vlad.tribnet.com / Issue #165 / Business / Reading article...

When the European Bank of Reconstruction and Development’s Russian Fund for Small Business set up shop in Vladivostok in June of 1997, it was a relative latecomer to the region’s support network for small business development.

At that time, the RFSB had already been in operation for three years in 32 cities and 20 regions throughout Russia, distributing more than 16,000 loans to a wide variety of small businesses.

Nine months and $1.5 million later, however, the Primorye branch of the RFSB is gathering steam, according to Andreas Franke, RFSB representative in Vladivostok .

“It originally seemed like an impossible task to try and issue loans and distribute credits here in Primorye,” said Franke, at an April 2 press conference.

“Now we realize that the level of small business here is much higher than in other regions in the country.”

RFSB works through locally-based Dalnevostochny Bank, Moscow-based banks SBS-Agro and Inkombank, and the Primorsky branch of national Savings Bank. And the fund issues micro-, small-business, and investment loans, from $100 up to $125,000, for businesses with fewer than 50 employees.

Financing rates for the loans range from 40 percent over 12 months for micro-loans, to 19 percent over 36 months for investment loans.

Loan approval takes between one day and two weeks, said Franke.

The fund’s target is to lend $3 to $4 million by the end of this year, giving 40 to 50 loans a month. Partner banks receive money from the RFSB at favorable rates with built-in incentives to encourage them to lend the money quickly and profitably.

According to the RFSB, of the 90 Primorye businesses which have received loans, roughly 71 percent have been trading companies, 17 percent manufacturing and 11 percent service companies.

At the first of several public consultations to be offered by the RFSB, Franke explained that the fund was more geared for experienced businesses with working capital, rather than start-ups. He also emphasized that the RFSB wants to provide long-term experience to both banks and businesses by establishing a network of banks and training loan officers.

“What we’re trying to do,” said Franke, “is to open a small window for small business credits in banks which do not usually work with small business.”

Reaction to the presentation was positive for the most part, though one businessman did say that the RFSB program, on the whole, was better suited for micro businesses with limited working capital.

“Interest rates are relatively high here [with the RFSB], and the loan amounts are small,” noted Georgy Martynov, whose enterprise involves several seafood products-related companies. “This is certainly useful for very, very small businesses, but not for us.”

Martynovalso disagreed that approaching the larger Primorye banks for similar-sized, similarly-financed loans was as large a problem as the RFSB argued it was.

The main problem lies in the high rates for financing, common throughout the banking sector, nationwide, he said.

Maxim Vilchenko, a businessman involved in trading was much more optimistic.

“This was very useful today. I’m positive I’ll be able to come again, and get something concrete from the program.”