Caspian Energy (CE): Mr. Mammadov, how would you estimate the trends of development of the Georgian banking sector?
Shahin Mammadov, CEO at PASHA Bank Georgia: Georgia boasts by far the most sophisticated banking sector in the region. Considerable steps have been taken to strengthen banking regulation and supervision with regards to meeting international standards. The NBG has introduced an advanced risk-based supervisory regime, aimed at detecting risks at an early stage and allocating supervisory resources in the most efficient and effective manner. Most of the country’s lenders have relatively strong foreign owners. We found consumers very prone to technological advancements like in the majority of European countries. Meanwhile there is a room for assimilating corporate banking segment that is what Pasha Bank targets in Georgia.
CE: How does consumer behavior vary between the two neighboring countries, Azerbaijan and Georgia?
Shahin Mammadov: Banking is banking everywhere. But some features differentiate Georgia from Azerbaijan. The Georgian market is technologically driven. You can find customers who are not physically communicating with their banks at all as they are conducting all their dealings online. However, that is not our tactic. We are all about developing relationships with our customers, large corporations, and approaching them individually.
We find it hard to deal virtually. Face-to-face cooperation is preferable when referring to corporations. However, saving time is a most valuable issue so we are working on this direction. Georgian consumers are very price sensitive. They openly negotiate prices with banks. I think that this is one of the advantages of the Georgian market. Customers are aware of the terms, the costs, and it is easy to communicate with them. Rates are lower in Georgia than in Azerbaijan but still remain a point of negotiation. It is all of this that makes the Georgian market very interesting for us. As well as these factors, exchanging experiences between Georgia and Azerbaijan has been an important element for me.
CE: What are the main goals that you would like to achieve on Georgian market and how successfully are you implementing them?
Shahin Mammadov: We started our operations in Georgia in February 2013. It has been more than a year since we entered the Georgian market. In Georgia we tried to establish the same corporate strategy which we had already developed in Azerbaijan. However, the two markets are quite different. We were focusing on corporate and investment banking and found that the stock market is not well developed in Georgia. The investment banking is one of the main business lines of PASHA Bank in Azerbaijan. We have a good practice of supporting corporations to develop and get financing for their bond issuance via underwriting and market maker services. In Azerbaijan PASHA Bank is the market leader in that area. Accordingly, we have found it to be one of the main tasks here in Georgia. Georgian corporations are quite well developed, so attracting them and offering adequate services has been an additional task for us. Meanwhile, with our individual approach we do not find it difficult to supply all corporations with the requested services.
CE: Which innovative products can PASHA Bank bring to Georgian market?
Shahin Mammadov: We found out that in Georgia like in the majority of post-Soviet countries the stock market remains a developing issue. When we first started developing the stock market in Azerbaijan we overcame the challenges by making changes in the legislation, in the education of corporations and explaining the main advantages of security issuance. Creating the first success story was the hardest but the most instrumental step in its further development. After that we achieved agreement in terms of legislation. This is the first issue that needs to be developed in Georgia. Articles relating to corporate issuance should be more concrete. These issues can be easily solved. We just need one or two cases of cooperation with large corporations. Furthermore, it will boost the market. The finance sector is also less active in Georgia in comparison to in Azerbaijan. We started from non-banking credit institutions in Azerbaijan. Later on, we made good deals with the telecommunication, oil and gas industries. In Georgia we also need to find some good partners, either financial institutions or big corporations. In terms of this we need to negotiate with the National Bank, with the Ministry of Economy and Sustainable Development and with the Ministry of Finance. One or two such cases will then be a sufficient base for its further development. Here in Georgia we do not have a fully developed investment banking team. Therefore, at the beginning we will use our resources in Azerbaijan. They have good experience and will be useful in this process. During our work here the main obstacles in this direction have been the legislation, meeting with the large corporations, and explaining the difference between lending and stock issuance. We are open to holding discussions with any financial institution in regard to this.
CE: Which business directions is PASHA Bank in Georgia targeting to support?
Shahin Mammadov: We focus on what clients need rather than on selling banking products and have developed an open-architecture system, meaning that we do not limit our clients to specific services. We are prepared to support our clients’ activities inside and outside of Georgia. We are always with our clients.
The main segment of our clients is large and middle sized companies. Establishing long term relations with our clients is our main goal. Finding an individual approach of cooperation with each of our clients is the key issue for our bank’s policy.
Being a very important part of the Georgian economy and we see our mission in supporting it financially and intellectually. Currently PASHA Bank in Georgia offers various bank products to its customers, including trade finance products. The trade finance products are very important for us. We plan to create a volume portfolio due to these products. In this regard, we financed a trade finance conference. Representatives of several dozen leading Georgian corporations were in attendance.
