Page 41 - RusRPTMar19

Ministry of Economy promises SMEs $152bn in preferential lending The Ministry of Economic Development will restart the program of preferential lending for small- and medium-sized enterprises under the national project for the development of small business. Entrepreneurs can receive loans with a 7.75-8.5% annual interest rate as part of the scheme. Stimulating small business is a key priority of Putin’s May Decrees. The Russian economy remains dominated by large SOEs. The ministry’s program is designed to promote SMEs – but the government has been chasing this will-o’-the-wisp for years without much luck. Part of the problem is that large companies have the means to either fight off venal officials looking for bribes, or can simply afford to pay them. Small traders operate on narrow margins and so corruption often kills their business off as they effectively become graft-slaves to whoever is in a position to extract the bribe, so they quickly give up. A recent Central Bank of Russia (CBR) reports found that state programs for preferential lending have helped decrease average rates for SMEs on the open market. However, preferential lending is not a fix-all. Truly boosting the small-business sector of the Russian economy requires structural reforms. The ministry previously ran a similar program starting in 2015, which offered preferential annual rates ranging from 9.6-10.6%. The ministry has selected 70 banks to participate in the new program, almost five times more than in its earlier version. The government will subsidize part of the rate, by 1.5-2.5% for systemically important banks, and by 1.75-2.75% for others. The maximum loan amount for a fiscal year will be RUB1bn ($15.2mn), and the maximum loan term will be ten years. The ministry expects to issue more than RUB10 trillion ($152bn) worth of loans under the new program by 2024; RUB1 trillion ($15.2bn) will be offered in 2019.
Russian M&A flat y/y in 2018 on sanctions pressure. Russia had to cope with four rounds of new US sanctions in 2018 as well as unstable oil prices and a general miasma that has fallen over the population as real incomes failed to rise for the fifth year in a row.
All that hurt business sentiment and overall M&A activity in Russia was almost flat in terms of value in 2018, totalling €19.99bn across 153 transactions, compared to €20.2bn (178 deals) announced in 2017, according to Russian
41 RUSSIA Country Report March 2019 www.intellinews.com