Development of the Microfinance system in Russia

Development
of the Microfinance system
in Russia
Anna Kaganova
National Business Incubation Association
Russian Federation

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