Financing SMEs and Entrepreneurs 2020

5. Belarus

Key facts on SME financing

According to the National Statistical Committee, the Belarusian SME sector consists of 111 214 legal entities (including SOEs and companies in mixed ownership with fewer than 250 employees), which amounts to 78.3% of total businesses as of January 1 2019.

Micro, small and medium enterprises, as well as individual entrepreneurs and their employees, account for 30.7% of total employment (30.4% in 2014).

Gross value added produced by SMEs amounts to 28.8% (28.4% in 2017) and their share of GDP remains at the last year’s level, which was 24.6%.

Outstanding SME loans (in both national and foreign currencies) increased by 19%, as compared with the beginning of 2018. As of January 1, 2019, total outstanding SME loans stood at BYN 9.88 billion.

Ensuring SME access to finance is an essential component of the general business support policies of the Belarusian government.

Financial support for SMEs has two basic dimensions. First, there is state support, i.e. public funding provided by central and local budgets and by the Development Bank of the Republic of Belarus (DBRB). The second dimension of financial support for SMEs involves non-governmental support provided by commercial and non-profit entities using various forms and methods of financing.

Table 5.1. Scoreboard for Belarus

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Debt
Outstanding business loans, SMEs	BYN billion	..	..	..	..	..	..	..	7.74	8.49	7.59	8.30	9.88
Outstanding business loans, total	BYN billion	2.10	3.22	4.77	6.61	11.59	16.18	20.54	25.11	30.90	28.70	29.73	32.46
Share of SME outstanding loans	%	..							30.83	27.46	26.46	27.91	30.42
New business lending, total	BYN billion	4.11	5.95	7.43	10.96	16.63	27.07	29.23	33.03	38.31	45.10	56.99	69.33
New business lending, SMEs	BYN billion	..	..	..	..	..	..	..	10.77	12.10	13.13	18.29	26.59
Share of new SME lending	%	..							32.62	31.57	29.11	32.09	38.36
Outstanding short-term loans, SMEs	BYN billion	..	..	..	..	..	..	..	2.07	2.00	1.81	2.17	2.97
Outstanding long-term loans, SMEs	BYN billion	..	..	..	..	..	..	..	5.67	6.49	5.78	6.13	6.90
Share of short-term SME lending	%	..							26.76	23.55	23.88	26.14	30.11
Direct government loans, SMEs	BYN million	..	..	..	..	..	..	5.43	4.76	6.45	5.05	5.98	7.09
Non-performing loans, total	%	0.82	0.80	1.05	0.84	0.35	0.51	1.04	1.65	2.60	4.78	4.81	1.39
Non-performing loans, SMEs	%	..	..	..	..	..	..	..	2.06	5.18	6.95	3.34	1.71
Interest rate, SMEs	%	..	..	..	..	..	..	..	..	..	20.20	12.17	9.92
Non-bank finance
Leasing and hire purchases	BYN billion	..	..	..	..	..	..	..	..	1.05	1.11	2.10	3.39
Factoring and invoice discounting	BYN thousand	..	..	..	..	..	..	..	..	..	..	..	126.8
Other indicators
Bankruptcies, SMEs	Number	..	..	..	..	..	1725	1850	2047	2364	2410	1919	1970
Bankruptcies, SMEs (growth rate)	%							7.25	10.65	15.49	1.95	-20.37	2.66

Source: See Table 5.2.

SMEs in the national economy

According to the National Statistical Committee, the Belarusian SME sector consists of 111 214 legal entities (including SOEs and companies in mixed ownership with fewer than 250 employees), which amounts to 78.3% of total businesses as of January 1 2019. The number of individual entrepreneurs is estimated at 241 300.

The share of micro-enterprises (≤15 employees) in the total number of SMEs is 87.6%, while share of small enterprises (15-100 employees) is 10.4%.

Micro, small and medium enterprises, as well as individual entrepreneurs and their employees, account for 30.7% of total employment (30.4% in 2014). The number of SME employees increased by 4.5 thousand, while the number of individual entrepreneurs and persons employed by them is 4.2 thousand higher than before.

