Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697751681877.pdf (Georgia)
COUNTRY REPORT 2020 GEORGIA WWW.EU4BUSINESS.GE TABLE OF CONTENTS EXECUTIVE SUMMARY: 2019 at a glance ................................ 3 EU SUPPORT TO SMES IN GEORGIA IN 2019 .......... 10 Portfolio overview .......................................................................................... 11 Breakdown by intervention ....................................................................12 Overview by type of intervention .......................................................13 Access to Finance ..................................................................................13 Business Development Services ............................................... 19 Business Enabling Environment ................................................ 23 ACHIEVEMENTS IN 2019 ............................................. 26 Aggregated results ...................................................................................... 27 Access to Finance ........................................................................................33 Business Development Services .......................................................41 Business Enabling Environment ........................................................47 Article by the OECD: SMEs in Georgia ..........................................50 ANNEX ............................................................................. 54 List of projects in Georgia as of 2019 .............................................54 2 EXECUTIVE SUMMARY 3 EXECUTIVE SUMMARY FOR GEORGIA: 2019 AT A GLANCE As this difficult year draws to a close, we are proud to present the results of the EU4Business Initiative in this 2020 Country Report for Georgia.
Despite the pandemic and its stark impact on business, the entire EU4Business team has worked tirelessly to expand the range of projects that we collect data on and we are pleased to say that we can now show the results that accurately reflect the entirety of EU support to SMEs in the Eastern Partnership, including Georgia.

WHAT SUPPORT DOES THE EU PROVIDE TO SMES?
Access to Finance (A2F): Business Development Services (BDS): Business Enabling Environment (BEE): concessionary loans via providing direct advice and promoting regulatory reform national banks training to SMEs and best practices microfinancing for household training and capacity-building businesses small grants to SMEs training staff at national banks to better serve SMEs training SMEs in financial literacy among national business support organisations (BSOs) establishing business incubators for start-ups developing business clusters for mutual support and development supporting governments in identifying new markets building capacities at export support organisations 4 building capacity amongst policymakers and regulators encouraging public-private dialogue informing business about reform processes and rules/ procedures PORTFOLIO FOR GEORGIA IN 2019 47 projects Total budget of EU support in Georgia €328.83 million of which €75.89 million was disbursed 50% A2F €165.46 million Breakdown by intervention 15% BEE €47.26 million 35% BDS €116.11 million RESULTS OF EU SUPPORT IN GEORGIA IN 2019 36,234 SMEs supported 25.1% women- owned €3.4 billion total turnover of SMEs supported €414.8 million extra income generated by SMEs 31,443 new jobs created 5 RESULTS OF EU SUPPORT IN GEORGIA IN 2019 116,949 employed in EU-supported SMEs the average SME supported by the EU in Georgia has €90,000 in annual income employs 3 individuals WITH THE SUPPORT OF THE EU these SMEs grew on average by +14.4% more SMEs engaged in exporting +5.36% expanded their staff by +36.8% EU-supported SMEs increased their exports by +3% For every million euro of EU support, €1 million 6 an average of 110 SMEs benefited 130 €7.4 new jobs were generated million increase in income was recorded RESULTS PER PILLARS BUSINESS DEVELOPMENT SERVICES (BDS): BUSINESS ENABLING ENVIRONMENT (BEE): 643 business support organisations improved their capacity 157 laws, policies and regulations reformed 32,948 consultancy services delivered to SMEs 23.91% women-owned 254
 public-private dialogue events held 143 government institutions strengthened capacity ACCESS TO FINANCE (A2F): 2,956 SMEs received loans and grants 27.6% women-owned €237 million total value of loans €2.036 million total value of grants €89,977 average loan 9 partner financial institutions supported 7 EU4BUSINESS COMMUNICATION EU4Business communication activities have provided an ongoing continuous effort using a structured and targeted approach.
Having set out an updated vision in our communication strategy, we aligned all processes to build a more structured system for communicating the EU4Business brand.

Our focus is on storytelling and putting quality of content over quantity.

Since August 2019, we have prepared more than 60 success stories and news items about EU support to Georgian SMEs that have been shared with the EU, our partners, and the press.
The number of visitors to the current EU4Business website grew 17.8% over January-August 2020, compared to the same period last year.

MODERNISING OUR WEBSITE We have revamped our website to better match the needs of our target audiences.

In December 2020, we launched the main donor-oriented platform and six country SME-focused web pages, providing a one-stop-shop for SMEs to find information about EU support.

Our stories have gained wide coverage in the mainstream media in Georgia.
According to Google Analytics, we received 156,975 page views 85.3% new visitors The initiative has eschewed paid ads, focusing instead on promoting meaningful content.

CHECK OUT the new SME-oriented EU4Business webpage for Georgia: the updated donor-oriented main website: www.eu4business.ge www.eu4business.eu 8 IN RESPONSE TO THE COVID CRISIS our team quickly launched COVID business help pages for all six countries under the EU4Business Initiative in just two weeks.
We brought together recommendations from the EU, governments and business.
CHECK OUT the Covid-19 Information Support Webpage for Georgia: covid-19-georgia.eu4business.eu Over May-August 2020, we recorded more than 3,000 visits to these Covid-19 pages Since the pandemic hit, we have issued more than 25 Covid-19 Weekly Alerts that registered a remarkable 40% 9% open rate click rate The number of subscribers to our digest has grown by 20% since January 2020 To make sure that all messaging is consistent and cohesive so that a strong brand voice is established, we have upgraded the branding guidelines for the EU and our partners with easy-to-use templates and toolkits that each country will be able to adapt to its needs.
The guidelines were presented to the EU, partners and projects at the beginning of 2021.

Our information exchange guidelines have been widely communicated to make information flows more effortless and avoid unnecessary paper work and fully use the EU Digitool system to maximise cohesion.

