Institutional Investors Council (IIC): A New Stage in the Development of Georgia’s Capital Market

Georgia’s financial sector remains heavily dependent on banks. While banks are the backbone of the financial system, a healthy and sustainable economy also needs alternative sources of financing. Businesses need more ways to access capital, while accumulated savings and institutional capital need more opportunities to be invested in the economy. This is where the idea of establishing the Institutional Investors Council (IIC) comes in an initiative designed to support the development of Georgia’s capital market and bring new momentum to the sector.

The development of Georgia’s capital market largely depends on its ability to attract long-term capital, generate stable demand and offer investors a diverse range of financial opportunities. With this objective in mind, the Georgian Stock Exchange Group has presented its vision for the establishment of the Institutional Investors Council (IIC).

The initiative responds to several interconnected challenges currently facing Georgia’s capital market. The scale of institutional capital remains limited, stable and predictable demand is insufficient, the range of available financial products is relatively narrow, and both trading activity and market liquidity remain low.

Together, these factors create a kind of “vicious cycle.” When there is insufficient demand in the market, companies have less incentive to issue new financial instruments because they cannot rely on a stable investor base. At the same time, when the range of financial instruments is limited, investors have fewer opportunities to diversify their portfolios, making it more difficult to mobilise large pools of capital. One of the key objectives of the IIC is to help break this cycle.

Institutional investors have a particularly important role to play in this process. Their long-term capital provides an important source of market stability, while their consistent participation generates sustainable demand and helps mitigate liquidity risks. At the same time, the requirements and expectations of institutional investors can contribute to higher standards of corporate governance, while their presence in the market can serve as an important signal of confidence to other investors.

The IIC is being established to harness this potential more effectively by creating a space where institutional investors can exchange perspectives, discuss shared challenges and collaborate on priorities for the development of the capital market.

The Council’s concept goes beyond simply providing a forum for meetings and information exchange. The IIC is envisioned as a platform for collaboration, a collective voice for institutional investors and a strategic partner in capital market development. Its purpose is, on the one hand, to help consolidate the positions of major investors and, on the other, to facilitate more effective dialogue with the government, regulators and other market participants.

Importantly, the IIC is not intended to operate as a new association, commercial entity or additional bureaucratic body. Instead, it is envisioned as a flexible platform for cooperation, designed to contribute to the development of the broader market ecosystem without creating unnecessary administrative barriers.

The Council’s activities will cover several practical areas. These include advocating for the common interests of institutional investors and supporting relevant legislative initiatives, facilitating continuous dialogue with the National Bank of Georgia and the Ministries of Economy and Finance, supporting the development of new financial instruments, and promoting the adoption of international best practices in the Georgian market.

For institutional investors themselves, participation in this process also offers practical value. Cooperation provides an opportunity to contribute to the creation of greater investment opportunities and increased market liquidity, take part in shaping processes that are important for the market, and exchange knowledge and expertise with other leading market participants.

The establishment of the IIC will be a gradual process. The first stage will focus on the comprehensive identification and analysis of the barriers currently facing the market. This will be followed by an agreement among Council members on strategic priorities, which will provide the basis for establishing dedicated working groups on specific issues. The next stage will involve developing the first concrete initiatives and coordinating their implementation.

The establishment of the Institutional Investors Council forms part of the Georgian Stock Exchange Group’s broader strategic vision. Its 2026–2027 development agenda seeks to break the market’s existing “vicious cycle” through two key directions: attracting institutional capital and advancing technological modernisation.

In this context, the IIC has the potential to become an important platform that brings market participants together around shared challenges and transforms dialogue into concrete initiatives. Greater participation by institutional investors, stronger and more stable demand, the development of new financial instruments and higher market standards all ultimately serve a common objective: the creation of a deeper, more liquid and more competitive capital market in Georgia.