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The impacts of the investment are (i) improved access to financial services for MSMEs operating in rural regions outside the capital and (ii) enhanced resilience of Georgia''s banking system. It is expected that more prudent financial intermediation by banks, with a special focus on the regions, will lead to greater consumer confidence. This will be reflected by an increase in bank deposits and loans, as well as an increase in the private credit to GDP ratio.

The outcome of the investment is that TBC remains profitable and becomes a more resilient bank, prudently serving the diverse needs of Georgia's economy. TBC is expected to set an example for other banks in the industry and position itself to be able to withstand possible future financial stress by putting in place advanced approaches for maintaining capital adequacy, improving its risk management capability to exceed minimum requirements of Basel II and III, and improving efficiencies.

TBC will improve its service outreach to MSMEs in the regions, and diversify its risk exposure by (i) reducing borrower (group), sector and regional concentration; (ii) maintaining adequate asset quality and asset liability management; and (iii) ensuring adequate investment is made in human resources, processes and systems to deliver sufficient liquidity, capital adequacy and profitability.

The Georgia Country Strategy 2013-2017 is currently under preparation. The Georgia Interim Operational Strategy 2008-2009 identified financial intermediation as a priority for private sector development, noting that sustaining growth will require broadening access to finance. The strategy also highlights that agriculture and SMEs have inadequate access to financial services, and that lending support through financial institutions presents the greatest opportunity for ADB''s private sector operations. The recent crisis highlighted the importance of resilient banking systems to protect against adverse impacts on its population.

Financial sector development is a key focus of ADB assistance as set out in ADB''s Private Sector Development Strategy and Enhanced Poverty Reduction Strategy, which note economic growth, stimulated by private sector investment, as a key contributing factor in reducing poverty. These strategies also note the importance of generating jobs, with private sector employment being the major source of income for workers and their families. The Private Sector Development Strategy emphasizes ADB''s role in strengthening the financial sectors in its DMCs. It provides that SME beneficiaries of financial intermediation are important employers and providers of income to contribute to poverty reduction. Support of financial intermediaries is also important to instill confidence and rehabilitate the financial sector in crisis hit countries. The proposed loan is consistent with ADB''s Financial Sector Operational Plan and the 2007 report of the Working Group on Rural Poverty, which underscores the importance of rural finance, and promotes financial inclusion of underserved poor households, farmers and SMEs.