a credible institution at its own tier, and an application built as though the tier were lenient tends to be read as an applicant who did not understand it.
What the file has to show
- 1
Eligibility: that the applicant fits the category - an operating history and scale that make a microbank the right tier, rather than an aspiration to become one.
- 2
Capital: evidence of the statutory minimum, its lawful origin, and the ability to maintain it.
- 3
Owners and administrators: fit-and-proper evidence for significant shareholders and for management, including experience relevant to a credit institution.
- 4
Governance and risk management: board structure, internal audit, credit risk, liquidity and operational risk frameworks proportionate to the tier.
- 5
A business plan with financial projections that the regulator can test, not a pitch.
- 6
AML/CFT programme, information systems, and consumer-protection arrangements that already exist at application rather than being promised.
The microfinance organisation that had outgrown its own permissions
An MFO with a decade of operating history finds itself repeatedly declining business it could serve well - not for credit reasons, but because the activity falls outside what a microfinance organisation may do.
- 1Before the microbank category existed, the only route to those activities was a banking licence, which the organisation's scale did not justify and its owners did not want.
- 2The microbank tier fits the actual situation: an established lender, sound governance, a need for broader powers, no ambition to be a bank.
- 3The application leans on what the organisation already is - its history, its risk record, its existing systems - rather than on projections.
- 4The hard part turns out to be internal: governance built for a microfinance organisation has to be raised to the new tier before the file is credible, and that is months of work before a page is drafted.
The category rewards institutions that have genuinely reached its threshold. The question to answer first is not whether you want the licence, but whether the regulator would recognise you as already operating at that level.
Illustrative. Eligibility is assessed by the National Bank on the applicant's actual position.
The applicant who read 'micro' as 'easy'
A newly formed company with committed capital and no lending history applies for a microbank licence, reasoning that the intermediate tier will be assessed more leniently than a bank.
- 1The assessment tests fit and proper, governance, risk management and systems at the standard appropriate to a credit institution of that tier - not at a discount.
- 2The applicant has capital and a plan; it has no operating record, no tested credit process and a governance structure drawn up for the application.
- 3Every question the regulator asks about how the institution would actually run is answered with an intention.
- 4The application fails on credibility rather than on any single requirement, and a first refusal is a fact the next attempt has to explain.
'Micro' describes the tier, not the scrutiny. An applicant with capital but no institution behind it is usually better served starting as a microfinance organisation and building the record the microbank licence will later require.
Illustrative. Licensing decisions are discretionary and made on the whole file.
Who it suits, and who it does not
- Suits: an established microfinance organisation or lender with a real operating record, sound governance, and a concrete need for activities beyond microfinance.
- Suits: a group consolidating regional lending operations that has outgrown microfinance but has no case for a full bank.
- Does not suit: a new entrant with capital and no history - start as a microfinance organisation and earn the record.
- Does not suit: anyone treating the tier as a cheaper way to call themselves a bank; the regulator reads that intention immediately.
What this article does not decide
Whether your institution is eligible, and whether the tier is right for it, turns on the current text of the Law on Microbanks and the National Bank's acts under it, and on your actual operating position - none of which a general article can assess. Nor does it state the capital figure or the activity limits, on purpose: those are the numbers most likely to be superseded, and the ones a client would most regret relying on.
General information, not legal advice. The Law of Georgia on Microbanks and the National Bank's normative acts set every threshold referred to here, and are subject to change.