"Expert RA"

Expert RA has made a study “Crediting SME: time to choose”

March, 27th, 2008

The Expert RA rating agency has made a study “Crediting SME in Russia: time to choose”, presented at the Third annual professional conference “Financing SME – 2008”.

According to our study, SME crediting in 2007 grew faster than corporate and retail crediting. Corporate credit portfolio in 2007 went up by 49%, credits to individuals –by 57%, and SME bank credits grew by 62% to amount to 54.1 bln dollars. Credits to small business proper (revenues up to 5 mln dollars per year) were almost doubled and neared 21 bln dollars.

The first extensive stage of development has been completed – federal banks opened new branches and faced system limitations, demanding further geographic coverage and development of new attractive credit products. According to Oleg Ivanov, vice-president of Association of regional banks, “close proximity” of SME to crediting sources has become vitally important. So far possible channels for promoting bank services are underutilized in Russia, for instance, transactions through mobile operators or post offices. Presently Pochta Rossii has over 40 000 branches all over the country (Sberbank has much less), and only 20 banks take credit payments through post offices, and 1 bank gives credits through post offices.

“SME crediting has remained in the lead, but acceleration might be faster, – says Irina Velieva, Expert RA, bank ratings department. – As to margin, the segment is still quite attractive for banks, and “low base” effect is still in place. But the main reason for slow growth is inactive state policy. By 2010 the state effective strategy may bring the SME credit portfolio to 280 bln dollars, otherwise - only 168 bln dollars”.

According to Mikhail Voronko, OAO URALSIB, head of department, next to lacking state support there are some other SME credit limiting factors: poor development of the small business sector, individual entrepreneurship being the main element of growth, objective inability of banks to finance start-up enterprises, whose present share in the RF is very high. “The start-up sector requires synergy of banks and the state, – adds Nadia Cherkasova, TRUST SME development director. – Banks find it difficult to bear all SME-related risks by themselves”.