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Roundtable: Efficient regional policy instruments to support small and medium sized enterprises

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Small and medium sized enterprises (SMEs) contribute to economic growth, employment, poverty reduction and innovations, but at the same time they usually have limited access to financing compared with big enterprises. In Ukraine, SMEs can help to re-structure the economy build on large raw materials enterprises. SMEs access to bank loans raised a lot in 2005-2008, pushing up SMEs development, but the crisis of 2008-2009 hit hardly both SMEs and banks.

The financial crisis of 2008-2009 in Ukraine caused an abrupt fall in small and medium sized enterprises’ (SMEs) access to bank loans because of economic recession, financial difficulties for SMEs and accumulation of bad loans by banks. Now banks say they are ready to increase amount of loans to SMEs in 2013-2014 even under the current moderately pessimistic economic expectations, but SMEs access to loans will not fully recover because of some serious impediments: slow economic growth, still high amount of bad loans, slow progress in strengthening creditors’ rights, weak and non-transparent business of SMEs. SMEs name such impediments as high interest rates and collateral requirements.

Given the prominent role of SMEs in economic development, state policy is needed to increase SMEs access to financing. In 2012 four regions provided the largest financial support to SMEs as partial compensation of interest rates payments or/and subsidized loans or investments: Kyiv (UAH 2.0 mln), Odesa region (UAH 1.8 mln, 10 SMEs supported), Lugansk region (UAH 1.0 mln, 13 SMEs supported) and Ivano-Frankivsk (UAH 1.1 mln, 11 SMEs supported). Eight from 27 regions did not provide any financial support. The small amount of support and small number of supported SMEs make this instrument negligible in raising SMEs access to financing. Under the current budget constrains the regional policy should primarily focus not on direct financial support, but, instead, on more efficient instruments, especially fruitful business environment deregulation for local SMEs.

These issues were discussed during the roundtable on June 13 in Odesa. The roundtable «Efficient regional policy instruments to support small and medium sized enterprises» was organized by Center for social and economic research – CASE Ukraine with organizational support of Regional fund for support of entrepreneurship in Odessa region.

The roundtable was organized within the project titled «Popular Economy: Reform Monitoring» that CASE Ukraine has been implementing under financial support of Open Society Institute.  The main goal of the project is to bring professional discussion about country development beyond the audience of trained experts and build the dialogue with general public. 

Roundtable handouts:

1)      Presentation: «SMEs financing in Ukraine: bank lending and state policy» (ukr);

2)      Report: Will banks lend to small and medium sized business in Ukraine? (ukr);

July 11, 2013