Listen to our third podcast and read the interview with Nika Kurdiani, Deputy CEO at TBC Bank in Georgia.
TBC Bank is a leading bank in Georgia with a total share of 59% SME customers and biggest SME loan portfolio in the country. And was the first to implement non-financial services for SME customers in Georgia.
Olena Gryniuk: How was the year of 2016 for SME Business line in TBC bank? What are your results?
Nika Kurdiani: The year was very good. We had quite a big growth. If we take in general lending portfolio we grew, including Bank Republic, which is our recent acquisition, we grew appr. 40%. This is for SME segment. In terms of customers we had also quite a big growth, we have appr. 90000 customers, which is also a lot. This makes us happy.
What is the general dynamics of new businesses opening in Georgia? Is it easy to start a business in Georgia? I was looking through Doing Business Ranking: Georgia is in 16 place for Ease of Doing business and 8th place for starting a business – which is just wow! How is in reality?
Yes, I would say it’s quite easy. If we take 2016, we had 22000 more businesses opened in the country, which is the number of 202000 in Georgia whereas last year it was 180 000. Quite a big growth. Of course, in absolute figures country by country are different, but in terms of percentage we have quite a big growth. And also, all the rating of Doing business and Ease of Business this is one of the top priorities in the country, and we see it everywhere, wherever we go on the meetings with governmental officials or different state agencies, which are promoting business in Georgia – these are things they try to focus on and make it easier every time. So, I would say, yes, it’s really easy to do business or open a business in Georgia, and everything around is focused on making it even better and easier.
So How are small business companies doing in Georgia now – as you have the biggest part of them in your portfolio – are they growing, are they exporting or they are in decline or flat over the last year?
If we take a country, we had GDP of Georgia grew last year and also for this year it’s forecasted to grow more than 3%. The point is that this growth wouldn’t be if the economy and real sector wouldn’t be performing more or less OK. We know the region, we know the difficulties in the region, so despite these factors we still manage to have a good performance. Also, if you take new business opening, they wouldn’t have new businesses opened unless the economy would not be potential for doing more business. Or if you take lending portfolio growth – also this is direct representative – if there is no need for loans people would not be taking more loans, if they don’t have any projects. So, having the growth of 37 % in the biggest bank in the country in business portfolio growth – this is quite massive. All these proxy indicators to some extend give us a message that country more or less is doing OK.
Is there a trend in Georgia, are you noticing that millennials are going into entrepreneurship now more than the older generation within these newly opened businesses?
There are many different types of research and different observations now on Millennials and let’s say on new generation and definitely all the researchers say, yes, these people are more prompt to being independent, having their own businesses or being freelancers and this topic is becoming more and more active in Georgia also, because we have growing number of startups, we have more and more competitions, challenges, hackathons and all these kinds of formats happening in the country. And all this is around doing new business and starting up companies. So I would say, yes, the younger generation is very active in starting up new businesses. We also launched a new program called Startuper, where we have most of the people younger, Millennials generation. Yes, in Georgia this trend is very noticeable.
Yes, and coming back to Startuper program. What is the scale of the Program – how many startups you gonna support with nonfinancial and financial services within the Program?
Yes, firstly, we should differentiate financial and nonfinancial. In terms of financial, we have different banking products. They have more than 100 involved in it, because we are opening current accounts with the preferential rate, they are opening business cards. We also disbursed more than ten loans in these couple of weeks’ period, which is quite good. In terms of non-financial – we have more than 100 people attending our trainings. If you go to the website of Startuper program (www.startuperi.ge), you will find 100 startups have been posting their profiles into the catalog. So as for a start – which is three weeks for now – the Program has been quite successful, and it attracts a lot of attention. And this is very good. The bigger the story, the more startups we gonna have in the country, which is also the purpose of the Program.
Coming back to the loans for startups, which you have within the Program – many banks consider such a product is too risky to implement. So to get a loan a startup should have sales during three months. Min amount is 20 000 Georgian lari, so around 7500 EUR. Not bad!
