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Factoring is a relatively new product for the Georgian market, developing in 2007. The factoring market in Georgia began with the technical advisory support of European Bank for Reconstruction and Development’s (EBRD) Trade Facilitation Programme (TPF) to facilitate and pilot the implementation of factoring with a Georgian bank.

Despite the number of successful transactions and availability of the product on the market, interest in the product itself was quite limited at its inception. But over time, other banks in Georgia have also expressed interest in developing the business.

By 2011, around three commercial banks provided factoring services locally on the market. Seeing the opportunity to expand the factoring market, these banks began to promote the product through conferences and workshops for businesses and the regulator, the National Bank of Georgia (NBG). International experts, multilateral developments (MDBs) and Factors Chain International (FCI) provided their factoring expertise.

Factoring in Georgia: The current landscape

The only players that are currently offering factoring are commercial banks, who still mainly focus on domestic factoring (recourse and non-recourse). Georgia is an importing country, and respectively export volumes determine its low activity for cross-border factoring. 

As per the latest FCI Report for the Year 2022, there are three FCI member banks located in Georgia, which enables these banks to offer two-factor system cross-border factoring when needed. 

Regardless of the potential, the factoring business still is viewed by some as a last resort and expensive facility. This negative perception has created a hurdle for widespread adoption, and the facility has often been rejected outright by target clients without fully considering its features and benefits.

Through factoring, SME’s can convert the receivables into liquidity, which provides them with much-needed working capital. Depending on the region, the legal framework would determine whether the receivable would be a true sale, equitable assignment, pledge, or some other method of securing title over the asset. 

For example, under IFRS 9, the arrangement is considered a purchase of debt (if it is done on a non-recourse basis), which allows the factor to record it as an asset and not a loan, while enabling the client to remove the debt from their books. Ultimately, the factor ensures they have first rights over the receivable. In Georgia, factoring is treated and considered as a loan arrangement, and credit risk is assessed on that basis, which is one of the saddles for product development.

Until now, factoring in Georgia was solely provided by commercial banks. These banks conduct their operations according to Georgia’s banking legislation, regulated by NBG. Georgia does not have a law on factoring and is regulated by the assignment of receivables indicated in the Georgian Civil Code. 


In 2017, the EBRD took a leadership role in conducting a feasibility study of the local regulatory framework for factoring in Georgia, as well as studying obstacles to the successful operating business models for the product. The feasibility study was followed by technical and advisory support of EBRD, funded by EU in the frames of the EU4Business initiative and engagement of the government of Georgia and the National Bank of Georgia. This led to the development of the factoring law in Georgia. 

With the active leadership of the Georgian Investor Council (IC), the draft of the law has been finalised. At the same time, the EBRD coordinated the Feasibility of the Electronic Platform for the Registration of Factoring Transactions, with the Public Registry of Georgia as a successful enabler for the implementation of the new factoring legislation. The feasibility study and recommendations have been delivered and now the market is waiting for the next steps and technical outcomes.

In the new factoring law, there are stipulations stating that a factoring agreement may not be deemed a credit or loan agreement. The law allows participants such as factoring companies and microfinance organisations to offer factoring services in Georgia and assigns the NBG to supervise and regulate factoring.

Based on FCI Annual Review 2022, factoring operations show an optimistic picture over the past five years and Georgia’s increase of 22 % compared to the previous year is quire promising. However, factoring penetration in GDP still remains quite low, still representing circa 1.2% in 2021. The potential for it to reach an average ratio of 2.5% by 2024/25 is quite realistic. 

It is important to highlight the role of the Asian Development Bank Trade and Supply Chain Finance (ADB TSCF) Programme and its support in providing full-scope technical assistance to one of the leading banks in Georgia. 

What’s next for factoring in Georgia?

The incremental growth results in 2021 confirm that factoring is strong and can act as a beacon of hope for SMEs and the business environment during challenging times. While technology and automation continue their upward trend, many countries still do not have adequate infrastructure to address these challenges. 

However, COVID-19 accelerated digital adoption, and new solutions are being discovered to help with the technological infrastructure in Georgia.

Digitalisation is making substantial progress in the factoring industry globally, which of course, in turn, benefits the speed and quality of service. Like other regional banks in developing markets, for the smaller banks in Georgia, the process of atomisation and digitalisation of factoring will be long and strenuous.

The most important element of digitalisation should be to create products and processes that fit the different needs of customer segments. The focus must be on simple, transparent, and inexpensive solutions. As business and SME financing needs are growing, and the trade finance gap continues to widen, Supply Chain Finance is an important tool to bridge the gap.

Until now, the pool of the products that SCF provides uses only a limited number of services that are not in high demand, like reverse factoring. Additional benefits that come with this product, such as credit cover, receivables ledger administration and collection, are not currently utilised. As of now, credit insurance is still not available in Georgia, and it is still a tendency that banks are more active in Buyer Led products, where debtors are represented by large corporates.

It’s important to outline the World Bank’s technical assistance project on secured transactions reform, specifically Georgia Relief and Recovery for Micro, Small, and Medium Enterprises (MSMEs) in order to provide relief and support their recovery by strengthening the enabling environment for access to finance.

Taking into account governmental, multilateral and association support, we believe that the demand for SCF products will continue to grow in Georgia, leading to a more robust and diversified offering in the coming years.