Despite the challenges facing SMEs in the EaP region, and indeed the whole world, the EU’s commitment to supporting Georgian businesses remains unchanged.
With a new and improved vision and approach, EU4Business is ready for any further challenges 2021 might present and looks forward to reporting on yet more positive results for this year.
Mark Hellyer Team Leader 9 EU SUPPORT TO SMES IN GEORGIA IN 2019 10 PORTFOLIO OVERVIEW The European Union’s support for SMEs in the Eastern Partnership is based on the joint policy between the EU and the EaP as set out in the 2020 Deliverables with top priorities, such as the regulatory environment, SME development, and access to finance.
THEREFORE, THE EU IS FOCUSING ON THREE TYPES OF INTERVENTIONS: Access to Finance (A2F): Business Development Services (BDS): Business Enabling Environment (BEE): 47 projects provided support to SMEs in Georgia in 2019 with a total budget of* €328.83 million * This is the total value of contracts being implemented rather than disbursements in 2019.
11 BREAKDOWN BY INTERVENTION Breakdown of Active Projects in Georgia by intervention (total regional and bilateral) in 2019 50% A2F €165.46 million 15% BEE €47.26 million 35% BDS €116.11 million €328.83 million 49% of total budget 51% of total budget Breakdown of Active Bilateral Projects in Georgia by Intervention in 2019 Breakdown of Regional Projects in Georgia by Intervention in 2019 25% €161.67 million 22% 53% A2F €40.79 million BEE €35.57 million BDS €85.31 million 75% €167.16 million 7% 18% A2F €124.67 million BEE €11.69 million BDS €30.8 million 12 OVERVIEW BY TYPE OF INTERVENTION ACCESS TO FINANCE (A2F) A2F is the largest area of EU intervention to support SMEs in Georgia.
A total of €165.46 million in EU support was allocated to unlock access to finance in Georgia in 2019* 7 major specific support instruments: A1 A2 A3 A4 Capped Loss Recovery Interest Subsidy Targeted Assistance (TA) to PFIs Capped Guarantees A6 A7 A8 SME Incentive Grants (linked to loans) Grants to SMEs Structured Funds * This is the total value of contracts being implemented, not disbursements in 2019.
13 THE SEVEN SUPPORT INSTRUMENTS THAT THE EU4BUSINESS INITIATIVE USES FOR ENABLING ACCESS TO FINANCE IN GEORGIA ARE DEFINED BELOW: A1 Capped Loss Recovery This is a risk sharing instrument in the form of a grant that the EU provides to an IFI.

This grant is used by the IFI to partially cover the loss that any PFI, such as a local bank, would carry as a result of SMEs not repaying part or all of its loan.
In this way, the PFIs feel more comfortable and are willing to use the credit lines from IFIs to lend to SMEs.

However, the EU grant only partially covers the potential loss that PFIs could claim.

The recovery of loss covered by this EU risk sharing instrument is generally up to 10% of the total loan portfolio of the respective PFI (total value of the loans disbursed by the PFI from the respective credit line of the IFI) and generally up to 50% of each individual sub-loan.
This actually means that if an SME does not pay back the loan to the local bank, the EU grant for capped loss recovery can actually cover half of the loss of the bank.

In this way, the local banks are more willing to disburse loans to SMEs which are generally perceived as high-risk borrowers.

This instrument is a grant given by the EU to IFIs in order to lower the cost of their loans to SMEs in the EaP.
The grant provides interest subsidies of up to 10%, which is applied to the regular interest rate, with which the IFI lends to PFIs and further on to SMEs.

The purpose of this instrument is to lower the final cost of finance for SMEs in the EaP.

This instrument consists of technical assistance to PFIs in the form of consultancy services, mentoring, and specialised training.
The main effect of this instrument is that the PFIs (local banks and microfinance institutions) become more familiar with the modus operandi of the big IFIs, with the characteristic of their credit lines, their reporting requirements, as well as to the standards regarding financial and risk analysis of the potential borrowers.
A2 Interest Subsidy A3 TA to PFIs 14 A4 Capped Guarantees This instrument consists of a guarantee given to IFIs in order to lower the risk of lending to SMEs via local PFIs through guarantees to reduce collateral requirements of SMEs.

This is a guarantee that enables improved access to finance through the reimbursement of a portion of the loss caused by the SME portfolio.
These guarantees are generally capped at up to 25% of the total portfolio of the respective partner financial institution and to generally 70%-80% of each individual sub-loan.

In the case of the DCFTA facility phase, 1 EIB/ EIF the guarantee was 25%/70%, for EIF COSME support the guarantee was 50%/70%, for DCFTA facility phase 2 the guarantee was 25%/80%.
A6 SME Incentive Grants (linked to loans) This instrument is different from regular grant schemes as the incentive grants are not given directly to SMEs as a “pure grant”.

The SME signs a loan contract from one of the credit lines of the IFIs via the PFIs.

After the loan is disbursed, is a verification process to check if the loan was used for the purpose listed in the business plan or feasibility study and of the other pre-conditions for the loan disbursement.
Once the verification report confirms compliance, a part of the loan is transformed into a grant, so that the total “cost” of financing is lowered.

The most common incentive grants are between 10% and 15% of the loan value as it is the case for the EBRD DCFTA facility 1 and 2.

A7 Grants to SMEs These grants are non-reimbursable and generally modest in value in order to support as many SMEs as possible.
In general, SME grants are disbursed in order to target specific economic development goals such as development in rural areas, poor communities, or a response to various types of crisis.

These grants are usually disbursed through Non-governmental Agencies (NGOs) with links into the targeted communities.

A8 Structured Funds This direct finance instrument is implemented directly by EU participation as opposed to the risk sharing with IFIs.
Typically, this involves direct loans or equity investment in a financial instrument or fund.

As the EU does not have the capacity to disburse direct loans to SMEs, this function is assigned to an intermediary.

