Другое : Small business lending in Kazakhstan (предоставление кредитов малому бизнесу в Казахстане)
Small business lending in Kazakhstan (предоставление кредитов малому бизнесу в Казахстане)
I.
Introduction.
A. Reasons for undertaking research.
At
the times of Soviet Union, there wasn’t not only small or middle business,
there was not any business at all, everything was public and there was
no owners; so all countries of ex-Soviet Union have to develop their small
enterprises intensively. For Kazakhstan, it was very difficult, mainly because
Kazakhstan had more mineral industry and a little of agriculture, for the most
part - grain. Processing industry was very weak. When USSR broke up and young
Kazakhstan had to care about itself, enterprises needed huge amounts of money
to buy necessary equipment, employ qualified workers to work in mineral
industry and to develop processing industry, which demand, by the way, more
expenses. However, firstly, government and banks did not have enough money to
give credits to the enterprises and secondly, it was much easier to create
monopoly. Thus, our system of supporting small business was not correct from
the very beginning. But still, 10 years later when it seems that Kazakhstan had
grown roots and almost everything going rather well, our system of supporting
small business in a bad condition (see Appendix 1).
There
are several reasons why our small business develops very slowly. Firstly,
there was not any optimal government strategy it support small business.
Government did not reveal the appropriate branch and regional priorities for
small business. Secondly, another problem is corruption. As we know,
officials can build huge barriers before entrepreneurs, for example, different
checks, problems with registration, and others. Thirdly, a high taxes on
enterprises.
Small enterprises pay more taxes than big ones. This
system of taxation should be more fair, because for small enterprises there is
no stimulus not to develop, but even to conduct their own business. Lastly,
in our country there is no appropriate lending system. Banks do not want to
credit small business, because there is more probability that business won’t go
well, also there is big problems arises with preparing necessary documents in
order to receive a credit, another problem is liquid enough pledge. So we can
see, that enterprises collide with many problems when they are trying to
receive a credit.
What for our country should support small business?
Small business creates new workplaces, form middle class, develop trade and
production. If we would not develop small business, there will be no
competitive market, thus there will be no improvements in our market, in
products and services. So, we should develop small business in Kazakhstan to
build up our economy, particularly we should improve our crediting system of
small enterprises, because small firms have to develop themselves, but they can
not do that without money. Thus, our research problem is with which problems
small business meets, when it is trying to receive a credit.
B. Research structure.
Our research structure:
1.
Necessity to credit
small business. In this chapter, we will tell you about needfulness of
developing small business and some ways to realize financing and investing
support.
2.
Goals for receiving a
credit. In this chapter, you will read about aims of entrepreneurs who are
trying to receive a loan and on what kind of goals banks lend money.
3. Terms for receiving a credit.
You will read about necessary documents, required in banks and difficulties
with preparing these documents, about meeting with representative of credit
department, about pledge and interest rates.
4. Interest rates and repayment.
In the chapter we will tell you about one of the most important things, with
which each entrepreneur meets when he receives a loan – interest rates. Another
important thing you will read in this chapter is a day or period of repayment.
C. Research methodology.
We conducted our research on case study and survey. We
reviewed literature, Internet, publishing information, periodical,
science magazines, and reports of different banks. We conducted an interview with respondent Ms Sahauyeva Zhanar, who is
working as a chief accountant in “Oasis” company, this interview was organized
in 3 of April (checklist, see Appendix #1).
II.
Necessity to
credit small business.
First of all, let us define the
notion of small business. According to the existing law, to small business
refer new and working enterprises, in which number of employee not more than 50
and total cost of assets not more than 60 000 calculation indexes ( Law of Republic of Kazakhstan
from 19 July 1997 N 131-1 O gosudarstvennoi poddershke malogo
predprinimatelstva (with amendments to this law in 10.07.98 № 283-1; in
26.07.99 № 458-1; in 29.11.99 № 488-1)). Thus, for today maximum amount for
assets of small enterprises cannot exceed 46 500 000 tenge. Small and middle
business – the basis of market economy, it overcomes monopoly, provide employment
(see Appendix 2), provide revenues from its activity to government, provide
more innovations than other forms of business.
It
is important to credit small business. Most of small enterprises had to limit
their activity because of lack or inaccessibility of credits. Thus, now the
weakened business cannot carry out its functions, which is create new
workplaces, form middle class, develop trade and production, and which is
effective especially in sphere of agriculture, tourism, rendering of services to
the population, etc. Therefore, financing and investing support is the most
important for effective development of small business.
