Russia's new government starts saving small business

Russia's new government starts saving small business

After the release of Russian President Vladimir Putin's new May decree, the government will restart the support of small and medium-sized businesses. Russia's Ministry of Economic Development has already prepared its measures. It has proposed to lower the reserve requirement ratio to provide loans to small companies, expand the list of banks participating in the soft loan scheme "6.5", introduce educational programs for farmers, as well as provide unified service desks for entrepreneurs.

Promoting small businesses was one of the points of the Russian president's March address. "By the middle of the next decade, its contribution to the country's GDP should approach 40%, and the number of employed there should grow from 19 million to 25 million people," Putin noted. Now the share of small and medium businesses in GDP is about 20%. According to the task, even if the economy grows by only 2% per year, the contribution of small and medium-sized businesses to the economy should be increased by 24 trillion rubles by 2025.

Reboot of support measures means "updating"considering business demands, RBC writes with reference to the federal official.

One of the main sets of measures is financial support for small and medium-sized enterprises (SMEs). The Ministry of Economic Development proposes to lower the Bank of Russia's reserve level that should be created by banks lending to small and micro-businesses. Now the risk ratio with regard to lending to small and medium-sized businesses is set at 75%.

There are also problems with the "6.5" program, which is one of the most famous government measures to support SMEs, through which entrepreneurs should receive loans at reduced rates. According to the SME Corporation, the interest rate under this program is higher than the declared 6.5%. With a loan of at least 3 million rubles for small businesses, it is up to 10.6% per annum, for medium-sized enterprises - up to 9.6% per annum. There are not enough banks authorized to participate in the program at the moment (45). The ministry considers it necessary to increase this number to at least half of the total number of Russian banks.

The vice-rector of the Academy of Labour and Social Relations Alexander Safonov, speaking to a correspondent of Vestnik Kavkaza, noted that the key step to the growth of small business in Russia is cutting interest rates. "There is a need for development of competition as well. In Russia too many government orders are distributed among large suppliers without any tenders. The third important area is the development of entrepreneurial skills among citizens. We should develop startups linked to  innovation in universities," he said in the first place.

"Due to this, we need preferential financing related to the development of innovative products in the form of co-financing, because such products require a very large number of research programs, which are usually not funded by banks because of high risks," Alexander Safonov noted.

The vice-rector of the Academy of Labour and Social Relations stressed that small business makes up at least 70% of GDP in developed Western countries. "In such conditions, the economy system is balanced in terms of the ratio of benefits from large business and those innovative start-ups provided by small business. There is also a need for active consumer demand, which, unfortunately, does not yet exist," he concluded.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, drew attention to the need to improve the country's business climate. "It is very important that the business environment is convenient for small businesses. Much has been done to simplify the procedure for registering enterprises and individual entrepreneurs, but small business is still shrinking, since there are numerous inspections, violation of competition and interference of law enforcement agencies. We also need stable tax regulations and regulations for the participation of entrepreneurs in pension support. A wider admission of small businesses to servicing state monopolies is also important, including the removal of public procurement restrictions for small business," he said.

"We need new managerial decisions on the interaction of federal law enforcement agencies and regional authorities," Alexander Abramov stressed.

"It should be understood that small business is very important both in terms of employment, and in terms of economic growth and ensuring competition. This does not work as well, due to the large dominance of the public sector of the economy and the retention of this monopoly position by the state," the professor at the department of the stock market and investments at the Higher School of Economics concluded.