Gross value added produced by SMEs amounts to 28.8% (28.4% in 2017) and their share of GDP remains at the last year’s level, which was 24.6%.

As of the end of 2018, SME sales of goods, services and works amount to BYN 147.5 billion, which is more than 20% higher than in 2017 (in current prices). In addition, SMEs’ share in total business sales increased by 1.0 percentage points.

SMEs account for:

• 18.4% of total industrial output (+0.6 percentage points year-on-year);

• 35.1% of retail trade turnover (-0.4 percentage points);

• Almost half (49.9%) of catering sector turnover, which is 4.3 percentage points higher than in 2017 (130% growth rate);

• 50.6% of goods exports (+3.7 percentage points);

• 39.8% of services exports (+4.2 percentage points).

The return on sales remained stable at 7.2%. The share of loss-makers decreased by 0.5 percentage points and amounted to 20.9% in 2018.

SMEs and individual entrepreneurs are distributed in different sectors as follows:

• Wholesale and retail trade, repair of motor vehicles and motorcycles – 36% of the total;

• Transportation, warehousing, postal and courier services – 12% of SMEs;

• Professional services, research and technology – 9%.

Finally, 8% of SMEs and 8% of individual entrepreneurs work in the industry and construction sectors.

SME lending

Outstanding SME loans (in both national and foreign currencies) increased by 19%, as compared with the beginning of 2018. As of January 1 2019, total outstanding SME loans stood at BYN 9.88 billion.

Outstanding SME loans in national currency are BYN 4.85 billion, accounting for 49.1% of total outstanding loans, while outstanding loans in foreign currency are USD 2.32 billion and 50.9%.

The share of long-term loans in total SME outstanding loans is 69.9% or BYN 6.90 billion in absolute terms, while short-term loans share amounts to 30.1%, or BYN 2.97 billion.

The share of NPLs and prolonged loans in total SME loans is 1.7%.

Outstanding loans are issued to:

• Micro and small enterprises: 58.3% of total SME loans, or BYN 5.76 billion,

• Medium-sized enterprises: 39.5%, or BYN 3.90 billion,

• Individual entrepreneurs: 2.2%, or BYN 0.22 billion.1

Government policy response

Ensuring SME access to finance is an essential component of the general business support policies of the Belarusian government.

Public support

Financial support for SMEs has two basic dimensions. First, there is state support, i.e. public funding provided by central and local budgets and by the Development Bank of the Republic of Belarus (DBRB). The legal framework for this type of support bases itself mainly on the following laws and regulations:

• Law on the support of small and medium-sized entrepreneurship (adopted on July 1 2010);

• Presidential decree No. 255 on Specific measures of state support for small and medium-sized entrepreneurship (May 21 2009);

• Resolution of the Council of ministers No. 149 on the State programme for SME Development in Belarus for 2016-20 (February 23 2016), and other regulations adopting the State programme.

This type of support is targeted at:

• Individual entrepreneurs;

• Micro-enterprises with annual average number of employees up to 15;

• Small enterprises with annual average number of employees between 16 and 100 (on the condition that new jobs are created).

The aforementioned laws and regulations provide for state support for investment and/or business projects of small businesses focused on:

• Creating, developing and expanding the production of goods (performance of works, delivery of services);

• Setting up and/or developing the manufacture and sale of export-oriented or import-substituting products;

• Manufacturing environmental-friendly, energy-efficient products;

• Introducing innovative technologies.

The funds budgeted under state support programmes may be provided to SMEs via:

• The Belarusian Fund for the Financial Support of Entrepreneurs, which gives access to (interest-free) financial loans and finance-leased assets;

• The Executive Committee of Minsk City and regional Executive Committees (or, upon their decision, via executive committees of cities, towns and districts, other local authorities, and/or entrepreneurship financial support infrastructure in regions or Minsk City). These entities provide (interest-free) financial loans, interest rate subsidies (in the case of bank loans), subsidies to reimburse costs of leasing, including the lessor’s cost (in case of finance leasing), subsidies to reimburse costs of trade fairs organisation and/or participation;

• Banks, providing concessional (micro) loans using the funds from local budgets allocated by the state SME support programmes and deposited in the banks in question;

• DBRB (see below).