Finance and investing support for small business can
be realized in the following ways:
§
Crediting by second tier banks priority
projects by tender system on the preferential conditions;
§
Creating and development of
guarantee credit system in a second tier banks, on a basis of forming pledge
funds in regions;
§
Promotion of stimulation of second
tier banks;
§
Continuation of budget and second tier banks financing of
projects;
§
Development of venture financing;
§
Encouragement of credit partnerships creation,
mutual insurance societies (Finansirovanie I kreditovaniye subyektov
malogo biznesa, 2001).
Summary.
Thus, we can see, that it is
very important to develop investing and financial support of small business in
Kazakhstan. Small business needs money to expand their business, buy equipment,
employ more workers, that is why the key in developing small
business is investment in it.
References.
Finansirovanie I kreditovaniye
subyektov malogo biznesa, 2001 #"#">#"#">#"1.files/image001.gif" align=left hspace=12 alt="Подпись: Graph #1">
This diagram shows in what level each factor influence on
decision of the bank, when it is giving a credit to the enterprise. As we can see, the most important is financial
report – 31%, that is why it is very important for the enterprise to prepare it
in a best way. After financial statement of the company, follow market, which
takes 16%, this means information about customers, suppliers and enterprises’
borrowers, and lenders. The next is pledge –15%, we will consider it in more
details later.
(Source
of the diagram: Osnovniye prinzipi kreditovaniya MP, 2001).
Another
problem is getting sanction for realization a project. This is due to
difficulties with receiving confirmation in different state organizations.
There are several supervising organs whose corroboration you have to
receive, but they are varying depending on the project itself.
§
Ministry of Ecology
and Natural Resources regional representations
§
Sanitary-epidemical
services
§
State Supervision of
architecture and construction
§
Standardization and
certification organs
§
Fire services
§
Custom services (Dauanov I., 2000)
Mainly,
because of imperfectness of our organs, and especially due to corruption,
getting through the expertise takes 6 or more months.
C.
Meeting with representative of credit department.
No credit can be
given until a meeting of banker and entrepreneur. During this meeting borrower
should show and tell about his business, how it works, in short, he should do
the best to present his business. Banker will ask him questions about financial
statements of the company, about revenues and losses, so borrower should be
prepared for questions like
this. Credit
interview is often held in bank or in enterprise office. By the way,
entrepreneur should always offer to visit his office, and not only because
owner is proud to present his business, but also to present additional
information about his business like first appearance of the office, other rooms
and buildings; site, neatness of the office; show employees, equipment. This
information will improve impression of representative about business
(Sahauyeva, 2001). Representative in his turn has to be in connection with
borrower, keep abreast with the needs of the company, should offer bank in
order to solve financial problems of the enterprise, and should offer to submit
application for a loan. Thus the representative has to understand how business
works, risks connected with making deals with this company, keep up that
everything is legal, and look after how borrower spend credit (Osnovniye
prinzcipi kreditovaniya MPS, 2001).
From the interview with Sahauyeva Zhanar we learned
that “Oasis” company also prepared to the meeting with representative of credit
department. Executor looked through office rooms, presence of the basic, and
turnaround means, in general he was satisfied with total condition of the
business (Sahauyeva, 2001).
D. Pledge.
1. Required pledge.
Banks have to ensure their credits, which are given to
entrepreneurs in case of bankruptcy. Thus, all banks demand pledge maintenance
from borrowers. Banks accept as a pledge property, guaranties of other legal
persons, and other types of pledges. For instance, European Bank of
Reconstruction and Development accept real estate, motor vehicles, personal property, enterprises’ property
and goods, which are in business (Yevropeyskiy bank rekonstrukzii I razvitiya,
2001). In our considered “Oasis” company, the pledges were real estate of the
founders and commodity
stocks. Estimated value of the commodity stocks was equal to 20 mln. tenge.
2. Difficulties of enterprises with providing
a pledge.
It is very difficult to receive a credit on
ordinary terms, offered by banks. This is due to most enterprises are not able
to provide a pledge required by banks or their pledge is not liquid enough.
There are several problems, which are arising with providing
a pledge to bank. The most important is illiquidity of the pledge that if
offered by enterprises. Banks accept movable
and immovable property,
which is owned either by enterprise or entrepreneur, guaranties of other legal
persons, marketable securities (Kreditovaniye, 2001). Another important thing
is that banks usually underestimate cost of the pledge. And the last thing is
registration of documents confirmed your ownership of the pledge. Banks, when
they are giving out a credit, demand these last two items. Thus, if the
estimation of the pledge that is carried out by experts of the bank is free of
charge, then confirmation of ownership is carried out at the expense of the businessman. (Dauranov I., 2000).
