Banking in Georgia (Part 1)

Will there be a part 2? Maybe? Anyway, I’d been waiting to get all the information for you guys, but that may or may not happen so…. Here’s a little story about my experiences so far with banking in Georgia. Off we go….

Quick insert from future me: There will absolutely be a part 2. This topic ballooned into something far larger than I’d originally thought.

So first thing’s first, why open a bank account in Georgia of all places? Well…this is going to take some explaining….

What to look for in a bank and/or economy

You know how in the West, banks give you like 1% interest on their MMAs (Money Market Accounts) if you’re lucky? Well, good news: the whole world isn’t like that! There are so many places that offer reasonable interest rates (think better than the US before 2008). I’d heard Georgia was one of those places.

But you want more than just good interest rates. You also want something stable. This comes in several forms that I’ll briefly cover: bank stability, government financial stability, and inflation. And yes, I know some of those are the same thing, but examples below should clarify why I separated them.

You don’t want a situation where the bank plays it fast and loose with loans. Anyone that was paying attention in the US around around 2008 can tell you what happens then. It also didn’t help that around half the US economy was related in some way to housing. But I digress….

You also don’t want a situation like Cyprus in 2013. For those unfamiliar with the story, the government dealt with their financial crisis by simply confiscating a bunch of money. Banks are, frankly, an easy place for governments to get at your money. You have been warned.

Additionally, any place with an insanely high inflation rate should be considered very carefully. Everyone’s probably familiar with Zimbabwe, but it bears repeating. What good is a 100% interest rate when the inflation rate is 1,000%? At that point, you’re losing rather than saving money.

Quick side note: this is also why many people in the US are putting their money anywhere but in a bank. It’s contributed massively to the housing crisis, several stock market boom/bust cycles, and a general culture of spending over saving. If that thing you’re purchasing devalues at a lower rate than inflation, you’re winning. Or if the interest rate for a loan is lower than inflation, you’re winning there as well. This is not a situation anyone should want.

I’d heard Georgia was also a decent place as far as these factors went too. So…research time.

Do Georgian banks meet the criteria?

“So…about that government stability thing…. Wasn’t there a Russian and Georgian conflict in 2008?” Yes, there was. South Ossetia and Abkhazia didn’t want to be a part of Georgia. Both ‘countries’ gained the support of Russia during the war, and are now autonomous areas.

People have asked me whether Russia might just decide to invade Georgia, and take over the country. While there’s no question Russia could do that, I don’t think they will. Ostensibly, the reason Russia got involved in the last conflict was to free the two previously mentioned areas. Since they are now de facto autonomous, I don’t think there’s going to be another war. The two countries definitely don’t like each other, but that doesn’t impact the stability of the Georgian government.

All other signs I see point to a growing economy. Batumi is a sea-side resort town with a lot of fancy hotels, restaurants, casinos, and karaoke bars. Tourism (especially from Russians) will keep that place running for a long time.

Tbilisi is a recently modern city. Every time I walk around town, I find new places full of construction. Much of the city is still old and looks pre-Soviet, but that’s rapidly changing. The city is definitely financially stable.

And the countryside…. Small villages still exist everywhere, but they’re being increasingly propped up by a quickly growing tourist industry. While Russia has long seen Georgia as a tourist destination, the West is just now discovering it. The increasing number of tourists is bringing prosperity to the small villages as well, and will continue to do so (in my opinion) as more people figure out that when I say Georgia, I don’t mean Atlanta. (Insert favorite joke about geographically illiterate Americans).

Government financial stability: check.

So how about the banks? Are they stable? Well…I don’t know what it’s like where you’re from, but in the US, there’s a whole system devoted to determining if someone deserves credit. It might not be the best system in the world, but it’s developed and stable. There’s nothing like that here.

I’ve heard a lot of locals complain about not being able to get a mortgage, because the banks don’t trust them. It seems in order to get a loan, you have to rent a similar property for at least a year before the banks will even think about approving you.

So that Opera thing Western banks do…. (“You get a loan, you get a loan, everybody gets a loan)” Yeah, that doesn’t happen here.

Additionally, their services are pretty sweet. You know that NFC (Near Field Communication) technology that people go nuts about in the States? Yeah, they’ve had that here for a while. Just hold your card up to the reader, and…approved!

Bank Stability: check.

Inflation…. You know what? I’m not going to bore you with a bunch of numbers, and charts. If you like that sort of thing, a quick Google search will pull up all the information your happy little heart desires. I’m just going to tell you inflation is not a problem. See? Easy.

Inflation: check.

But, no…really…why?

So now that I’ve overloaded you with all that information, you’re probably saying to yourself: “That’s fantastic, Porcupous. Georgian banks are a decent place to stash my cash, but why…please, tell me why would I want to go through all that trouble?”

I could tell you it’s a great diversification strategy. You don’t want all your eggs in one government’s basket.

But the real kick in the pants? What if I told you that CD rates for holding US Dollars was between 5-6%? Or that if you wanted to hold Georgian Lari, rates are between 10-12%? Well, this is not fake news, that’s actually true. So if you’re a saver like me….well…you know…you could open a Georgian CD or something. You know, for the LOLs…. That’s what those cool kids say these days right?

Summary of part 1

So hopefully, this answered the ‘why’ question. Because this is ridiculously long already, I think I’m going to save my experiences for part 2. What I actually found here is not exactly what I was expecting.

So stay tuned. The next time I get a few hours to pound out 1000+ words, you too will be able to read about the pain, the agony…just kidding, it wasn’t that bad. Or was it?