Rating action

Scope Ratings GmbH (Scope) has assigned to JSC Microbank Crystal (Crystal) a first-time issuer rating of B+ and short-term debt rating of S-4, both with a Stable Outlook.

The full list of rating actions is at the end of this rating action release.

Key rating drivers

Business model assessment: Focused (Low). The issuer rating is anchored by the Focused (Low) business model assessment. Crystal operates as a licensed microbank in Georgia since February 2025, after been established as an independent microfinance organisation in 2007. Its business model is focused on microcredit, mainly micro businesses, agricultural and SME loans that represent around 60% of the loan portfolio as of June 2025. Its business diversification is still limited, since before been granted the microbank license, Crystal was not allowed to capture customers deposits, reducing the scope of operation as a full provider of banking services.

The size of the bank is limited compared with large commercial banks at national level, but relative to its microcredit niche segment the bank is the largest player with total assets of GEL 580m (app. EUR 200m) as of YE 24. Geographic diversification is well executed across the country, supported by the nature of its microcredit strategy, with operations in almost all regions and with a distribution of exposures in rural vs urban areas of 46% and 54% of the loan portfolio as of June 2025, respectively. We expect Crystal to continue its ambitious strategic growth to further expand its leadership in the Georgian microfinance sector.

Scope views the transition to a microbank as a strength, as this allows for greater business diversification on both sides of the balance sheet and to access broader market segments. However, expanding its offerings to the full set of lending and savings’ products allowed within the banking licence will take time, and the successful execution of its strategy in a highly competitive banking sector is yet to be proven.

Due to the strategic focus on microfinance and growth prospects in its niche market, we expect Crystal’s business model to remain unchanged in the medium-term.

Operating environment assessment: Constraining (High). The assessment reflects the operation of Crystal in its home market, Georgia.

Crystal’s operating environment is focused exclusively on its home country, Georgia. The country is a small emerging economy that still lags regional peers on several macroeconomic indicators (e.g. unemployment rate, GDP per capita, economic diversification), despite gradual improvements and structural reforms in recent years that have supported the economy, improved GDP growth and strengthened the labour market. However, current social tensions, stemming from a political crisis and contested election as well as increasing geopolitical risks in the region, raise economic uncertainty and market confidence volatility, and remain an area of attention.

Banking regulation in the country is aligned with Basel 3 standards. The regulatory framework for microbanks is closely aligned with the banking regulatory framework.

Scope arrives at an initial mapping of ‘b’ based on a combined assessment of the issuer’s operating environment and business model.

Long term sustainability assessment (ESG factor): Developing. The assessment reflects Scope’s view that the issuer is embracing changes to ensure the long-term sustainability of its business model. Progress made may be tangible but does not warrant further credit differentiation.

Crystal plays a relevant role as the largest microbank in the country, with a clear strategic focus on social impact providing access to microcredit, supporting entrepreneurial and agricultural sectors as well as facilitating financial access, to improve the social and economic conditions of a segment of the population that has not easy access to traditional banking products. Initiatives related to social impact and financial inclusion are key part of the bank’s strategy, supporting the strength of the franchise compared to other players in the micro banking sector in Georgia.

Digital capabilities are a relevant factor supporting growth, optimisation of distribution channels and accessibility for customers, mostly for those in rural areas. This should lead to improvement in cost management and efficiency going forward and supportive for the business model, which at this stage have not translated into relevant efficiency improvements. Scope expects that the execution of the strategy and growth will allow for monetization of digital capabilities with efficiency gains in the medium-term.

Governance risks are limited as we consider the oversight from the two largest international and institutional shareholders (with a combined 59% shareholding) to add a relevant layer of institutionalisation. In our view this improves the risk management framework and supports the implementation and execution of good practices, without raising elements for key man risks, which is a common characteristic of small entities in less mature markets.

The long-term sustainability assessment leads to an adjusted rating anchor of ’b’.

