Топик: Small business lending in Kazakhstan (предоставление кредитов малому бизнесу в Казахстане)

Finansirovanie I kreditovaniye subyektov malogo biznesa, 2001 http://business.zakon.kz/fincredit/,

Law of Republic of Kazakhstan from 19 July 1997 N 131-1 O gosudarstvennoi poddershke malogo predprinimatelstva (with amendments to this law in 10.07.98 № 283-1; in 26.07.99 № 458-1; in 29.11.99 № 488-1).

III. Goals for receiving a loan.

There are many goals pursued by entrepreneur when he is asking for credit, but not for all purposes it is given. For example, EBRR gives credit for increase in working capital, investments like purchase of real estate, etc. (Krediti dlya malogo biznesa EBRR , 2001), Kazkomertzbank offer credit for increasing turnover, increasing working capital for further growth, expansion of production or volume of services, purchase of machinery, equipment, row materials, improvement of manufacture, purchase, construction and maintenance of real estate, and other capital investments (Kreditovaniye, 2001).

In our survey, we conducted an interview with chief accountant of “Oasis” company. This firm was organized in 1997 and busy in selling wholesale trade of medicines, the authorized capital was formed from personal savings, and number of employees is equal to 12. This company took a credit from Centercredit Bank in year 2000. They took a credit in Centercredit Bank because firstly, they have served in this bank and secondly, there was program on supporting small business, which were conducted by EBRR. The goal of receiving a credit was increasing turnover. With this credit, the company gained 30% income - they made 3 contracts on the total amount of $19,000. Thus, the company got profit from receiving a credit (Sahauyeva, 2001).

Summary.

Thus, we can conclude, that there are many reasons for the enterprises to give an application to the bank in order to receive a credit, and one of the main reason is investing, i.e. buying an equipment, building. However, banks give credit mainly in order to increase turnover. In our case, the company took credit exactly for this purposes (increasing turnover), and gained a profit.

References.

Krediti dlya malogo biznesa EBRR, 2001 http://www.fund.kz/ebrr_c.html

Kreditovaniye, 2001 http://www.kkb.kz/banking_re/sber/service/06_credit.asp

Sahauyeva Zhanar, 2001, interview

IV. Terms for receiving a loan.

A. Necessary documents

There are several documents, which are required in order to receive a credit, they are:

• Application
• Constituent documents
• Registration certificate
• Statistical card
• Confirmation of RNN by RNI
• Borrower form and chiefs biographical data
• Financial reporting for the past 3 years
• Contracts
• Cards with a sample of signs
• Documents establishing right for an object of pledge
• Certificate about number of employee with chief’s and accountant’s signs with seal
• Marketable securities prospectus
• Marketable securities registration certificate
• Certificate from tax inspection and from extra-budget fund about absence (or presence) of debts (Kreditovaniye, 2001).

These are the main documents, demanded by banks, but representative of credit department of the bank may require extra documents, depending upon financed project (Sahauyeva, 2001).

B. Difficulties with preparing documents for receiving a loan.

Since half of the year 2000 banks simplified scheme for giving credits. Until year 2000 the main problem in preparing documents in order to receive a credit was business-plan, but now, after simplifying scheme, the main problem became – preparing annual financial statements, because banks intensify requirements for financial position and accounting documents. Why did they intensify? Now the majority of small enterprises and not only small conducts double accounting - one accounting for tax purposes and another for presentation to banks and investors. In financial statement for tax purposes, for example, the company decreases its revenue or has losses, in order to pay fewer taxes, and if this company will bring the same financial statements to the bank to borrow money, most probably the bank will deny for the loan.

Nowadays there are many organizations, which helps entrepreneurs to make up different kinds of documents like financial statements, pledge documents, which are demanded in banks, but there is absolute no guaranty that with this financial statements you will receive a credit, simultaneously services of these firms rather high.

In our interview, our respondent – Sahauyeva Zhanar, chief accountant of “Oasis”, said, that there was more difficulties with annual financial statements, than with other documents. Representative of the credit department of Bank Centercredit demanded annual financial statement for the last two years, which was given to the Tax Committee of Republic of Kazakhstan. As was written before, some small companies conduct double-accounting, and banks know about this, that is why Bank Centercredit have demanded financial statements for tax purposes. By the way, “Oasis” company did not addressed to the companies that help enterprises to prepare necessary documents to gain a credit, but they received a credit. (op.cit).

This diagram shows in what level each factor influence on decision of the bank, when it is giving a credit to the enterprise. As we can see, the most important is financial report – 31%, that is why it is very important for the enterprise to prepare it in a best way. After financial statement of the company, follow market, which takes 16%, this means information about customers, suppliers and enterprises’ borrowers, and lenders. The next is pledge –15%, we will consider it in more details later.

(Source of the diagram: Osnovniye prinzipi kreditovaniya MP, 2001).

Another problem is getting sanction for realization a project. This is due to difficulties with receiving confirmation in different state organizations. There are several supervising organs whose corroboration you have to receive, but they are varying depending on the project itself.

- Ministry of Ecology and Natural Resources regional representations

- Sanitary-epidemical services

- State Supervision of architecture and construction

- Standardization and certification organs

- Fire services

- Custom services (Dauanov I., 2000)