Russia

Loans to small businesses

If you believe the World Bank, IMF and other influential international organization, the main trouble our economy is its excessive "centralization" and dependence on commodity factors. "Centralized" stems from the fact that we have very few SMEs and their contribution to the total national GDP quite small compared with the contributions of the large companies.

The issue of small and medium businesses with enviable frequency rises to the highest level: the State Duma, the government, the Federation Council, the Chamber of Commerce, but the special promotions for the better is not observed, ending at the lack of resources for their own development in small business, and also impossible to take credit for business from banks. In the past year, banks to lend to small businesses allocate no more than three percent of total lending to non-financial sector.

The reasons are obvious. The Bank recognizes that loans to small businesses are quite risky, because there is no assurance that the company will be able to quickly get up and start to generate cash flow to service its debt.

As small business loans is quite high risks, the loans granted by banks have to form a reserve, but such a "luxury" affordable only to large financial and credit institutions, which are not very interested in working with small businesses. It is no secret that Russia's leading banks or serve the most profitable entities or budget cash flows, or the leading companies in various industries. Small banks are faced with the above mentioned risks and challenges, forcing them to draw conclusions about the high risks of the business.

Bank analysts, however, do not exclude the possibility that lending to small businesses will open a "second wind." This may be due to several factors at once. First, the market appeared large foreign banks, accustomed to lend small and medium businesses. In this area, they have a lot of experience of risk management, as well as they have the necessary resources to the development of loan allowance provided to small businesses.

The second factor that can objectively contribute to the growth of small business lending - is the growth of risk in granting loans to individuals. As experts, consumer loans for banks become less attractive because of the high risks and the fact that the market is pretty much already "mastered." Now banks have become necessary in the development of new areas and one of them could be lending to small businesses.

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Small businesses that are new to the market, feel the greatest need in the credits, but from the point of view of the bank they are the poor borrowers. They have no collateral, no experience, speed, success stories, normal reporting.

In Russia, bank lending to small businesses so far developed well. According to statistics small business needs met by about thirty percent. Business loan for small businesses is not uncommon. True, still remain many problems: flawed mortgage law, the quality of the collateral and reporting of businessmen, reserve requirements imposed on banks by the Central Bank of Russia.

For further development of the small business lending banks need to solve two technical issues: resource base, as well as minimize the risk allocation. Provide loans to those who are only at the start, the banks are not solved. Lending to individual entrepreneurs met by 4-7 percent, according to estimates of the Resource Center of small business potential of this market is more than five billion dollars. Although it is unlikely that in the near future, banks will participate in the funding of the initial stages of development of individual entrepreneurs and small businesses. Few can afford the development of small business loan programs at their own expense, or has in his possession access to cheap resources, because of their status. To date, the domestic banks to such concerns Vneshtorgbank that year gave SME loans worth about five billion rubles.

Loans to small businesses by the standard grades start at the amount of thirty thousand dollars. The fact that less than a micro-credit. In cases where the business does not fit the formal requirements, no collateral, just starting to work, the number of its employees and the turnover is much less than the threshold values, then the bank's risk zone begins. Most banks no financial power, with which you can afford to take the risk. Therefore, banks and do not want to bother with trifles very risky, and can not. Unlike specialized microfinance funds and credit cooperatives that exist due to different foreign loans, grants and funds shareholders. They are more free in the regulation of their activities, and have more room to maneuver.

Today, the market has several hundred credit cooperatives, unions, foundations, etc. According to research the Open Economy Institute, conducted last year, the total portfolio of microfinance institutions for the year amounted to $ 94 million. In this case, microfinance institutions to assess the borrower's approach is more flexible than the bank and ready to work with a fairly small amount of the loan. According to studies, the value of a loan to the MFI is in the range of 600-1200 dollars. Consumer credit in the bank, in most cases far exceed the size of the "business" loan to the microfinance organization. Therefore, banks should make a serious effort to properly assess the prospects of microcredit.

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