RussianSmallandMedium-Sized Enterprises Forum: ‘Financial instruments for supporting SME’
On June 15, in St. Petersburg, within the scope of SPIEF 2016, the second Russian Small and Medium-sized Enterprises Forum was held. The Forum’s co-organiszr was the All-Russian Non-Governmental Organization OPORA Russia.
Issues relating to development of the SME enterprise crediting system, accessibility of credit, investments, financial and credit support, as well as the place and role of commercial banks in financing small and medium-sized businesses were discussed at the panel session ‘Financial Instruments for Supporting Small and Medium-Sized Businesses’.
The session was devoted to crediting of small and medium-sized businesses, which, as the business community notes, is impeded by high interest rates, difficulties in obtaining long-term loans and impossibility of getting deferred credit for development. At the same time, for the banks, this segment remains one of the most risky and problematical.
The moderator of the panel session was Managing Partner of the National Agency for Financial Studies Pavel Samiev. Opening the session, he furnished some results of an all-Russia survey of businessmen, which established that only one in five entrepreneurs raises external financing. The high loan interest rates or lack of need prompt them to reject this instrument. After all, an alternative to banks is provided by loans from friends and relatives or micro-financing institutions. At the same time, a third of the respondents have no knowledge about SME support measures. According to Vice-President and head of the Small Business Development Department of Sberbank Andrei Sharov, however, the demand for loans is climbing back. Sberbank extends a total of RUB 5 bn in loans to small and micro-businesses every week. The loans to medium-sized businesses come to treble this sum.
“Accounting is done in notebooks. Incomes for the owner differ from those for the tax authorities and again from those for the bank. And then we are surprised at how quickly overdue loans to SME are growing. Businessmen should be encourage to run their businesses above board”, Sharov stated.
For this purpose, Sberbank, together with the Bank of Russia, is changing how the credit subdivisions operate. The main task is not to request documents from the client at all. Instead, data can be provided by state bodies and other banks. Transfer to such a system will allow loans to be issued in just one day. The next stage is one-click loans. But all this is impossible until business start operating above board, Andrei Sharov is convinced.
His colleague from VTB Bank, Deputy President and Chairman of the Management Board Mikhail Oseevskiy, in turn presented the key points of the bank’s support programme for exporters. There are special VAT refund guarantees, beneficial loan terms, mechanisms for supporting subsidiaries, implementation of financing instruments with the support of state institutions, collaboration with export centres, and the like.
In addition, companies orientated on exports can obtain information and establish contacts with trade representations of the Russian Federation abroad through VTB offices. “Export is a difficult business; you need to be both consistent and persistent. And both the state and the banks need to support this activity”, Oseevskiy concluded.
The importance of incentives to SME was mentioned by President of the Association of Russian Banks (ARB) Garegin Tosunyan. First of all, Mr. Tosunyan is convinced that development funds need to be decapitalised. The current scope does not suffice. Another measure that will help the SME sector is expansion of refinancing by banks under pledge of prof-claims on loans extended to small and medium-sized businesses. It is also important to encourage banks to issue loans and make it easier for SME to access state resources and products. Finally, small and medium-sized businessmen need to have their funds guaranteed given that bank licences are being actively revoked.
First Deputy Chief of Staff of the State Duma Mikhail Kopeikin spoke about the various state support measures currently in place for SME and export. He, too, stressed the important of developing the SME sector in Russia.
His colleague, Deputy Director of the Department for Development of Small and Medium-sized Enterprises and Competition under the Ministry of Economic Development Alexei Shestoperov spoke about the measures that his department intended to undertake by the end of the year to improve the situation. The first thing to do is to make investment institutions and guarantee funds better known. The second is to formulate the requirements on these organisations at the level of the law. The third is to strengthen the role of credit institutions. The fourth is to involve the expertise of banks for better assessing the projects of businessmen applying for subsidies. And the fifth is to cut administrative costs for all participants in the process and go over to electronic paperwork.
Mikhail Mamuta, Head of the Service for the Protection of Financial Services Consumers and Minority Shareholders under the Bank of Russia, told how the Bank of Russia supports small and medium-sized businesses and how a special SME group had recently been set up in the service under his control. The results include, for instance, a programme for loan refinancing at 6.5%, which has already proven itself. Thanks to this programme the interest rate for the end borrower may be 9%, Mikhail Mamuta announced.
The Bank of Russia has also introduced standards for collaboration between finance companies and consumers, separating collaboration with small businesses into a special category. “This will help us protect the rights of the small businessman”, Mamuta commented.