Development of the Microfinance system in Russia

Development of the Microfinance system in Russia Anna Kaganova National Business Incubation Association Russian Federation anna_kaganova@mail.ru Small business development in Russia  SMEs have been existing for 12 years;  >5.6 millions (including 4.5 millions of individual entrepreneurs);  90 % of the total number of establishments;  44 % of GDP;  45 % of employment. Sources of financing Commercial banks Regional (State) Funds for Support of Small Entrepreneurship Business partners, relatives or other people Microfinancial Institutes • convinient and especially attractive for entrepreneurs • represent a flexible form of a classical banking credit • permit to set up the business without start-up capital and credit history Basic conditions of Microfinance  IInterest rate is approximately 6-8 % per month in the first borrowing month with its further reduction to 3-4 % per month  TTotal first credit sum fluctuates between $ 500 – 1000 USD  TTerm of payment is till 3 months More advantageous for small size borrowers than classical bank loans Main objective of Microfinance creation of a high dynamic and an effective financial system for SMEs for an additional stimulation of goods and services production and distribution, and also for a mutuality of start-up enterprises in the acquisition of getting profits and a capital accumulation experience Main tasks of Microfinance  to stimulate efficiency access to the financial resources;  to create work places;  to grow of tax proceeds;  to create a credit history for the further development of SMEs through the bank sector;  to barrier SMEs for their transition to the shady sector of economics. Why not a bank? • lack of guarantees; • lack of credit history; • necessity in operating with a small sum of money ($ 500 – 1000 USD); • necessity in quick credit operating (for several days – week); • necessity in other forms of support and consulting; • existent distrust to banks. Microfinancing Programs Position, summary (on Jan, 2003)  Average monthly microloans interest credit rate – 6%  Average loan size – $400 USD  Average volume of credit on one client – $650 USD  Average percentage of a loan repayment – 95%  Loans distribution: • trade – 55%, • rendering of personal services – 24%, • farming – 11%.  63% of all loans are given to beginner entrepreneurs  Demand for Microloans is evaluated on $ 4.5 bln USA Total quantity of MFIs in Russia - approx. 300 MFIs Social Effect of MFIs MFIs create new work places MFIs give an opportunity for economic development for a lot of people in different Russian regions MFIs usually work with economically unprotected entrepreneurs in regions and give them opportunities for economic development More than 70% of program’s clients are women Example: “Credits for Small Enterprises” microfinance program  Credit sum is from $30 till $1000 USD  Term for accepting the decision 1 day  Interest rate is 4 % per month  Guarantee conditions are 2 warranties (husband/wife, business partner or relative) [...]... clients using given them loans  Nowadays: Microfinance activity has become more mature The models of successful operation of MFIs have been worked out, leading to the mature creation MFIs Development Perspectives SMEs meet depositors directly attracting resources from financial institutions reinvestments the National Business Incubator Association of Russia Founded in 1997 by 22 Russian business incubators... Our Projects   APEC Cooperation Center – New Channel for the NBIA of Russia International Networking; The ACC foundation initiated in 2002;  Aims at facilitating Russian businesses’ development through international cooperation and promotion, in the APEC region especially;  Building Cooperative Networks between Business Incubators in Russia The ACC Principal Lines of Activities:      - APEC SME...Russian Microfinance System and Microfinancial Institutions Agriculture/country credit cooperatives Credit Unions Microfinancing Institute Commercial Banks State Funds (Regional Funds) for support of small entrepreneurship International Microfinance Programs ACDI/VOCA USAID programs Opportunity International FINCA International program of Russian Women’s Microfinance Chain, supported... composition and the structure of MFI’s authorized capital; norms of accounting and supervision; interest rates; special rules, providing financial stability and borrower’s protection MFIs function in such tax conditions, which put them in less favorable conditions than banks Last achievements in the sphere of Microloans In 2000-2002:  banks increased the intensiveness and volumes of the small business... interest rates and simplified the procedure of application examination and allowance of credits Last achievements in the sphere of Microloans (continued)  November 1999: Informal “Working group on microfinance policy” was established  2001: Agency of credit histories was established  2001: New legislative rules were adopted Under these rules incidence of taxation was reduced either on non-bank MFIs or... Information support of Russia – APEC SMEs business contacts; Special “APEC-oriented” SME staff training; Joint projects consulting support; and Partner search Take part in the Conference International Conference “Small and Big Business Interaction” Moscow, June 2004  to consolidate the efforts of entrepreneur community in the interests of entrepreneurship effective development;  to develop the cooperation . Development of the Microfinance system in Russia Anna Kaganova National Business Incubation Association Russian Federation anna_kaganova@mail.ru. create a credit history for the further development of SMEs through the bank sector;  to barrier SMEs for their transition to the shady sector of economics.