DBRB

A new programme of SME financial support was launched in August 2014, aiming to offer and enhance SME access to loan financing, as well as opportunities to use finance leases for investment projects at various stages of business lifecycle. The Programme initiated and developed by the DBRB focuses on providing affordable loans on clear and transparent terms. Exact areas of SME support in Belarus depend on actual priorities. At the end of 2016, DBRB aligned its products with national SME development priorities, such as support of startups, innovation, export firms, etc. Thanks to this, public financing is now available not only to manufacturers and service providers, but also to trade companies.

The Programme is implemented in partnership with selected commercial banks and leasing companies having experience of working with SMEs. There is a two-step implementation mechanism:

• Step 1: DBRB provides funds to partner banks and leasing companies that qualify for the Programme requirements;

• Step 2: Partner banks and leasing companies select borrowers based on criteria agreed on with DBRB, assess their financial position and project proposals, and approve loans at an interest rate which cannot exceed the cap specified.

Moreover, in order to widen the range of potential beneficiaries, an additional support mechanism was set up, which involves loans provided to the leasing companies by the partner banks and assets leased to SMEs by such companies. Therefore, Belarusian SMEs can get funding via leasing companies as well as from banks directly. Eleven partner banks and four leasing companies are participating in the Programme. Financial support is targeted at SMEs in production and service sectors that:

• Introduce innovative technologies;

• Enhance export capacity, manufacture import-substituting products;

• Build or upgrade physical infrastructure;

• Acquire, reconstruct, update, build, generally renovate/overhaul fixed assets.

Investment projects are ineligible for support if involving:

• Weapons and/or military equipment production;

• Tobacco production and export; and

• The production of spirits.

Loans to SMEs shall be provided by the partner banks under the terms and conditions of the banking product specifications drafted by DBRB. As of April 1 2019, the Programme had already helped to secure funding for 2 989 investment projects and sign a number of loan and leasing contracts with a total value of BYN 422.79 million. The total value of the projects funded by DBRB is approximately BYN 767.58 million.

Non-governmental support

The second dimension of financial support for SMEs involves non-governmental support provided by commercial and non-profit entities using various forms and methods of financing.

SME financing is among the most important and promising activities of Belarusian banks. Banks offer SMEs a wide range of financial support solutions, including (micro) loans, factoring, leasing, and guarantees, with loans being one of the main forms of SME financing.

As of January 1 2019, there were 24 active banks in Belarus. The share of SME loans in total business loans provided by the banks is almost 4%, while in 2015 it was over 30%.

The National Bank has taken some steps towards lowering costs of micro-loans provided by non-profit microfinance institutions and developing a transparent microfinance market within the current legal framework (Resolution No. 20, January 19 2018).

Starting from April 1 2018, annual interest rates for micro loans issued by non-profit MFIs shall not exceed the National Bank’s refinancing rate in effect on the micro-loan agreement date, if such institution is established in form of a fund or foundation.

As for consumer credit co-operatives, their maximum annual interest rate can be twice the refinancing rate in effect on the micro-loan agreement date.

In compliance with the Presidential Decree on Loan Issue and Raising Activities and Microfinance Institutions (No. 325 adopted on June 30 2014), all such funds, foundations and co-operatives shall focus on providing financial support to individuals who are: craftsmen/artisans; agro-ecotourism service providers; owners of private subsidiary farms; owners of property, founders or shareholders of commercial entities. Besides, funds and foundations are allowed to offer SME financing for business purposes.

SMEs may take part in various competitions, awards and grant projects implemented by other institutions and organisations as well.

