Entrepreneurship: particularities and perspectives of development in Russia

The main priorities ofthis program are:– innovative companies– mid-sized enterprises– assistance in the development of leasing for small entities– support for beginner entrepreneurs via grants– creation of business incubators, industrial parks and entrepreneurship centersFinancial support for small and medium business is exercised through different channels. One way is through regional governments. In 2012 subsidies from the federal budget to regional budgets, with a focus on support to SME, were RUB19 bln (EUR475 mln). An additional RUB18 bln (EUR451 mln) is to be distributed in 2013. The volume of annual support is approximately 0.4% of the total loan portfolio of all banks to SME. These subsidies are meant to increase the volume of regional programs of support to SME that will in turn increase the number of companies which will receive financial support. The distribution of subsidies is not uniform across all regions. Regional leaders are: Moscow (7.5%), Krasnodar Krai (5.0%) and SaintPetersburg (4.6%). Regional outsiders: Jewish Autonomous Oblast (0.1%), Chukotka Autonomous Okrug (0.03%), Nenets Autonomous Okrug (0.03%).According to the most recent Doing Business research (2014), government measures implemented in 2012-2013 helped Russian Federation to move up 20 positions being amongst the top-5 countries improving the most in the year 2013.More detailed overview shows that this change in the country’s rating resulted from a number of improvements: – Revising electricity connection prices– Eliminating requirement to obtain cadastral passport on land plots– Abolishing the requirement to have the bank signature card notarized before opening a company bank account– Eliminating several requirements for construction project approvals– Reducing the time required to register a new building and other reformsThough the Doing Business methodology has limitations it reveals that Russia steadily moves towards and enforces crucial and right directions in changes for better conditions in doing businesses. The goal set by the government is to reach top-20 by the year 2018.Another way for entrepreneurs to obtain financing under favorable conditions is through an intermediary of SME Bank. SME Bank has implemented the State program of financial support for small and medium enterprises since 2004. The Bank’s primarygoals in SME support are:– assurance of equal opportunities for SMEs to access mid- and long-term financing– financial support, primarily to entities in the manufacturing sector and to those which realize innovative and technologyintensive projects; thus, changing the structure of lending– financing the building and development of infrastructure for SME support (business incubators, leasing companies, technoparks, etc.)Since 2007 the only shareholder of SME Bank has been state corporation “Vnesheconombank” (VEB). SME Bank provides loansand other forms of support to SMEs through a two-tiered system that includes a wide network of partners – banks, leasing and factoring companies, microfinance organizations, etc. The total support for SME as of 1 June 2013 is RUB91.2 bln (EUR2.3 bln), from which RUB70.5 bln (EUR1.8 bln) are distributed through 134 bank-partners, RUB20.2 bln (EUR0.5 bln) are distributed through 140 non-banking institutions and the rest RUB0.5 bln (EUR0.01 bln) are disbursed for the creation of infrastructure objects. The share of support through SME Bank in total lending to SMEs is 2% but it can be as high as 10% in target segments for SME Bank such as long-term SME financing, microfinancing, etc. The Bank’s support programs cover all 83 regions of Russia. More than 80% of all loans are for more than two years and the average interest rate is 12.7% (compared to 15-17% on the market).The procedure of partner selection for banks is being carried out in the following steps:1. A partner bank should verify its compliance with the SME Lending Program terms of selection2. If a bank complies with terms, it fills out a credit application in accordance with the selected credit product, including a questionnaire, and submits it to SME Bank with the necessary documents3. SME Bank checks to see that the partner complies with the terms, assesses its financial performance and determines the credit limit4. SME Bank notifies the partner bank about the possibility of participating in the Program and provides information on the established limit5. Once the partner bank accepts the offered terms, SME Bank and the partner bank sign credit and security agreements Since support through the Program is goal-oriented, SME Bank conducts remote control of partner banks allocating credits to SMEs (based on reports and documents submitted by partner banks) and on site control.Beginning in April 2013, SME Bank became the operator of the guarantee mechanism, which was developed by the Russian government. The purpose of the guarantee mechanism is an increase in availability of financing to medium businesses.Guarantees will be provided to certain banks that give loans for investment projects to medium-sized companies. SME Bank will guarantee 50% of an amount of a loan (but no more than RUB1 bln (EUR25 mln)) with maturity of 2-10 years. The maximumamount of guarantee fee is 1.8% per year [4].The business in Russia is a point of priority for the Russian economy and governmental bodies. First, it provides the potential for the diversification of the economy from the current concentration on natural resources. Second, SMEs create workplaces and, actually, about one-quarter of the employable population in Russia works at SMEs. Third, the SME sector is a potentially considerable taxpayer which can provide the state budget with a diversified income base. The growth rate of SMEs output after the crisis is about 19% per year, which can be treated as considerable. The Russian government is concentrating its efforts on providing support to SMEs and support for financial activities with SMEs, but at the moment the system of support is fragmented and not fully transparent. A comparison of SME financing market figures for Russia and Europe shows the considerable potential for the growth of banking and nonbanking financing to SMEs. Actually the share of Russian banks’ loan portfolios related to SMEs is the lowest in comparison with corporate and retail loans and, at the same time, the level of overdue loans in the SME sector is the highest. This is mainly caused by the fact that the majority of Russian banks are in the beginning stage of implementing SME lending technologies, but this process is intensifying.Moskovskaya А. А. (red.). 2011. Sotsialnoye predprinimatelstvo v Rossii i v mire: praktika i issledovaniya. M.: Izd. Dom VShE. Nort D. 1997. Instituty, institutsionalnyye izmeneiya i funktsyonirovaniye ekonomiki. M: Fond ekonomicheskoy knigi “Nachala”. Radayev V.V. 2001. Novy institutsionalny podkhod: postroyeniye issledovatelskoy skhemy. Ekonomicheskaya sotsyologiya. 2 (3): 5–26. URL: http://ecsoc.hse.ru/data/008/587/1234/ecsoc_t2_n3.pdf Radayev V.V. 2003. Sotsiologiya rynkov: k formirovaniyu novogo napravleniya. M.: Izd. dom VShE