The most important EU investment in Direct Finance is shares in the European Fund for Southeastern Europe (EFSE).
15 Allocation of A2F Budgets in Georgia by Instrument * There might be some round-off errors in some figures throughout the report Capped Loss Recovery TA to PFIs SME Incentive Grants (linked to loans) A1 €5 million A3 €8.01 million A6 €23.96 million 3% 5.4% 4.8% 7.3% 14.5% 24.7% Interest Subsidy Capped Guarantees A2 €8.93 million A4 €12.08 million Grants to SMEs A7 €40.79 million 40.3% Structured Funds A8 €66.69 million 16 Capped Loss Recovery Interest Subsidy TA to PFIs Capped Guarantees SME Incentive Grants (linked to loans) Structured Funds A1 €5 million A2 €8.93 million A3 €8.01 million A4 €12.08 million A6 €23.96 million A8 €66.69 million Allocation of Regional A2F Budgets in Georgia by Instrument in 2019* €124.67 million 75% 4% 7.2% 6.4% 9.7% 19.2% 100% Grants to SMEs A7 €40.79 million 53.5% Allocation of Bilateral A2F Budgets in Georgia by Instrument in 2019* €40.79 million 25% 17 * There might be some round-off errors in some figures throughout the report In Access to Finance, projects in 2019 leveraged almost €589 million in loans in Georgia 11 local financial institutions supported 78,550 SMEs benefitted €18,421 average size of loans 18 BUSINESS DEVELOPMENT SERVICES (BDS) BDS is the second largest area of EU intervention to support SMEs in Georgia.
A total of €116.11 million in EU support was allocated to improving business development services in Georgia in 2019* 5 specific support instruments: B1 B2 B3 Consultancy Services for SMEs Capacity Building among BSOs Incubators B4 B5 Clusters Trade Information 2 This is the total value of contracts being implemented, not disbursements in 2019.
19 THE FIVE SUPPORT INSTRUMENTS THAT THE EU4BUSINESS INITIATIVE USES FOR IMPROVING BUSINESS DEVELOPMENT SERVICES AND KNOWLEDGE TO SMES IN GEORGIA ARE DEFINED BELOW: B1 Consultancy Services for SMEs Through this instrument, the EU4Business Initiative aims to directly increase the knowledge and skills of SMEs in EaP countries through the direct provision (fully or part paid) of non-financial business services (these can range from basic start up and registration, accounting, marketing, input supply, technology and product development, training and technical assistance, infrastructure support and advocacy).
These services can be delivered through both international and/ or local consultants, in both private firms/ individuals, and/or business support organisations.

This instrument aims at increasing the capacity of Business Support Organisations (such as Chambers of Commerce, SME associations, professional bodies, the Sector Trade Association, training institutes, etc) to deliver BDS services to SMEs (whether members or not).
The capacity building is achieved though mentoring, training trainers, advisory services and study tours to either enhance existing services, build new ones, or improve organisational structures.

The business incubator is an organisation designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections.
The EU4Business incubators instrument generally shares the cost with the local authorities where the EU bears the cost of refurbishment and cost-sharing arrangements for the running costs and/or service provision.

One of the most important aspects related to this instrument is sustainability.

As operation costs are high, the initial financial set-up is crucial for keeping the incubators viable after the EU4Business intervention ends.
This instrument involves group support to SMEs involved in the same field of activity but on different positions in the value chain or with common interests.

The basis of the clusters approach is the synergy of creating a more effective value chain within the cluster.

The success of the SME cluster is tightly related to the level of value added in the respective field of activity.
The Trade Information instrument provides SMEs already exporting, exporting infrequently, or those interested in exporting with the range of information needed to move closer to exporting.

This instrument can include generating the necessary information (brochures, guides, market reports) or developing tools for covers market information, marketing guides and market access requirements.
B2 Capacity Building of BSOs B3 Incubators B4 Clusters B5 Trade Information 20 BDS Portfolio by Instrument * There might be some round-off errors in some figures throughout the report 59.3% Consultancy Services for SMEs B1 €68.88 million Incubators Trade Information B3 €0.6 million B5 €1.39 million 33.2% Capacity Building of BSOs B2 €38.52 million 5.8% B4 €6.72 million Clusters 21 Regional BDS projects by Instrument in Georgia* €30.8 million 27% Bilateral BDS projects by Instrument in Georgia* €85.3 million 73% 45.7% Consultancy Services for SMEs B1 €38.98 million Consultancy Services for SMEs Capacity Building of BSOs Incubators 22 B1 €29.9 million B2 €0.3 million B3 €0.6 million 44.8% Capacity Building of BSOs B2 €38.22 million 97% Clusters Capacity Building of BSOs B4 €6.72 million B5 €1.39 million 7.9% * There might be some round-off errors in some figures throughout the report BUSINESS ENABLING ENVIRONMENT (BEE) BEE is the third area of EU intervention to support SMEs in Georgia.
A total of €47.26 million in EU support was allocated to improving the business enabling environment in Georgia in 2019* 37.7% C1 €17.81 million Capacity Building among policymakers and regulators 4 specific support instruments: 27.2% C1 Capacity Building among policymakers and regulators C2 PPD (Public Private Dialogue) Regulatory Reform C3 C4 Information and Communication for SMEs 25.7% 3 This is the total value of contracts being implemented, not disbursements in 2019.
9.4% C2 €12.87 million PPD (Public Private Dialogue) C3 €12.14 million Regulatory Reform Information and Communication to SMEs C4 €4.44 million 23 THE FOUR SUPPORT INSTRUMENTS THAT THE EU4BUSINESS INITIATIVE USES FOR CONTRIBUTING TO A BUSINESS ENABLING ENVIRONMENT ARE DEFINED BELOW: C1 Capacity Building among policymakers and regulators Through this instrument, EU4Business interventions aim at strengthening the capacity of staff of various government to ensure better, more transparent, and open policies and regulations that affect business, whilst ensuring appropriate controls in the six Eastern Partnership countries.
This can include making and amending policies, laws and administrative procedures based on need and risk assessment.

Through this instrument, the EU4Business interventions deliver direct advisory, mentoring services and study tours to the relevant staff involved in policy making.

C2 PPD (Public private Dialogue) C3 Regulatory Reform Public-private dialogue is an instrument for more inclusive and targeted policymaking.
Specifically, it involves effective consultation and collaboration between government and the private sector and/ or its representatives, in order to achieve effective reform and administration of regulations that affect SMEs.