Earnings capacity and risk exposures assessment: Supportive (+1 notch). The assessment reflects Scope’s view that earnings capacity is stable through economic cycles and provides a strong buffer against losses. Risks are well managed and are highly unlikely to lead to losses capable of undermining the issuer’s viability.

Crystal has demonstrated a supportive and improving profitability track record in the last five years. Following regulatory changes in 2018 and subsequent changes to its strategy, the bank has successfully implemented underwriting standards and cost management practices with a focus to support recurrent and stable earnings.

Return on RWAs has reached an historic high of 4.3% and RoE of 27% in 2024, supported by a growing base of net interest income as the main source of revenues, linked to the strong growth of the loan portfolio. We expect the revenue base to continue growing in the medium-term as the execution of the strategic plan delivers on the prospects of strong loan growth for the next 3 years.

Crystal’s asset quality is adequate, considering that around 70% of the loan portfolio is unsecured, reflecting the microfinance nature of the business. The loan portfolio is granular and does not evidence relevant concentrations, with an average ticket of GEL 4,300 and average maturity 24 months. The Stage 3 ratio is 2.7% as of June 2025, with a NPL ratio (local GAAP) at 8.33% (includes past due >30 days and restructured), which we consider adequate notwithstanding the structurally higher risk profile of microfinance.

While the change to microbank will allow for faster growth of the loan book, we expect asset quality to remain stable following the recent implementation of risk management and collection policies that improve oversight and control of early deterioration.

Financial viability management assessment: Adequate. The assessment reflects Scope’s view that financial viability management provides some buffer and, under a base case scenario, could not imminently push any metric close to minimum requirements or jeopardise the issuer’s financial viability.

With a CET 1 ratio at 15.4% as of June 2025 and a buffer to requirement of 500bps, Scope expects Crystal to maintain an adequate capital position in the medium-term, moving closer to the management buffer of 200bps above CET 1 requirement as the balance sheet grows. Crystal’s funding structure includes more than 15 counterparties, both international and national financial institutions, that represent the main source of funding, considering the historic limitation on customers deposits. The funding profile is well distributed across counterparties and maturity and has a currency distribution that allows also for cost optimisation, while having in place adequate hedging policies to limit currency risk.

Liquidity is strong, as it responds to the need of ample available resources to support the portfolio growth, with an LCR at 210% as of June 2025.

The expectation of an increasing base of customers deposits should allow for a diversification of the funding sources and also a reduction in funding costs, moving away from the concentration from financial institutions, which it is still to be proven under the execution of the microbank license.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that the risks to the current rating are balanced.

The upside scenarios for the ratings and Outlooks are (individually or collectively):

1. An improvement of the operating environment assessment for Georgian banks and microbanks, could drive a review of the initial mapping for the issuer rating.
    
2. A material improvement in efficiency and digital capabilities that could be materialised with an evident strengthening of the business model, while maintaining strong governance and risk management practices, could lead to a positive review of the long-term sustainability assessment.
    
3. A sustained strengthening of capital metrics supported by a more conservative capital management and well diversified funding structure, could lead to a positive review of the assessment on financial viability management.

The downside scenarios for the ratings and Outlook are (individually or collectively):

1. A significant deterioration in the operating environment for Georgian banks and microbanks, which could result from prolonged political uncertainty and tensions, could lead to a negative review of the operating environment assessment.
    
2. Pressure on profitability due to a lower ability to generate sustained revenue, higher funding costs and/or higher impairments, could lead to a negative review of the earnings capacity and risk exposures assessment.

Debt ratings

Short-term debt: S-4. The short-term credit rating is derived from the long-term issuer credit rating. The rating is consistent with Scope’s long-term/short-term rating correspondence table.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

JSC Microbank Crystal

Issuer rating: B+/Stable, New rating

Short-term debt rating: S-4/Stable, New rating

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for this Credit Ratings and/or Outlooks, (Financial Institutions Rating Methodology, 10 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Carola Saldias, Senior Director
Person responsible for approval of the Credit Ratings: Karlo Fuchs, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 11 August 2025.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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