This is good! There are a couple of things one should consider when talking about startups. Banks which are operating in Retail Banking, would it be retail for private individuals or small businesses, we should understand that startup is being started and operated by a person who is at the same time a private individual. And we as banks lend to these private individuals from consumer 0financong. So more or less these people, in any case, would get a loan if they have a salary somewhere, they would back their salary for getting the loan and then investing this money to whatever their consumer financial needs are. And this can be easily a startup. So, what I’m trying to say that in any case we have these customers in our portfolio. In terms of approval rates when financing startups, we won’t have dramatically high approval rate. On average, we want to keep around 35%. and this is more or less where we are standing now. So, if from 100 application 35 are being financed is already very good. I’d say this takes a bit courage; this is not a taboo to go to startups. We should take it with a bit of clarity that we have already these customers and we serve them. Overall I don’t think the banks shouldn’t be playing in that segment. I think this is, in any case, the same thing as investing in private individual customers when they have for example products like child deposits, or we are going with our marketing activities to children’s or youth segment with different kind of programs. So, it’s all the same calculation. Investing today in a customer over the period you will see more business so that you would benefit and the customer will be more loyal.
So, the Bank has risk appetite for such loans.
I wouldn’t say that this is a topic of risk appetite, this is calling a loan with a right name. So, we are more or less, in any case, would have had these customers in our portfolio, but for other product types like credit cards or consumer financing. And generally, we are taking this with a very good risk assessment, we know what we are doing because now we look at these customers, we assess their business plans, we do interviews with them, we are trying to understand what the vision is, how their sales are. Up to 40 000 lari which is 7000 dollars we are not requesting collateral, but up to 100 000 lari, which is appr. 45 000 dollars we would ask for collateral. It’s well-covered loan. The main thing is there is how much we would take the risk of the business, the vision of the business.
Is an entrepreneurship a skill that you are born with or it can be taught as you see a lot of entrepreneurs inside your bank.
I think entrepreneurship is not a skill, it’s a lifestyle, firstly. And secondly, I think it’s up to a person to choose. I think we all are entrepreneurs in the office, in the big corporate institution or separately doing our own business. It’s up to a person to decide would he or she be an entrepreneur or not. There is also an understanding of a corporate entrepreneurship when you are always trying to develop something new in the company, or you can do it outside developing your businesses. So, I think it’s more a decision of taking a risk and doing staff rather than a skill which is granted only to chosen ones. I think it’s just a decision.
How fast are the processes inside the bank? Firstly, at the level of HQ. How long did it take your team to approve and implement Startuper product in the bank?
We were discussing these things generally as an idea for quite some time. However, in terms of deciding and launching it took us like two weeks. It was quick because it was high-level engagement on this topic, so we had all the approvals meaning that I was taking the personal responsibility and organizing the team around this target. We very quickly went to different decision stages, and the end launched it in two weeks from the moment of decision. The main thing there is while you are deciding on doing things and we should take a risk and be a bit braver. Because you can endlessly analyze and discuss a topic, but if you spent too much time the competitors would be quicker. So, in this regard, this was the main reason why the process was quick.
And how fast the processes are for a customer? How long does it take to open a current account in TBC Bank? And how long does it take to apply and to receive a loan for SME customer?
Operational services are super quick. You come for two things for a couple of minutes, and then you leave. For SME loans, it takes couple of days. From the moment of application maximum a week or week and a half. We are trying to minimize it. We are working on the products which will be fully automatized end-to-end. The general focus now is to decrease the number of interaction with the bank in one single process like Amazon would have one-click shopping, so we try to apply the same philosophy or methodology for every process and priority of this year is to redefine the speed of serving the customers.