Through this instrument, EU4Business interventions support the EaP countries to improve the regulatory environment based on best practices and most often approximation (to align their SME-related legislations, rules and regulations with those of the EU).
Approximation occurs in all six Eastern Partnership countries, but it is more intensely applied in the three DCFTA countries, which have committed to widespread adoption of EU business acquis under the Association Agreement (AA).

C4 Through this instrument, EU4Business interventions support government to inform SMEs on reforms and implications for their business and steps to comply with regulatory reform.
Information and Communication to SMEs 24 C1 €1.25 million Capacity Building among policymakers and regulators C2 €1.99 million PPD (Public Private Dialogue) C3 €8.45 million Regulatory Reform 10.7% 46.5% 17% 72.3% C1 €16.56 million Capacity Building among policymakers and regulators C2 €10.88 million PPD (Public Private Dialogue) C3 €3.69 million 30.6% Regulatory Reform Information and Communication to SMEs C4 €4.44 million Regional BEE projects by Instrument in Georgia* €11.69 million 25% 10.4% 12.5% * There might be some round-off errors in some figures throughout the report Bilateral BEE projects by Instrument in Georgia* €35.57 million 75% 25 ACHIEVEMENTS IN 2019 26 AGGREGATED RESULTS IN GEORGIA IN 2019 EU support for SMEs in Georgia is reported here under the EU4Business Initiative.
It is an amalgamation of all EU support but, unlike previous years, we are reporting by instrument rather than by project under the three types of intervention — A2F, BDS and BEE.

This allows us to isolate and present results by country, intervention and/or instrument in a meaningful way, which, in turn, enables our readers to analyse and assess EU support more thoroughly.
In 2019, the EU disbursed €187.7 million to support SME growth in the EaP 40.4% of total spent occurred in Georgia €75.89 This is the largest amount out of the six EaP countries Business enabling environment €43.51 million 57% 31% Areas of intervention 12% Access to finance €23.62 million Business development services €8.76 million 27 NUMBER OF SMES SUPPORTED Overall, the EU supported a massive of 36,234 SMEs in Georgia in 2019 25.11% women- owned €3.4 billion total turnover of EU-supported SMEs in Georgia 28 116,949 employed in EU-supported SMEs in Georgia the average SME supported by the EU in Georgia has €90,000 in annual income employs 3 individuals 0.75 of whom were women This was the fifth largest average income per SME supported in the EaP, where the average was €123,000 3.2 Average jobs per SME supported Average income per SME supported SMES SUPPORTED 8.5 €123,000 €90,000 Number of employees per €100,000 of income 6.9 3.6 Average income per SME supported employee €14,470 €28,125 Eastern Partnership Georgia The average number of jobs in SMEs supported in Georgia is lower per SME and per €100,000 in income.
This means that EU-supported SMEs in Georgia employ relatively fewer people than the average, but this also means that the average income per employee of SME supported in Georgia is almost 94% higher, indicating that EU support is going to higher value-added businesses.

29 NUMBER OF SMES SUPPORTED PER PILLAR GEORGIA VS THE EAP The number of SMEs supported through access to finance accounted for 8.2% of all SMEs supported in Georgia, which is lower than the average of 8.8% across the EaP.
The remaining SMEs were supported through business development services.

SMEs benefiting from improved business enabling environment activities are not included in the consolidated report of support, as potentially all SMEs in the country can benefit from reforms.
Eastern Partnership 72,049 6,946 Georgia 33,278 2,956 Business Development Services Access to Finance The average A2F-supported SME The average BDS-supported SME income Eastern Partnership €153,404 Georgia €98,318 employed Eastern Partnership 12.23 Georgia 8.3 income Eastern Partnership €119,590 Georgia €92,378 employed Eastern Partnership 8.16 Georgia 2.8 30 This shows that the SMEs receiving both A2F and BDS support in Georgia have a lower income (34% and 25% respectively) than the regional averages.
Employment in supported SMEs is also lower, 32% less employed in A2F-supported SMEs and 65% less employed in BDS-supported SMEs than the regional average.
JOB CREATION PER PILLAR GEORGIA VS THE EAP In 2019, SMEs supported by the EU in Georgia generated 31,443 jobs compared to the EAP average of +21.1% increased staff by +36.8% and ranked second highest in the Eastern Partnership region Business Development Services Access to Finance Eastern Partnership 104,981 12,273 Georgia 27,666 3,777 87.98% 12.01% The SMEs supported via business development services generated 87.98% of new jobs, compared to the SMEs supported via access to finance, which generated 12.01% of all new jobs.
This largely follows the overall EaP trend, whereby the majority of SMEs supported, 91.20%, are in BDS and generated on average 89.53% of the jobs created.

31 INCREASE IN TURNOVER 19.57% 16.15% 14.4% 14.78% 14.01% 12.72% Total increase in turnover Increase in turnover per A2F Increase in turnover per BDS INCREASE IN EXPORTING SMEs 7.5% 6.65% 5.85% 5.36% 4.19% 4.07% Supported SMEs in Georgia increased turnover by 14.4% in 2019, which is close to the 16.15% regional average.
Eastern Partnership Georgia The growth in number of supported SMEs in Georgia engaged in export is close to the EaP average.
Eastern Partnership Total Increase in Exporting SMEs Increase in Exporting SMEs per A2F Increase in Exporting SMEs per BDS Georgia INCREASE IN EXPORT 4.22% 3.83% 3% 3.43% 3.42% 2.58% Total increase in export Increase in export per A2F Increase in export per BDS 32 Amongst those supported SMEs engaged in export, there was a 3% increase in exports, which puts Georgia in fifth, and slightly below the 3.8% average growth of supported SMEs in the region.
Eastern Partnership Georgia ACCESS TO FINANCE FOR GEORGIAN SMES OVERALL RESULTS OF A2F INTERVENTIONS IN 2019 WERE: 2,956 SMEs supported with A2F interventions S E R U G I F N I A M €237 million in loans disbursed €2.036 million in grants disbursed 3,777 new jobs generated at SMEs supported through A2F 14.78% increase in income of supported SMEs 33 YOUNG ENTREPRENEUR TURNS ABANDONED BUILDING INTO INTERNATIONAL HOTEL IN TELAVI Financing by EU4Business and the EBRD helped 27-year-old Levan Eristavi turn an abandoned building into an international hotel under the Holiday Inn brand.
In the process, Eristavi generated 65 new jobs and attracted thousands of tourists to Telavi, Georgia.

