Vnesheconombank Deputy Chairman Mikhail Kopeikin’s Interview to TV Channel Russia-24

RUSSIA-24,
INTERVIEW,
12.07.2010. 21:42

HOST: Why are small and medium-sized enterprises so poorly developed in Russia, why do banks extend credits to businessmen at such high interest rates, how is the state going to support businessmen – this what Vnesheconombank Deputy Chairman Mikhail Kopeikin told my colleague Irina Matjushenko about in his interview.

Reported by Irina Matjushenko

CORR: At present, the share of small and medium-sized enterprises (SMEs) in the Russian economy is evidently insufficient. For example, in European countries 60 and even 80 percent of budget revenues might be generated by small and medium-sized enterprises.  Tell us why small and medium-sized enterprises are so poorly developed in our country?

Mikhail KOPEIKIN, Vnesheconombank Deputy Chairman: The main reason is that our small business is only 22 years old. I’d like to remind you that in 1988 a law on cooperatives was passed, which made it possible for cooperative movement and then small and medium-sized enterprises to develop. Over these 22 years the number of small and medium-sized enterprises as well as individual enterprises amounted to more than 5 million 600 thousand. Thus, their total number increased by more than 40 times. As far as this period is concerned, it’s a pretty good dynamics.

CORR: Vnesheconombank commits money to support small and medium-sized enterprises including monetary funds from the National Wealth Fund. Will you tell us how much money will be provided to small and medium-sized enterprises in 2010?

Mikhail KOPEIKIN: I’d like to start with the year 2009 because in terms of supporting small and medium-sized enterprises it was a critical year and the state committed a significant amount of funds to finance programs of supporting small and medium-sized enterprises. In particular, Vnesheconombank received 30 billion rubles from the National Wealth Fund, and moreover, Vnesheconombank contributed another 10 billion rubles to the Russian Development Bank’s charter capital. 30 billion rubles were also provided to the Russian Development Bank to implement the program of supporting small and medium-sized enterprises. So, 40 billion rubles were committed for supporting small and medium-sized enterprises.

CORR: And if we mean 2010?

Mikhail KOPEIKIN: We plan that only under the program of providing the state’s support for SMEs 55 billion rubles will be committed by the end of 2010. The total amount of funds to be provided to SMEs is scheduled to reach 100 billion rubles by the end of 2010.

CORR: You’ve said 100 billion rubles. Is this a large or a small sum of money on the national scale?

Mikhail KOPEIKIN: Compared with the year before last, or two, three years ago this is a huge sum of money, many times more than in the past. But if we mean support for SMEs in general this is a small sum. By various estimates, it’s about 2-3% of the amount of funds used to finance SMEs. In my opinion, a development institution’s goal is not to take the whole market or a significant part of it but, for example, to encourage those sectors of SMEs, which are not attractive for commercial banks and where risks are high. So, one of the most important lines of activity now is to provide support for SMEs operating in the innovative and high-technology sector.

CORR: Which companies are supposed to receive the said money in the final analysis? You’ve mentioned innovation business. And if we talk in general terms, which SMEs can receive the money in the first place? Are they trade or construction companies?

Mikhail KOPEIKIN: As far as SMEs are concerned, most of the funds are intended for wholesale and retail trade. Over the recent years about 40-42 percent of total credit resources have been committed for this sector. And I’d like to stress that 3.5 million people work in it. The manufacturing sector accounts for about 10 percent of funds. Two million people work in this sector. This is a structure that has remained unchanged for several years and banks lend to it.

CORR: At what interest rate are credits extended to businessmen?

Mikhail KOPEIKIN: I can say that two years ago an interest rate for the end borrower was about 19 percent, last year it was 17 percent and this year the interest rate ranges from 13 to 15 percent for a number of regions but not for individual borrowers and, of course, we are quite aware that SMEs, which start new businesses or implement projects related to innovations, high technologies or to monitoring these projects, run the highest risks. For this reason, we commit a part of funds to finance this sort of projects. We have already prepared several banking products. One of them is called “Innovation and Modernization”. To my mind, it is a very attractive banking product. The product provides for extending credits at an interest rate of 10 percent per annum. I’d like to draw your attention to the fact that there is a high demand for this product because credits are extended for a period of up to 5 years. This is a pretty long period of time, which creates favorable conditions for SMEs to develop successfully in the innovation sector.

CORR: 15 percent - this is a very high interest rate, isn’t it?

Mikhail KOPEIKIN: I think that a rate of 15 percent is pretty high. But I can say that a lot depends not only on Vnesheconombank but also on a specific region, borrower and many other conditions. As far as we are concerned, we firstly recommend the Russian Development Bank to set a minimum margin that is largely linked to monitoring a credit product. On the other hand, we limit regional banks’ margin to about 3-4 percent when we provide credit resources to them to support SMEs financially.

CORR: Business community has its own view on lending. For example, such organizations as Delovaya Rossia or OPORA ROSSII have repeatedly said that commercial banks are reluctant to lend to SMEs and even if they do, they extend credits to SMEs at extortionate interest rates and maybe it makes sense not to commit huge sums of money to fund SMEs but create a mild tax climate by way of reducing tax rates for businessmen?

Mikhail KOPEIKIN: To a large extent, a lot depends on the borrower’s financial standing. You’ve just mentioned the point of view of Delovaya Rossia and OPORA because they promote interests of SMEs. And I can express banks’ viewpoint. Banks would like very much to extend credits to a great number of borrowers on very favorable terms. But they believe that there are no good borrowers. And in many cases it’s not a matter of a bank that sets a margin of 25-30 percent it’s first of all a matter of the borrower’s quality. If it’s not clear if the borrower will return the money or not it will be refused a loan. But if there is a chance that the borrower will fail to repay a credit, a credit might be extended to it at a high interest rate.

CORR: This means that banks believe that risks are very high and credits might not be repaid?

Mikhail KOPEIKIN: Yes, risks are rather high especially in a period of crisis. Moreover, things associated with modernization and for the most part with innovations carry high risks. As I’ve already said, credits are extended for a period of up to 5 years and it’s not always clear what is going to happen to a certain project in 3-4 years and whether products to be manufactured by an innovation company will be in demand in the long run.

CORR: When do you think we’ll have interest rates on credits of 3-4 percent like, for example, in Europe? And what conditions should we create to this end?

Mikhail KOPEIKIN: In my opinion, we’ll be able to extend credits to SMEs at European interest rates when we have the same conditions like in Europe.

CORR: Mikhail Yurjevich, thank you very much for your interview.

Mikhail KOPEIKIN: Thank you.