CE: Is PASHA Bank planning to expand its shares on other markets?
Shahin Mammadov: We are equally ambitious about moving forward both regionally and internationally. Georgia was the first international market for PASHA bank. Turkey is going to be our next destination. We are ambitious to offer regional Bank for our customers. Aside from this, PASHA Bank has a number of strong international partnerships. For example, we are corporate governance beneficiaries of the IFC programme in Azerbaijan and work with the Black Sea Trade and Development Bank. We also work with banks in Europe, the US, Southeast Asia, China, and Japan. This broad global footprint allows us to support any client who is looking to do business in different parts of the world.
CE: What are the main advantages of PASHA Bank in comparison with your competitors?
Shahin Mammadov: We are not a transaction-driven bank. Instead, we are devoted to the relationship-banking model. As I already said we focus on what clients need rather than on selling banking products and have developed an open-architecture system, meaning that we do not limit our clients to specific services. We are prepared to support our clients’ activities inside and outside of Georgia, to open accounts at other banks, and to handle deposits. This is something we are promoting. For many years Georgians were more prone to developing businesses with its neighbor countries. Accordingly, PASHA Bank which becomes a tight link of Azerbaijan-Georgia and Turkey is the best and flexible scheme for businesses.
CE: Which institutional projects are you implementing?
Shahin Mammadov: As a bank which has been established just one year back we have several ongoing projects. First we started with our technological projects. This is the very sensitive issue on that market. In accordance, in September we migrated to the new core banking system, which was the start point for the future technological development of the bank. Georgian market is technologically driven, consumers are technologically sensitive that is why the next stage will be the creation of other interfaces and programs. They promote the supply of better distance services to our clients. Internet banking and plastic card operations are going to be launched soon for our customers. These projects are expected to be finalized till the end of the current year.
Another institutional project relates to corporate governance. The bank made a good start-up point in line with that. Risk management, including internal control has been a significant issue for us. PASHA Bank in Georgia started implementation of FATCA project. In this regard we are cooperating with Deloitte, one of the Big Four service firms.
For the next year PASHA Bank in Georgia will be more focused on creating better custumer services and improving the service quality. Development of internal decision making process will remain a key issue. We will work hard for fulfilling our internal reporting system of the bank. National Bank of Georgia started and we are finalizing the implementation of ICAAP procedures according to Basel Accord requirements.
Basel project will be interconnected and will go further in order to improve the risk management and internal control system of the bank.
CE: Which social projects are you supporting in Georgia?
Shahin Mammadov: Despite the Bank’s relatively short period of activity in the Georgian market, it has identified clear CSR aims and priorities as part of its Development Strategy. It has already successfully completed numerous projects relating to culture, education and sport. By implementing its CSR program, PASHA Bank in Georgia is actively supporting local communities and continuing to contribute to country’s further development. Helping to develop the business environment and committing to the welfare and cultural development of society is a key point for us. We recently sponsored the annual Business Brilliance Award Ceremony with an exclusive Business Development Forum for progressive Leaders, Marketing and Communications Seniors of Georgia, and its neighboring countries. As far as it was focused to find the tools to work smarter and keep up with the fast changing marketplace, we decided to support such useful event. PASHA Bank in Georgia is also actively involved in supporting sport and cultural events in Georgia. We are glad to state that the Bank is sponsoring Georgian Panorama in line with International Film Festival.
CE: How would you estimate the potential of Caspian Energy Forum?
Shahin Mammadov: Caspian Energy Forum has included discussions on all aspects of energy integration of the countries of the Caspian, Black Sea and Mediterranean regions into global energy markets. It is important that the focus of speakers, delegates and forum participants was on the key role of Georgia in energy, transport and infrastructure projects, the growing upstream gas sector, the Southern Corridor projects and the resource potential of the Caspian Sea.
Azerbaijan has been blessed with abundant hydrocarbons. Meanwhile Georgia has a lot of sun and wind. Energy is the most attractive business sector for foreign investors in Georgia. Baku-Tbilisi-Ceyhan pipeline is just one example that proves the abilities of successful cooperation between two countries. Currently climate changes oblige every country to develop renewable energy resources. So, the ongoing effective collaboration of two countries is inevitable.
The Caspian European Forum, the second part of the forum, is focused on development of the non-oil sector. The issues cover the innovations into the financial, banking, insurance, leasing, telecommunication, tourism, machine-building, construction and other sectors of the non-oil industry, doing business issues and creation of a business-government dialogue. We are quite optimistic regarding the future growth of Georgian economy and are proud to support it on this way.