“The EU4Business-EBRD credit line unlocked our potential.
Our team had the idea, but we could never have managed to put together such a major investment project on our own.” Levan Eristavi co-owner and the director of Holiday Inn Telavi Read full story 34 SUCCESS STORIES NUMBER OF SMES SUPPORTED PER ACCESS TO FINANCE INSTRUMENTS IN GEORGIA 2,956 SMEs were supported with A2F interventions in Georgia through access to finance instruments in 2019.
In 2019, the EU disbursed €67.9 million for A2F in the EaP 35.1% of total spent on A2F was in Georgia €23.6 million It is the second largest amount out of the six EaP countries The EU used five instruments: capped loss recovery, interest subsidies, SME incentive grants, SME grants, and structured funds.

It also provided technical assistance to PFIs.

1,631 Structured Funds targeted microloans with an average loan of €8,522, out of which 36.0% of SMEs were owned or managed by women.
20 Capped Loss Recovery targeted larger companies with an average loan of €3,260,000, out of which 26.0% of SMEs were owned or managed by women.

55.2% 27.1% 800 Interest Subsidy targeted medium-sized loans, with an average loan of €46,875, out of which 26.0% of SMEs were owned or managed by women.

6.9% 10.9% 183 SME Incentive Grants 322 Grants to SMEs targeted larger companies with an average loan of €655,738, out of which 26.0% of SMEs were owned or managed by women.
targeted small enterprises, mainly rural.

The average grant was €6,322, out of which 24.0% of SMEs were owned or managed by women.
35 The volume of loans triggered in Georgia in 2019 was €237 million Grants disbursed €2.036 million 2,634 SMEs received loans 322 grants given to SMEs 24% women- owned €89,977 average size of loans €6,322 average amount of grant 9 local financial institutions supported THE VOLUME OF LOANS triggered in Georgia in 2019 was €236.6 million, which is significantly higher than the EaP average of €84 million.
€236.6 million €84 million 36 RESULTS PER A2F INSTRUMENT Number of SMEs supported Income of SMEs Jobs in SMEs Jobs generated Increase in turnover Total 2,956 €290,630,331 24,640 3,777 €31,564,472 Capped Loss Recovery 20 €2,240,000 1,000 1,430 €268,800 12.0% Interest Subsidy 800 €55,862,628 6,500 825 €6,703,515 12.00% SME Incentive Grants 183 €19,604,703 1,650 532 €2,352,564 12.00% Grants to SMEs 322 €1,632,000 390 250 €431,827 Structured Funds 1,631 €211,111,000 15,100 750 €21,807,766 26.46% 10.33% 37 8 JOBS CREATED PER €1 MILLION LOAN IN GEORGIA 4 2 1 For each €1 million in loans provided, 15 jobs were generated, which is considerably lower than the regional average of 25.
25 jobs 15 jobs SME Incentive Grants Capped Loss Recovery Interest Subsidy Structured Funds UNCORKING GEORGIAN WINE WORLDWIDE Kakhetian Traditional Wine-making (KTW), one of Georgia’s biggest wine exporters established in 2001, built ultra-modern factories and wine processing facilities across the country and is now exporting to more than 20 countries.
But apart from satisfying consumer demand abroad, KTW has decided to welcome an increasing number of guests to the country too by developing and investing in wine tourism at home.

The EU under its EU4Business Initiative and the EBRD have been reliable partners throughout this journey – through the EU4Business-EBRD Credit Line programme, the company received funding to expand its business and production capacities.
Read full story 38 JOBS CREATED PER €1 MILLION GRANTS For each€1 million in grants provided, 123 new jobs were generated, which is considerably lower than the EaP average.

Eastern Partnership Georgia 123 745 INCREASE IN TURNOVER PER €1 MILLION LOANS Similarly, for each €1 million of lending in Georgia in 2019, supported SMEs increased turnover by €140,000.

This is considerably lower than the regional average of €640,000.
Eastern Partnership Georgia €140,000 €640,000 INCREASE IN TURNOVER PER €1 MILLION GRANTS The increase in turnover of supported SMEs per €1 million in grants is also lower with an increase of €210,000 in 2019.

This is because the grants were targeting rural microenterprises in the poorer areas of Georgia.
Eastern Partnership Georgia €210,000 €1.48 million 39 IMERETI HYDROPONIC FARM PROMOTES INNOVATION IN GEORGIA Imereti Greenery, an unusual greenhouse growing high- quality vegetables in water, received financing to enlarge its hydroponic greenhouse and buy more equipment.

The investment was complemented by an EBRD- EU grant of up to 15% of the loan and technical assistance involving local experts.
As a result, the company has raised awareness about innovative farming methods, increased its own production, and generated jobs for locals in the region.

Read full story 40 “We are proud that we are generating job opportunities for the locals of the region.

Regional development is critical for our country.
Each new job can make a real difference to the lives of one, two, and maybe even more families.” Natia Khelaia general manager of Imereti Greenery BUSINESS DEVELOPMENT SERVICES (BDS) FOR GEORGIAN SMES OVERALL RESULTS OF BDS INTERVENTIONS IN 2019 33,278 SMEs supported through BDS interventions 27,666 new jobs generated at SMEs supported through BDS Georgia ranks first in the Eastern Partnership region in terms of funds disbursed for improving business support services in 2019.
50.6% of total spent on BDS occurred in Georgia In 2019, the EU disbursed for BDS €85.9 million to support SME growth in the EaP 14.01% increase in income at supported SMEs 643 BSOs capacitated €43.6 million This is the largest amount out of the six EaP countries 41 GEORGIA SUCCESS STORIES GEORGIA’S INVET GROWS A COMPETITIVE BUSINESS Invet, a Georgian veterinary and pet product company, received support from the EBRD and EU4Business for purchasing and customising a software solution.
The new software helped improve the company’s productivity by 40% and cash flow by 20%.