As we already mentioned, the pledge of “Oasis” company to
the bank were real estate and commodity
stocks. But firstly, “Oasis” company offered only real estate as a pledge, but
in bank said that this is not enough, and then company added commodity stocks (Sahauyeva, 2001). Most probably, that bank
underestimated the cost of real estate, and then demanded more property in
order to ensure its money in a best way. It is well, that “Oasis” company could
offer commodity stocks, but if there were another company with not very big
amount of assets, we think, that bank would deny in borrowing money, because
there are so many companies that needs money to increase their turnover or to
buy some equipment, that banks could just choose the biggest company with a big
amount of assets. This is support the idea that banks are more pleased to work
with big companies and with big money, rather than with small enterprises.
Thus, it is very difficult to receive a credit. You may have
problems with providing a liquid pledge, demanding by banks. Even if your
business goes well and profitable, your company could just have not enough
assets to offer it to the banks, moreover, you are asking a loan to buy an
equipment, to increase your assets, but bank gives loans only to those, who
already developed. Thus, there is a situation, that rich become richer and poor
become poorer.
E. Interest Rates and Repayment.
Now, let us consider interest rates, which enterprises
have to pay as a payment to the banks for lending money. For example, interest
rates of NSBK are determined in dependence with concrete case and project:
§
On credits in national currency –
from 24%
§
On credits in national currency
with fixation of currency equivalent –from 17 %
§
On credits
in foreign currency – from 17% (Kreditovaniye, 2001).
These interest rates looks pretty high, but there are
a lot of programs on supporting small business, and many banks support this
policies and offer credits to enterprise on less interest rates. For instance,
Kazkommertz Bank offer 1% on foreign currency credits (Kreditovaniye (kkb),
2001). For example, our case company “Oasis” took credit under program of
supporting small business and took a credit in Bank Centercredit in national
currency under 10%.
The scheme of repayment of the credit and interest is
usually in most banks on personal scheme. “Oasis” company’s payment schedule
also was personally scheduled. They took credit on 9 months and made monthly
payments: part of the credit itself and part of interest rate. In first months
repayments interests charged on low rate, but closer to the 9th
month interest grew.
Summary.
Thus,
we can conclude, that entrepreneur has to prepare many documents, prepare to
meeting with executive of credit department of the bank, have a liquid pledge,
and have enough assets to give it as a pledge in order to be able to satisfy
the bank’s requirements. There are so high interest rates, but still there are
many programs on supporting small business lending and enterprises have to
discover first, which bank is more suitable and then go and find out its
personal specific terms.
References.
Dauranov I.(2000), Maliy bisnes: problemi oformleniya
kredita, Al Pari No.5:82.
Kreditovaniye, 2001 #"#">#"#">#"#">#"#">#"#">#"#">#"#">http://www.tacisinfo.ru/brochure/banksme/pzayav_m.htm
Sahauyeva Zhanar, 2001, interview
Tukayev A. (1998) Analys
raxvitiya malogo biznesa v Kazakhstane Al Pari
No.2:69-74
Turgulova A. (1999) Gde brat
dengi na maliy busines? Finansi Kazakhstana No.8-9:115-118
Umbetov A. (1999) The role of
banks in small business credit Al Pari No.2:29-33
Vilenskiy A. (1999) Finansovaya
podderzka malogo predprinimatelstva Economist No.9:88-90
Yevropeyskiy bank rekonstrukzii I
razvitiya, 2001 http://www.fund.kz/ebrr_c.html
VIII.
Appendixes.
Appendix 1
Checklist.
Respondent:
Ms. Sahauyeva Zhanar, the chief accountant
of “Oasis” company.
1.
Information about
company.
1.1
For what purpose
company was organized?
1.2
Sources of funded
capital (relatives, savings, sponsors)?
1.3
In which sphere do
you work (trade or production)?
1.4
How many employees do
company has?
2. Goals
of receiving a loan.
2.1. How do you think, do small
enterprises need to be credited?
2.2. How company used a loan?
2.3. What amount of gain did company
received from the loan?
3.
Loan.
3.1. In what bank do you prefer to
receive a loan?
3.2. What liquid pledge did the company
provide?
3.3. What interest rates did the company
pay?
3.4. In which terms the company can made
a repayment (monthly, quarterly or in the certain date)?
Appendix 2
Table #1
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