We’ve recorded two previous podcasts with 2 SME fintech banks – Penta and BankUP – which are launching in Europe this year. Totally digital with 3min onboarding process and marketplace of products which SMEs need the most – from invoice issuing system and e-stores to lending in 24 hours. How do you see that traditional banks which have longer processes could compete with such new players?
Basically, I think these new players is something very interesting. I know personally both startups and I have been discussing with them the whole concept a couple of times. I think the thing they bring into the industry is very interesting; I call it more an aggregation of services one portal for SMEs, provided by different fintechs or service providers. And this is something we, banks, should think of, and to some extend some of the players are thinking, but these startups are much more flexible and much quicker because they don’t have to go to different layers, to different legacy IT system. So, the only thing we have to share is the customer. They are at a different angle, we are to learn from them. I do not think they are a bit threat because at one point we will cooperate and if you look at the current trend of the market – fintechs are cooperating with banks, whereas was previously said that fintechs will be killing banks. No. What we see now is that fintechs and bank are coming together, there are partnerships in SME Business like ING Bank together with Kabbage, they launched in Spain, and now they are launching in Italy. So, I think we will be coming together to do business.
What is interesting that these fintechs are founded not by bankers. There is no banker in their teams. Like Devrim Tavil said at our previous SME Banking Club Conference in Warsaw that banks would not disrupt banking. My question is do you have some successful entrepreneurs – I mean from entrepreneurial environment totally without banking background in your team inside to consult?
Our team is composed of bankers and non-bankers. We have team members who never worked in banks, we have team members who have their own startups, and we have team members who come from industries like FMCG. And by thus we try to think very differently because if you don’t integrate and you close yourself in the banking environment, I don’t think in the modern world you would manage to do many innovative things. That’s one. Secondly, which we are also practicing is that we work with startups directly and there are many projects that we would integrate with a startup team into our internal team and cooperate with them in one single topic. This also helps to open up the mind because these guys are in the totally different situation in terms how they think.
What are your priorities, the main focus in TBC Bank this year?
One of the main challenges is to redefine the processes to male them smooth and quicker and more comfortable for the customers. This year we massively would start focusing, which we already started, on customer experience, customer expectation management. We also started to manage our sales activities not only for loans but actively for operational business, and we continue to be dominant in non-financial services, which was always making us different from our competitors and this program for SMEs Startuper is one of the progress we are doing. In a few months, we are launching a couple of big projects that are very cool things on the market.
What is your job as Deputy CEO to have all these priorities implemented?
I would say I’m just an administrator, I’m trying to administrate the processes in the way that the team can work better to keep in the team people which are of the same culture and mindset, and to help them think out of the box. We are trying to be as flexible as possible and as opened as possible, the average age of the team is quite young: we have guys of 24 years old and the maximum age is 35, so in this regard it’s a young team with lots of ideas and very opened and curious to new things. So, I think this is my main role to keep these things functioning in this way.
Nika, where do you see an inspiration and ideas how to do a better job. Which country or may be some particular banks and their models are inspiring you?
Firstly, we look at non-banking institutions a lot, and it’s not really needed to look at banks to get the inspiration. So that companies like big tech companies would be really something interesting for us. In terms of banking market – Turkey is super, Poland is showing fantastic examples, and also in terms of mentality and geography, these are the closest markets to us. And then fintechs all around the world. We like Kabbage a lot, and we look at them, we talk to Penta, to BankUP and all these guys, so I would say we look at fintechs globally, we look at added technology companies, like Alibaba, which I think is one of the biggest SME businesses in the world now.
Nika, which book do you read right now?
Couple of them. The one which applies to the topic is a START-UP NATION, which is a case of Israel and Israel as a nation which really boosted in startup activity and technological developments.
What is your favorite restaurant in Tbilisi?
Knowing the audience, I would advise going to restaurant Barbare, which is very good traditional Georgian cuisine run by a family of 12 people: mother, father, and ten kids and it’s a fantastic place.
Photos: TBC Bank, Nika Kurdiani