In Russia, the relationship between banks and small businesses is generally thought to be very tense. The online conference «Banks and small businesses — truth and myths» held on Raiffeisenbank’s site tried to determine where the myths end and the truth starts. Oksana Panchenko, member of the Board and Head of Corporate Banking and Corporate Finance Directorate.
Banks refuse to finance start-up projects? Start-up lending is not provided unless the business is a part of a group of related companies operating on the market for at least six months. The bank is not interested in pure start-ups — firstly because of the high risk, and secondly because the bank is not confident in the economic feasibility of such projects. In order to review a small project (industry, business model), the bank would have to spend as much time as it would need to analyse a large business.
You have nothing to offer as collateral? Today, banks offer unsecured loans both to micro businesses in amounts up to 1.2 million rubles (decisions on instant loans are made within one business day) and to small businesses (loans up to 5 million rubles, unsecured overdraft limits up to 8 million rubles). In addition to unsecured products, banks offer loans secured with real estate, motor vehicles, equipment, even goods in circulation and the assets acquired. Combined collateral is also accepted as well as a pledge of third-party assets.
High interest rates? The average market rates on SME loans start from
Banks refuse to provide loans? Yes, sometimes they do, but in most cases the bank offers other conditions acceptable in each particular case based on the bank’s review of the client’s financial position. Moreover, banks are prepared to accept a compromise and, when making a loan decision, take into account not only the client’s official records but also their real financial situation (management accounts).
Regarding «the financial incompetence of business people,» that was true a number of years ago. Now, the situation is changing. This is particularly true with businesses that survived the recent crises. This is also true about the clients who regularly communicate with credit experts, receive financial information, and thereby gain more knowledge in this sphere. We have to admit though, that the problem still remains with micro companies. Banks are dealing with this issue by involving client managers in communication with clients, the collection of information and documents required to obtain a loan.
Generally, though SME lending is still a rather risky business, we expect that more and more banks will see these operations as a principal avenue of development. This will result in a higher number of active players and stronger competition. On the one hand, this will trigger another liberalisation in prices. On the other, it will lead to higher returns in this segment.
At the same time, we think that the SME market will not develop to the level of certain European countries as the business structure reflects the structure of the Russian economy with its high concentration of large corporate groups and companies.
ZAO Raiffeisenbank is a subsidiary of Raiffeisen Bank International AG. Raiffeisenbank ranks 10th among the Russian banks in terms of assets, based on 2011 results (Interfax-CEA). According to the same Interfax-CEA data, ZAO Raiffeisenbank ranked 5th in terms of private deposits and 8th with regard to consumer lending.
Raiffeisen Bank International AG (RBI) regards both Austria, where it is a leading corporate and investment bank, and Central and Eastern Europe (CEE) as its home market. In CEE, RBI operates an extensive network of subsidiary banks, leasing companies and a range of other specialised financial service providers in 17 markets. RBI is the only Austrian bank with a presence in both the world’s financial centres and in Asia, the group’s further geographical area of focus. Around 60,000 employees service about 13.7 million customers through around 2,900 business outlets, the great majority of which are located in CEE. Raiffeisen Bank International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Oesterreich AG (RZB). RZB indirectly owns around 78.5 per cent of the common stock, the remainder is in free float. RBI’s shares are listed on the Vienna Stock Exchange. RZB is the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group, and serves as the group head office of the entire RZB Group, including RBI.