It also simplified business operations, cutting the time needed to accomplish certain tasks from a week to a day, and reducing the human resource needed by 85%.

Read full story “Accurate control over drug expiration dates and production processes minimised our losses, both in warehousing and manufacturing.

As a result, we expanded our client base, streamlined our distribution network, and acquired new facilities.
This gave a major boost to the growth of our profits.

This is one of the best decisions we ever made in our business.” Maka Skhvitaridze the Invet Group’s strategy development manager 42 NUMBER OF SMES SUPPORTED PER BUSINESS DEVELOPMENT SERVICES INSTRUMENTS IN GEORGIA A total of 33,278 SMEs benefitted from business development services support by the EU; 99% through consultancy services provided directly to SMEs, while 0.9% went to clusters and 0.09% to incubators.
33,278 SMEs benefited 20.97% women- owned 32,948 Consultancy Services for SMEs 300 Clusters 30 Incubators RESULTS BY BDS INSTRUMENTS Sustained jobs New jobs Turnover Turnover increase Consultancy Services to SMEs 86,708 27,620 €3,040,035,691 €167,201,963 5.5% Incubators 40 20 €5,145,907 €714,766 13.89% Clusters 5,561 26 €28,979,920 €6,375,582 22% 43 JOBS CREATED PER €1 MILLION EU SPEND ON BUSINESS DEVELOPMENT SERVICES IN GEORGIA In terms of job creation, SMEs that received EU support in the form of direct consultancy services generated more jobs for every €1 million of support: specifically, 685, compared with only 130 in those SMEs supported through incubators and 16 supported through clusters.
685 Consultancy Services for SMEs 130 16 Incubators Clusters INCREASE IN TURNOVER PER €1 MILLION EU SPEND ON BUSINESS DEVELOPMENT SERVICES IN GEORGIA €4.65 million By contrast, incubated SMEs increased income by far higher levels than SMEs supported through other instruments.

For each €1 million of support through incubators, SME income grew by €4.65 million compared with €4.15 million through consultancy services and €3.89 million through clusters.
€4.15 million €3.89 million Incubators Clusters Consultancy Services for SMEs 44 GEORGIAN COFFEE ROASTER MONDO COMPETES INTERNATIONALLY The EBRD and EU4Business have helped Mondo, a locally-roasted coffee brand, with consultations from international experts whose know-how helped the company introduce new products to the market and expand its international distribution network.

Mondo transformed from an importing business to an export operation, selling coffee to Armenia, Azerbaijan, Russia, and Turkey.
Read full story “The story of our company might have turned out differently without assistance from the international experts.
We might have achieved our goals, but it would be harder, we would have made more mistakes.” Maka Komakhidze Co-Founder of Mondo 45 BETTER QUALITY AND COMPETITIVENESS WITH EU SUPPORT Nutrimax, an animal feed producing company in Georgia with an annual output of 50,000 tonnes, received support from the EU and the EBRD to introduce a quality management system to further foster food safety standards and increase competitiveness at home and abroad.
As a result, the company was certified, and its journey of growth continues.

Nutrimax increased exports to Armenia and has an eye to expand to Azerbaijan too.

The company turnover and labour productivity increased by 24% and 15% respectively.

Read full story “Feed directly impacts the growth rate, production capacity and health of livestock and is the foundation for successful, sustainable farming.
We’re happy that we have a loyal client base among farmers and good partners from Europe who share our vision.
We want to continue delivering high-quality products.” Salome Lebanidze, Nutrimax quality manager 46 BUSINESS ENABLING ENVIRONMENT FOR GEORGIAN SMES OVERALL RESULTS IN BUSINESS ENABLING ENVIRONMENT INTERVENTIONS IN GEORGIA IN 2019 714 laws changed 254 PPD events 143 regulators/policymakers strengthened capacity In EU4Business reports, support for improving the business enabling environment is treated differently.
Whilst improvements in the business enabling environment will inevitably improve competitiveness, lower costs and make SMEs more efficient, it is more difficult to isolate which SMEs actually benefit, as, potentially, all will benefit: for example, reforms that make it easier and less costly to pay taxes will benefit all SMEs.
EU SUPPORT AIMED AT IMPROVING THE BUSINESS ENABLING ENVIRONMENT IN GEORGIA 25.8% of total spent for BEE occurred in Georgia In 2019, the EU disbursed for BEE €33.8 million to support SME growth in the EaP million€8.8 This is the second largest amount out of the six EaP countries 47 THE SUPPORT INSTRUMENTS USED TO IMPROVE THE BUSINESS ENABLING ENVIRONMENT ACTIVE IN GEORGIA IN 2019 INCLUDED: Changing / improving laws and regulations Public-private dialogue events Capacity building among government agencies / regulators The most effective instrument used in Georgia to improve the business enabling environment in 2019 was capacity building at government and regulating agencies.
NUMBER OF REGULATORS/ GOVERNMENT BENEFITING FROM CAPACITY BUILDING Georgia ranks first in the EaP, with 143 regulatory and government agencies supported in capacity building.
143 Georgia 456 Eastern Partnership NUMBER OF LAWS / REGULATIONS CHANGED 157 Georgia 714 Eastern Partnership NUMBER OF PUBLIC PRIVATE DIALOGUE EVENTS 254 Georgia 48 1,527 Eastern Partnership C BOT CHATBOT WITH AI KEEPS GEORGIAN BUSINESS INFORMED DURING PANDEMIC In the wake of the COVID-19 quarantine, an AI-based public assistant comes as savior for Georgian businesses and the more than 125,000 residents of Rustavi by keeping them informed about city services, new regulations, and steps to cope with coronavirus challenges without leaving their homes.
C Bot, a Rustavi City Hall ChatBot, developed by the Rustavi Innovations Hub and Rustavi Municipality with the support of UNDP Georgia, assumed special significance within the Mayors for Economic Growth initiative implemented under the EU4Business umbrella.
This innovative tool, unique in Georgia’s public sector and that of many other EaP countries, handles more than 1,000 questions on coronavirus statistics and recommendations, as well as questions about municipal services such as public information, social programmes, architectural services, and more.
“C Bot simplifies dialogue between the city and those starting a business and going through various procedures, including registration and construction permits.” Revaz Barbakadze chairman of the Rustavi Innovations Hub C Bot offers the business sector guidance on where to find out about state regulations and restrictions applied in the city during the pandemic to further continue economic activities and keep their business afloat.
Read full story 49 ARTICLE: SMES IN GEORGIA BENEFIT FROM IMPROVED BUSINESS ENVIRONMENT NUMEROUS CHALLENGES REMAIN The OECD has been working with Eastern Partner (EaP) countries for more than 10 years to guide SME policy reforms.
Within the framework of the EU4Business Initiative, the OECD, together with the EBRD, the European Training Foundation and the European Commission, published a third edition of the SME Policy Index in March 2020, monitoring progress in the implementation of the Small Business Act for Europe (SBA) and highlighting outstanding reform priorities.
From an already strong position, Georgia has made further progress since 2016 by adopting a more strategic approach to small- and medium-sized entrepreneurship development through targeted initiatives.

