English / ქართული / русский /
Kristine Omadze

Annotation.Our research aims at describing the modern credit relationship and reflecting their impact on the more interesting topic - ecological environment and the development of green economy. In this regard, the most demanded type of credit - mortgage loan, whose long-term interest and desired interest rate is due to the growing demand for it. This determines the modern credit policy and the attitude of the public to the comfort and ecologically respecting the environment. In addition, the modern system of private and state lending is described as a combination of financial flows to satisfy the demands of the public to live in the green economy and environmentally clean environment

Keywords: credit, mortgage, credit relationships, financial system, green economy 

In the modern world, the dominant mechanism for the realization of the functioning of the financial system is the financial market,where the credit market is an integral part of it. It is well known that the market is a socio-economic institution that ensures that buyers and sellers get in touch and make a transaction. (Jeff Madura, Financial Markets & Institutions,13th edition.2021:3).

Researchers most often talk about the financial market, money market, loan capital market, credit and securities market, the borders of which have undergone a wide transformation in recent times. The most typical outlook can be grouped as follows: The money market is most often associated with the financial instruments market for a short period of time, usually up to one year. While the loan capital market is perceived as a market for long-term financial instruments, a number of authors consider it to be a securities market as well.  (Jeff Madura, Financial Markets & Institutions, 13th edition.2021:117)

At the same time, a certain category of economists consider credit relations under the securities market. It is carried out through securities, which is a more realistic definition. Based on comparisons of functional differences and key features, it is possible to formulate the set of common and distinguishing features that are characteristic of these financial markets (see Table 1).

Table 1

Characterization of key segments of financial markets


Money Market

Loan Credit-Capital Market

Secondary Market of Loans

Securities Market






Economic essence

Satisfying demand for working capital

Loan capital movement services and growth.

Refinancing of issued loans to increase supply

The direction of the movement of funds

Demand – supply of the object

Funds payable

Optimal cost

Secured assets and loans



Usually does not exceed the rate of inflation

Usually above the refinancing rate

Defined in the trading process

Defined in the trading process

Time (length)

Up to 1 year

More than 1 year

More than 1 Year

Determined by the release conditions

Property Rights

Will be handed over to the buyer

Retains the creditor

Will be handed over to the buyer

Remains with the issuer

Source: Table compiled by the author. 

The credit market performs its functions through credit relations, which in turn include specific forms, types and methods of lending. The functioning of credit relations is to some extent related to all segments of the financial market. Accordingly, the credit market can be considered as a traditional node of loan capital, where the main instruments are cash loans and credit agreements. The credit market space includes lending capital, which includes the deposit and deposit market, the secondary credit market, and partly the money and stock markets.

The modern market economy is characterized by the monetary form of credit, as money is the universal equivalent, the universal means of circulation and payment. Without the monetary form of credit, any business form in the country would be impossible to operate.

In the economic relations of modern developed countries, the mixed monetary form of credit dominates, in the sale of goods within the country, it is widely used to sell goods on credit and repay its value in the form of monetary credit. In foreign economic relations between countries, the value of export goods is reimbursed in the form of cash loans.

In terms of market relations, there are different forms of commercial, banking, state, consumer and international credit.

  • Today, given the green economy and the demand for living in an ecologically clean environment, as the analysis of the credit market services shows, the promising segments of lending include:
  • Credit market of the non-financial sector of the economy;
  • Leasing of technical means and technological equipment;
  • Credit markets of financial institutions;
  • Consumer credit markets;
  • Debt securities markets. (Including government, municipal and corporate bonds, promissory notes, securitized and structured liabilities).
  • An essential feature of any loan at the present stage is its provision, on the basis of which organizations working on non-performing loans have become widespread.
  • All credits can be divided according to the nature of collateral:
  • Unsecured loans (characterized by high risk and considered justified in terms of high

credit rating);

  • Secured loans (characterized by reduced risk, the value of the collateral is determined by the ratio of the loan amount to the market value of the property).

In the practice of lending are used as collateral: bonds, stocks, simple promissory notes, commercial acceptances, bank acceptances, bill of lading, certificates of deposit, pledged real estate, pledged movable property, debit debt, current insurance, etc. In developed credit markets, collateral is seen as an additional obligation (collateral), as collateral or security (security). Self-sufficiency does not indicate a high quality of credit compared to an unsecured loan, according to the accepted practice, its amount exceeds the maximum limit of the loan that can be issued to one borrower. Foreign mortgages are widely used to protect the rights of participants in all stages of credit and mortgage relations in overseas markets, including rollover mortgages, second mortgages (bank loans issued under the first mortgage, with the exception of US). Under a number of state laws, local banks, trust companies, and in case of debt arrest, when the bank is allowed to repay previous liabilities.).

