Clothes, shoes, accessories, hygiene, cosmetics and perfumes – this is just a brief list of what one of the largest outlet store Navne offers its customers in Georgia at a high quality and low prices. The company was founded in 2011 and has been selling imported products since then through 23 stores across the country. Due to outlet character of purchases, Navne offers customers high quality products designed for US and European markets.
Similar to other businesses, the company was badly hit by the COVID-19 pandemic. Restrictions and closures have drastically changed their operations and plans. According to the company director Mrs. Ekaterine Nadiradze, all the stores were closed several times during the pandemic period, inflicting a huge loss for the retail company. To cope with the situation, Navne sold product on Facebook and its online platform, which was important to retain loyal customers, but not sufficient for maintaining and saving the business.
“Creating an online shop was a timely step, but it could not compensate for the shutdown of 23 outlet stores. During the first wave of the pandemic, our stores were closed for almost two months, and we had to take a loan to re-open, because the available products no longer matched the season. It was then that the long-standing partnership between our company and ProCredit Bank enabled us to apply the EU support programme and get a loan that was vital to keep the company operational.”
To overcome the business impediments caused by the pandemic, Navne founders applied to the InnovFin SME Guarantee Facility.
InnovFin, EU Finance for Innovators, is a joint initiative by the EIB Group (European Investment Bank and European Investment Fund) in cooperation with the European Commission under the EU Research and Innovation Programme Horizon 2020. It consists of financing tools and advisory services offered by the EIB Group, covering the entire value chain of research and innovation to support investments by micro, small and medium size enterprises (MSMEs).
The programme covers 50% of every loan disbursed by the local banks in Georgia and targets small and medium-sized enterprises and mid-caps that require investment and working capital to finance research, innovation and digitalisation activities. As a response to the COVID-19 pandemic, the guarantee has been increased to cover 80% of loans provided by the local banks to SMEs and mid-caps impacted by the coronavirus crisis for their working capital needs.
The InnovFin SME Guarantee Facility allows for offering more favourable lending terms to Georgian enterprises than otherwise available on the market. In particular, loans to SMEs provided under the facility are offered at reduced interest rates, but often also for a longer or more flexible repayment schedules, reduced collateral requirements and to high risk companies which would not be supported otherwise. The banks participating in the programme, ProCredit, TBC Bank, and Bank of Georgia, evaluate projects on the basis of their standard credit policies, taking into account the InnovFin eligibility criteria and in conformity with respective EU standards.
With the financial assistance, the company could replenish its warehouse supplies, buy seasonal products to the chain, and open the stores in compliance with all regulations, which was associated with high costs for each store. In addition, the EU and EIB Group support enabled Navne to negotiate with European and American brands with the goal of importing luxury hair care and cosmetics products to Georgia. By adding this new line of products, the network could attract an above-the-average segment of customers. All the innovations helped to strengthen the company’s vision, which implies continuous development of the chain and delivery of quality products.
Finally, with the EU and EIB Group support, the company not only survived on the market, but also opened three new branches since the onset of the pandemic, and managed to retain its human resources and even hired some additional staff. Today, the Navne brand employs about 230 people.
“The support of the EU and EIB Group was crucial for us. Getting access to funding after a two-month shutdown was very difficult, especially in economic crisis. Without involvement in the programme, Navne would have to close several stores and cut some jobs to replenish supplies for its other branches. Yet it was difficult to predict what potential consequences opening a limited number of stores would have or what could happen to those stores that we could not open in the first place. Could we even keep them, pay the rent, or keep paying the employees to keep them on standby? When a chain is not operating at full capacity, the company obviously loses the turnover, which results cancelling the planned operations, deviating from the policy and being stuck in one place or even taking a few steps back. With the EU and EIB Group’s support, we were able to avoid the threats,” Ekaterine Nadiradze says.
Today, Navne continues to operate at full capacity and with great enthusiasm. Despite the economic crisis, the chain is expanding, and the company has just opened another large store on one of the main avenues in Tbilisi. The company’s priority policy for the future is to keep the chain expanding, complete the rebranding process, and add several new stores, and continue supporting beauty and image of people in Georgia.
The EIB Group activities supporting Georgian MSMEs reinforce EU and Team Europe support for the recovery of Georgia’s private sector from the COVID-19 pandemic, as well as sustain jobs, maintain liquidity and operations, and fuel the economic recovery of Georgia. In 2020 alone, EIB Group provided EUR 70 million loans for MSMEs with leading banks and the new InnovFin SME Guarantee Facilities can cover up to EUR 250 million of MSME loan portfolio to boost recovery of Georgian businesses from the pandemic. Another EUR 100 million loan is supporting the reinforcement of the national healthcare sector’s ability to deal with the COVID-19 crisis.
Overall, the EU and Team Europe have mobilised around GEL 1.5 billion of new and reallocated assistance to help Georgia deal with the COVID-19 pandemic. Almost 2/3 of this amount is grants, the remaining are loans at favourable interest rates. That is one of the highest levels of EU assistance per capita to any country in the world and demonstrates the EU’s strong solidarity with Georgia at this time of unprecedented crisis.