Belarus offers a wide range of opportunities to access finance, thereby enabling SMEs to choose the most appropriate instrument. To make their choices well-informed, all such opportunities should be mapped and all the relevant information published on various media platforms.

Figure 5.1. Trends in SME and entrepreneurship finance in Belarus

Source: See Table 5.2

Statlink

Table 5.2. Definitions and sources of indicators for Belarus’s Scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, total	Debt on loans to legal entities. Legal entities - commercial and non-profit organisations, individual entrepreneurs, non-bank financial organisations	Banks of the Republic of Belarus
Outstanding business loans, SMEs	Debt on loans to legal entities - subjects of SMEs. SMSPs are defined in accordance with the Law on Supporting SMSP	Banks of the Republic of Belarus
New business lending, total	Loans to legal entities - the amount of loans issued to resident customers during the reporting period. Legal entities - commercial and non-profit organisations, individual entrepreneurs, non-bank financial organisations	Banks of the Republic of Belarus
New business lending, SMEs	Credits issued to SMEs - the amount of credits issued to SMEs during the reporting period. SMSPs are defined in accordance with the Law on Supporting SMSP	Banks of the Republic of Belarus
Outstanding short-term loans, SMEs	Short-term loans - loans with a full repayment period of up to one year, as well as loans provided on revolving credit lines and overdraft lending, except for loans with a period of at least one tranche of the loan originally established in the loan agreement over one year	Banks of the Republic of Belarus
Outstanding long-term loans, SMEs	Long-term loans - other loans	Banks of the Republic of Belarus
Short-term loans, SMEs, outstanding loans	Debt on loans - balances on accounting for debt of clients - residents of the Republic of Belarus, who are small and medium-sized businesses, to banks of the Republic of Belarus on short-term loans, taking into account overdue debts.	Banks of the Republic of Belarus
Long-term loans, SMEs, outstanding loans	Debt on loans - balances on accounting for debt of clients - residents of the Republic of Belarus, who are small and medium-sized businesses, to banks of the Republic of Belarus on long-term loans, taking into account overdue debts.	Banks of the Republic of Belarus
State financial support to SMEs	"State financial support to SMEs (concessional loans and subsidies) is provided in accordance with Decree of the President of the Republic of Belarus of May 21, 2009 No. 255" On some measures of state support for small business "at the expense of the funds provided for in the State programme" Small and medium-sized businesses in the Republic of Belarus “for 2016–2020, approved by Resolution of the Council of Ministers of the Republic of Belarus dated February 23, 2017 No. 149. It is not possible to allocate state financial support to SMEs in other programmes and regulations.	Belarusian Fund of Financial Support for Entrepreneurs, regional executive committee, Minsk City Executive Committee.
Non-performing loans, total	Until 01/01/2019 - prolonged and overdue debts, after 01.01.2019 - overdue debts	Banks of the Republic of Belarus
Non-performing loans, SMEs	Until 01/01/2019 - prolonged and overdue debts, after 01.01.2019 - overdue debts	Banks of the Republic of Belarus
Interest rate, SMEs	Interest rate, SME is the weighted average interest rate on the volume of bank loans issued by SMSP in the reporting period. The first time information on the SMEs was obtained in January 2016 (interest rates for loans with a maturity of up to one year).	Banks of the Republic of Belarus
Non-bank finance
Leasing and hire purchases	The volume of new business - the cumulative price of financial leasing contracts concluded by leasing organisations for the year	Leasing organisations
Leasing and hire purchases	Leasing portfolio - the amount of liabilities of lessees (leasing payments and redemption value) under financial leasing contracts payable after the reporting date, except for overdue liabilities	Leasing organisations
Factoring and invoice discounting	Compensation of losses to banks and banks and non-bank credit and financial organisations of the Republic of Belarus that finance residents of the Republic of Belarus under the assignment of a monetary claim (factoring) when implementing export contracts	Banks of the Republic of Belarus
Other indicators
Bankruptcies, SMEs	Number of cases initiated by debtors of SMEs	Crisis Managers

Note

← 1.  All figures as of January 1, 2019