The functions of special credit institutions, the types, volume, place and role of their operations in the country's economy are regulated by the state. In economically developed countries, special credit institutions have heterogeneous functions and roles. The following types of credit institutions currently operate in most countries:

• Mortgage banks;

• Investment banks and investment companies;

• Mutual Savings Banks, Loan - Savings Associations.

A typical example of a mortgage bank is the Tbilisi Noble-Local Bank, founded in Georgia in 1875 and headed by Ilia Chavchavadze for 30 years (I. Asatiani, 1994: 26). "The bank operated within the Tbilisi province and carried out loan operations, both in cash and on credit marks, ie within the framework of a mortgage. The loan was issued for a long term of 43 years and 6 months for rural land and 27 years and 6 months for urban real estate. Short-term loans were issued for 1 to 3 years, in cash. With real estate mortgages, from the annual profit that was left after all the expenses and losses. "

Typically, mortgage banks provide mortgages on real estate, land, buildings, and other collateral. The borrowers are mainly farmers and smallholder farms. Mortgages are based on private ownership of land and, unlike commercial loans, mortgages are long-term. At the present stage much more attention has been paid to the issues of ecologically clean environment, green economy. In this regard, the specific activities of mortgage banks lead to the formation of their passive and active operations, which are substantially different from the operations of commercial, savings and investment banks (see Table 2). 

Table 2

Balance sheet of state and private mortgage banks




1. Utility Bonds

1. Cash and accounts with credit institutions

2. Long-term loans

2. Long-term loans

3. Transitional credits

3. Securities

4. Own funds

4. Transitional credits

5. Other liabilities

5. Other assets

Jeff Madura, Financial Markets & Institutions, 13th edition.2021 

There have been significant changes in lending techniques recently. Previously, banks used to issue loans under mortgages, until the moment of realization of the mortgage or at the expense of their own funds. At present, banks do not provide advance lending, so they issue loans on the basis of funds received from the sale of mortgage issues. In addition, government funds play an important role in the passive operations of mortgage banks in many countries, which is reflected in the balance sheet under the article "Transitional loans".

In recent years, in order to attract monetary resources in the face of fierce competition between mortgage, commercial and other credit institutions, mortgage banks have often resorted to unconventional operations to increase their income, which is reflected in attracting deposits from individuals.

Particular attention is paid to the green economy and ecologically clean environment, and for this purpose banks use the placement of their own funds in securities, leasing and factoring operations. Mortgage banks are trying to expand their operations through diversification, as their current state is closely linked to changes in the economic conjuncture driven by the green economy. Slight setbacks in the economy of Western countries, especially in construction and agriculture, have a negative impact on the condition of mortgage banks as the risk of debt repayment increases.

In Georgia today we have two investment funds that finance (invest) various sectors of the country's economy State Pension Fund. JSC "Partnership Fund" is a state investment fund, which was established in 2011. "Partnership Fund" was established on the basis of consolidation of large state-owned enterprises in the field of transport, energy and infrastructure. Etc.) The activities of the "Partnership Fund" are carried out in two main directions:

1. Asset Management - The fund's portfolio of assets consists of the following companies of strategic importance.

- Georgian Railway - 100% share.

- Georgian Oil and Gas Corporation - 100% share.

- Georgian State Electrosystem - 100% share

- Commercial electricity system operator - 100% share

- JSC "Telasi" - 24.5% share.

2. Investment Activities - The Fund's portfolio currently includes several projects in various sectors of the economy with a total value of more than $ 1 billion. (www.fund.ge) The Fund is authorized to invest only in Georgia and its strategy is aimed at attracting and supporting private investment in priority areas of the Georgian economy, such as: energy, agribusiness, manufacturing, real estate and tourism, infrastructure and logistics.

There is also a second Co-Investment Fund (GCF) in Georgia (www.gefund.ge), which was established in November 2013 and is a private investment fund. The goal of this joint-stock fund is to invest 80% of the property accumulated in the fund in the priority areas of the Georgian economy (tourism, energy, agriculture) over the next five years.

Regarding Pension Fund – more than 1,5 billion GEL is under management of this fund, however, it is not decided yet where and how that funds should be invested.


Thus, the study-analysis of the activities of special banking and non-bank credit institutions showed that they are active structural elements of the credit market in modern developed countries and significantly contribute to the establishment of the institutional structure of credit markets and their proper functioning. It should also be noted that they play an important role in the macroeconomic stabilization of the country, especially in times of financial crisis. At the same time, the current financing methodology in Georgia needs further research, because the creation of a green economy and ecologically clean environment is equated with a high standard of living and comfort. In this regard, this product is focused on the more affluent layer and its popularization and wide introduction in credit policy is a matter of the future. 


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