Only 1-2% Of Romanian Small, Micro Firms Take Bank Loans

"Of a total 620,000 SMEs registered in Romania, some 89-90% are micro-enterprises, and only 1-2% took bank loans to fund their activity. Over the next 15 years, micro-enterprises and small firms will not be financed by banks and this problem is not specific only to Romania. These companies come with increased risk," Aurel Saramet, head of the guarantee fund, said Wednesday during a seminar.

Only 5,500-11,000 small firms and micro-enterprises in Romania took bank loans.

Saramet said these companies need to find other financing sources, such as venture capital companies to invest in their capital or fund start-ups in more flexible conditions, or companies granting loans with high risk, but which are too little developed in Romania.

"Unless we have at least 50 such companies, we won’t be able to back the financing of small and micro companies," Saramet added.

Apart from the high risk posed by the funding of small companies, which banks are not eager to assume, another factor influencing the reduced level of lending to this segment is the management of these companies.

"There is also a problem with the management of small and micro companies, which don’t understand bank-imposed criteria very well. Moreover, managers are quite reluctant to borrowing from banks," Saramet said.

In his turn, Sergiu Oprescu, head of lender Alpha Bank, said the situation is not due to the banking system alone.

"One factor limiting the access to loans is the degree of training in the business environment. It’s not lack of interest on the part of banks, as banks put out products tailored for SMEs,” Oprescu said.

Micro-enterprises are companies with up to nine employees and have annual net turnovers or assets worth up to EUR2 million, while small companies have ten to 49 employees and turnovers or assets worth up to EUR10 million.

"According to the central bank, only 14-15% of SMEs were funded by banks, and our studies indicate the level is at 17%. This means 80-90% of SMEs are not financed in Romania. In the European Union, the ratio is reversed and 77%of SMEs are funded by banks and 23% fund themselves," Saramet said.

Founded in 2001, the guarantee fund for SMEs is state-owned through the Ministry for Small and Medium-sized Enterprises, Commerce, Tourism and Liberal Professions. Since its creation, the fund has backed 6,000 SMEs and ensured guarantees worth EUR480 million for loans worth EUR900 million.

In 2008, Saramet estimated the fund will grant guarantees worth EUR230 million, up 25-30% on the year, to 3,500 SMEs.