STEPAN ZEMTSOV: ONLY COMPETITIVE SMEs WILL SURVIVE AMID CRISIS
Stepan Zemtsov, Senior Researcher of Innovation Economics Department of the Gaidar Institute, joined the discussion of financial support to small and medium-sized businesses amid crisis.
“The main factor in the development of the SME sector is the demand level, largely determined by household incomes. The availability of credit resources is a significant limiting factor in development, but its significance has been declining in recent years. According to recent Rosstat polls, 31% of small businesses noted lack of financial resources as a barrier in QI, 2020; 20% of respondents noted a high interest of banking loans and 54% specified the insufficient demand in the domestic market. In 2019, the number of banks participating in lending to SMEs significantly expanded. However, most of the SMEs, lacking financial support or property that can be used as pledge assets (trade, services, etc.), show a low demand for lending,” says an expert of the Gaidar Institute.
According to estimates by Stepan Zemtsov, the significance of the financial barrier will grow in QII, 2020. Many businesses already experience a lack of financial resources. There is a cash gap caused by a drastic decrease in demand against maintained current employment, rental, loan and other payments. In 2019, lending to small businesses grew at a record pace since 2013, which can also adversely affect the economic situation in the SME sector.”
The expert of the Gaidar institute said: “An increase in financing at preferential rates by itself, will allow only the small, but most competitive part of SMEs to survive. Most businesses simply have nothing to repay loans against the falling demand. According to RSBI, 62% of SMEs do not feel the need for new loans due to the uncertain economic situation and low profitability. Given the decline in consumer markets amid falling household incomes, the share of SMEs in gross loans will be reduced.
The risks of loan defaults are increasing, especially in regions with an underdeveloped SME sector amid unstable economic situation and incoherent governmental policy.”
According to Stepan Zemtsov, “a large share of entrepreneurs find it easier to fire employees, declare bankruptcy and open up again after the crisis has ended, rather than borrow funds to pay salaries. We expect an increase in the share of informal employment by several million people in 2020 and a decrease in SMEs employment (in 2019, the number of SME employees decreased by half a million people).”
The expert of the Gaidar Institute concluded: “The most competitive businesses that have been digitally remastered and demanded in the online format, will survive thanks to loans, while others may have to close.”
According to estimates by Stepan Zemtsov, the significance of the financial barrier will grow in QII, 2020. Many businesses already experience a lack of financial resources. There is a cash gap caused by a drastic decrease in demand against maintained current employment, rental, loan and other payments. In 2019, lending to small businesses grew at a record pace since 2013, which can also adversely affect the economic situation in the SME sector.”
The expert of the Gaidar institute said: “An increase in financing at preferential rates by itself, will allow only the small, but most competitive part of SMEs to survive. Most businesses simply have nothing to repay loans against the falling demand. According to RSBI, 62% of SMEs do not feel the need for new loans due to the uncertain economic situation and low profitability. Given the decline in consumer markets amid falling household incomes, the share of SMEs in gross loans will be reduced.
The risks of loan defaults are increasing, especially in regions with an underdeveloped SME sector amid unstable economic situation and incoherent governmental policy.”
According to Stepan Zemtsov, “a large share of entrepreneurs find it easier to fire employees, declare bankruptcy and open up again after the crisis has ended, rather than borrow funds to pay salaries. We expect an increase in the share of informal employment by several million people in 2020 and a decrease in SMEs employment (in 2019, the number of SME employees decreased by half a million people).”
The expert of the Gaidar Institute concluded: “The most competitive businesses that have been digitally remastered and demanded in the online format, will survive thanks to loans, while others may have to close.”