Banks in Abkhazia

APRA, a domestic bank cards and ATM system, is becoming more efficient in Abkhazia.

The number of cash machines (ATM) serving APRA and CIPS (Cross-border International Payment System) cards doubled in the past three months alone: there were 380 terminals in May 2016, whereas in September their number reached 700.

It is planned to increase their number up to 1,000 by the end of this year. 

Background

Isolation, in which Abkhazia has been throughout the post-war years (since the beginning of the 90’s), has automatically applied to the local banking system. The international payment systems, such as Visa and MasterCard, have never operated in Abkhazia.

Tourists always had to bring along the cash they were going to spend during the vacation. The aforesaid seriously affected the Abkhaz economy, since all that cash considerably increased the shadow turnover.

An idea to set up an alternative, domestic payment system in Abkhazia occurred back in early 2000s’. However, it couldn’t be fulfilled due to the lack of necessary funds.

The situation changed after Russia’s recognition of the Abkhazian statehood in 2008. In 2011, Russia allocated RUB700million loan [about US$11million] to the National Bank of Abkhazia for the development of banking system. A portion of this amount [RUB100million] was spent on development and introduction of the APRA system. 

However, it was all limited to procurement of equipment and software. And the money, allocated for APRA system could have been spent in vain if it hadn’t been for Beslan Baratelia, who headed the National Bank of Abkhazia since the end of 2014.  

Baratelia decided to reanimate the project, especially as it was high time to start paying back the loan, through which the project was implemented.

Is cash risk-free?

It was hard to take first steps towards introduction of the domestic payment system. For many years, people had got used to relying on cash and didn’t want to change their habits.

In January 2015, when he system was officially launched, the amount of cash transactions via APRA bank cards made just RUB20,000 [about US$300]. However, 6 months later, this figure reached RUB1million per day [about US$ 15,600], whereas by September 2016 the money turnover amounted to RUB2,5 million [about $ 40,000].

So far, the National Bank of Abkhazia has concluded partnership contracts with several Russian banks and now, the Russians, who come to Abkhazia, can withdraw money from their Russian bank cards at the APRA ATMs.

The CIPS card holders (predominantly the Russian tourists) withdrew RUB1,1billion [about US$16million] from the APRA ATMs in the first 8 months of 2016. Nearly the same amount was transferred via APRA system banking operations.

How it works or companions in misfortune

However, the payment system is still far from its full formation, since APRA has one big drawback- it’s just a local network.It’s impossible to use APRA card outside Abkhazia.

The Abkhaz National Bank’s leadership is engaged in talks with a new Russian National Payment Cards System so that the Abkhaz APRA cards could be used at least in the territory of Russia. Next year, this cooperation may be carried out through the Russian ‘MIR’ payment card.

However, even if it is achieved, it would be a half-solution.

This Russian system (100% owned by the RF Central Bank) was established in July 2014, after the Russian banks had started facing problems with Visa and MasterCard as a result of the imposed international sanctions. The ‘MIR’ system has been operating exclusively in Russia and therefore, cooperation with the Abkhaz APRA is quite possible.

What makes ‘MIR’ and APRA kin is that both of them emerged due to the sanctions.

Prospects

Nearly all public officials and pensioners are transferred salaries and benefits on their APRA cards. This system will presumably cover the commercial structures in the years to come.

The fact that there are no fees for money transfer and withdrawal from ATM should serve as an additional incentive to them. 

Since last year, 20% of those payoffs have been transferred directly to the Abkhaz National Bank’s budget. Due to the aforesaid, the National Bank earned nearly RUB1million [about US$16,000] on the APRA system in 2015. On the side note, the program itself cost the bank about RUB12million [approximately US$120,000].

“If we manage to maintain this growth rate over the next three years, I expect APRA to reach 70-80% return, says Beslan Baratelia.

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Published: 28.10.2016