The adoption of the SME Development Strategy 2016-2020 and matching action plans has helped to drastically improve the operational environment for SMEs.
Going forward — and with a view to seizing all the opportunities offered by the Deep and Comprehensive Free Trade Area with the EU, the Government of Georgia should prioritise the creation of level-playing-field conditions for firms of all sizes, provide for more efficient enforcement of contracts and competition laws, and strengthen the support provided to exporting SMEs, including targeted financing tools.
SMES IN GEORGIA’S ECONOMY SMEs play a prominent role in Georgia’s economy, as they accounted for more than half of business sector employment and added value in 2018—64% and 61%.

Yet they remain mostly concentrated in low value- added sectors such as trade, including repair of vehicles, manufacturing and construction.

1 OECD et al.
1 OECD et al.

(2020), SME Policy Index: Eastern Partner Countries 2020: Assessing the Implementation of the Small Business Act for Europe, https://www.oecd.org/development/sme-policy-index-eastern-partner-countries-2020-8b45614b-en.htm 50 Business demographics by company size, 2018 or latest available Note: Data on the number of enterprises refer to 2017, data on contribution to employment and value added refer to 2018.

Source: Georgia State Statistical Committee (GeoStat).
Sectoral distribution of SMEs in Georgia, 2017 Note: Sectors include sections B to N, S95, excluding K (financial intermediation services) of ISIC rev.

4.

“Other” includes arts and recreation; education; health; electricity and water supply; mining and quarrying; financial services.

Source: OECD calculation based on data from the National Statistics Office of Georgia (GeoStat).
98.3% 0.3% 1.4% 35.8% 39.5% 23.4% 40.8% 25.9% 34.5% Small Medium Large 4.7% Information and communication 2.9% Agriculture forestry and fishing 5.1% Other 8.1% Transportation and storage 19.7% Manufacturing 39.1% Wholesale and retail trade, repair of motor vehicles and motorcycles Construction As in 2016, Georgia stands out as the top performer in this assessment.
The country’s efforts to implement the previous assessment’s recommendations are particularly visible when it comes to improving entrepreneurial learning and women’s entrepreneurship, with an average increase of 57% since 2016, and SME skills up 38%.

Performance remains weakest with regards to bankruptcy and second-chance policies, as well as SME greening.
51 SME Policy Index scores for Georgia Country scores by dimension, 2020 vs. 2016 Small Medium Large Georgia has established a well-structured institutional and regulatory framework for SME policy.

Currently implementing its first multi-year SME Development Strategy, the government established two key public agencies, one to support SMEs, the other dedicated to innovation.
SMEs in Georgia benefit from a favourable business regulatory environment that has received international recognition and has access to one of the region’s most advanced platforms for e-government services.

However, insolvency legislation, where reforms are underway, could be further improved.

Additional steps should include: Elaborating a new SME Strategy beyond 2020.

Implementing an early-warning system to detect insolvency.
Moreover, the report identifies excellent non-formal learning initiatives to encourage young people to develop their entrepreneurship potential, such as the Fablab initiative.

Entrepreneurs, notably women, benefit from various training sessions provided by Enterprise Georgia and the Georgian Innovation and Technology Agency, GITA.

A sector-specific skills intelligence framework was developed to better identify SME needs, including an ‘export readiness’ tool assessing SMEs’ capacity to internationalise.
Moving forward, Georgia could: Reinforce online training sessions to widen outreach to SMEs in remote regions.

SME access to finance has become easier since 2016, notably with the expansion of bank lending and public financial support programmes, such as EU-supported credit guarantee schemes and subsidised loans.

Reforms are under way to develop leasing and factoring, which could increase the availability and use of financing.
Financial literacy is also being promoted through a dedicated National Strategy, and the mandatory introduction of IFRS for SMEs standards should increase the creditworthiness of adhering companies.

Going forward, Georgia could: Support the diversification of financing to enable small businesses to access funding.

Reduce the level of dollarisation in the financial sector.

SME access to markets has improved.

In 2017, SME exports accounted for 60% of total export value.
In addition, SME internationalisation has been promoted, notably through approximation with 52 EU standards, training courses on export market standards offered by DCFTA information centres, and the information portal Trade with Georgia.

However, the SME participation rate in public procurement remains low (2.1% in 2018).

Going forward, Georgia should: Train public procurement officials to apply principles and practices for open and fair procurement.
Introduce targeted financial support such as trade insurance for exporters.

Nearly 60,000 SMEs benefitted from government- supported business development services in 2017.

Various programmes have been made available, such as Start Up Georgia providing financial support, training, and consultancy services, and Produce in Georgia, designed after consultations with stakeholders and research on SME needs.

Innovation is a priority, supported through dedicated initiatives developed by GITA.
Actions on SME greening need to be scaled up.

Going forward, Georgia should: Develop a single portal containing information on all entities offering programmes.

Provide a single point of access for SMEs to get information on implementing green practices.
Despite the country’s strong position in most dimensions, Georgia should step up its efforts to create a level playing field for all firms: its legal framework for competition law remains seriously underdeveloped and lacks investigation, sanctioning, and remedial tools.

The quality of the judicial process has improved, notably with court automation, but further steps are needed to ensure the independence and efficiency of the judiciary.
Georgia has strengthened the framework for preventing corruption in the private sector, but more should be done to encourage firms to adopt business integrity practices, e.g.

introducing codes of conduct and compliance mechanisms.
53 ANNEX LIST OF PROJECTS IN GEORGIA AS OF 2019 Title Economic and Business Development in Georgia — Budget Support contract Green Economy: Sustainable Mountain Tourism and Organic Agriculture (GRETA) Clusters 4 Development — Better Business Sophistication in Georgia EU innovative action for private sector competitiveness in Georgia Increasing Institutional Capacity for Innovation Project Improving Rural Development in Georgia (ENPARD III) Improving the Agriculture Sector in Georgia (ENPARD III) European Neighbourhood Programme for Agriculture and Rural Development in Georgia, phase III (ENPARD Georgia III) Strengthening Georgian Accreditation System with the Focus on EU Technical Regulations Joint EU-UNDP Programme for Rural Development, Phase II (ENPARD III Abkhazia Component) Total Budget* Start date End date Type of the Project A2F BDS BEE Areas of Intervention €21,250,000 2018 2023 Bilateral €3,000,000 2018 2023 Bilateral €5,300,000 2019 2023 Bilateral €5,693,500 2019 2023 Bilateral €2,700,000 2019 2022 Bilateral €10,000,000 2018 2022 Bilateral €12,000,000 2018 2022 Bilateral €44,500,000 2018 2022 Bilateral €1,400,000 2019 2021 Bilateral €4,000,000 2018 2021 Bilateral * Budgets indicated for regional projects apply for 6 EaP countries 54 Title Total Budget* Start date End date Type of the Project A2F BDS BEE Areas of Intervention Promotion of rural development and diversification in Khulo Municipality European Neighbourhood Programme for Agriculture and Rural Development in Georgia, phase II (ENPARD Georgia II) Rural Development for Sustainable Growth of Tetritskaro Municipality Extension of Project 'Support to Regional Policy Implementation II''; ENI 2016/376-862 DCFTA Adaptation Programme (DAP) Support for SME competitiveness in Georgia SME Development and DCFTA-GEORGIA Support to Regional Policy Implementation in Georgia (Phase II) €1,800,000 2017 2021 Bilateral €24,875,000 2017 2021 Bilateral €2,127,260 2016 2020 Bilateral €404,985 2019 2020 Bilateral €4,500,000 2015 2019 Bilateral €5,033,940 2015 2019
 Bilateral €1,230,300 2016 2019 Bilateral Strengthening Rural Development Models in Georgia €2,999,998 2017 2019 Bilateral Food and Agriculture SME Support Initiative (FASSI) CSOs for Sustainable Economic Development — Strengthening Role of CSOs in DCFTA and SME Policy Implementation in Georgia Georgia on European Way: Creation of Effective Model for DCFTA and SME Strategy Implementation €477,478 2017 2019 Bilateral €478,600 2017 2019 Bilateral €400,000 2017 2019 Bilateral 55 Title Total Budget* Start date End date Type of the Project A2F BDS BEE Areas of Intervention Support to the National Food Agency, Phase III Empowerment of local economic actors for basic sustainable rural development in Abkhazia Regional Civil Society Organizations as Vectors of Rural Economic Development DCFTA Initiative East (EIB) (can also be referred to as DCFTA Facility by EIB) €5,500,000 2016 2019 Bilateral €1,500,000 2016 2019 Bilateral €500,000 2017 2019 Bilateral €62,746,000 2016 2031 Regional DCFTA Facility Phase II by EBRD €38,900,000 2017 2027 Regional EU Deep and Comprehensive Free Trade Area (DCFTA) Facility, EBRD DCFTA Programme €19,430,000 2016 2026 Regional DCFTA SME Direct Finance Facility €10,220,000 2014 2024 Regional SME Finance Facility Phase I — EBRD/KfW 2018 NIP decision share — Green for Growth — Extension to Neighbourhood East II Green for Growth — Extension to Neighbourhood East II EU4Business — The EU Local Currency Partnership Initiative: the European Fund for Southeast Europe (EFSE) Structural Reform Facility: World Bank component €10,200,000 2010 2019 Regional €5,162,849 2018 2040 Regional €6,157,151 2018 2040 Regional €50,320,000 2018 2039 Regional €1,500,000 2018 2023 Regional * Budgets indicated for regional projects apply for 6 EaP countries 56 Title EU-EBRD Country-specific Investment Climate Reviews and Action Plans for Eastern partnership (EaP) countries.
Financial Sector Institution Building and Crisis Response Total Budget* Start date End date Type of the Project A2F BDS BEE Areas of Intervention €2,000,000 2018 2021 Regional €12,000,000 2009 2020 Regional Mayors for Economic Growth €4,979,800 2017 2020 Regional Mayors for Economic Growth 2 TA €10,000,000 2017 2020 Regional EIB-04 SME Finance Facility — EIB window WBG technical support to the implementation of the Mayors for Economic Growth initiative Eastern Partnership: Ready to Trade — an EU4Business initiative EU4Business: From Policies to Action Green for Growth — Extension to NIF East Region Framework for Capacity Building to support Financial Intermediaries in Azerbaijan and Georgia €5,100,000 2012 2020 Regional €500,000 2016 2020 Regional €6,000,000 2017 2020 Regional €4,000,000 2017 2020 Regional €13,350,000 2013 2019 Regional €2,880,000 2009 2019 Regional SBS Program — EGP BAS Phase II €8,000,000 2015 2019 Regional EFSE (Neighbourhood Window of the European Fund for South East Europe) €5,100,000 2009 2019 Regional GGF L shares for Georgia €10,000,000 2009 2019 Regional STAREP (Strengthening Auditing and Reporting in the Countries of the EaP) €1,000,000 2014 2019 Regional 57 WWW.EU4BUSINESS.GE WWW.EU4BUSINESS.EU