Financing newly emerging private enterprises in transition economies.

288 Pages·2000·1.372 MB·English

by  OECD

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O FINANCING
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T en years into the transition, newly LY V NEWLY EMERGING
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emerging private enterprises in M
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transition economies, usually R
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PRIVATE ENTERPRISES
described as small and medium-sized I D
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enterprises (SMEs) in the international G N

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context, have come to play an increasingly R A
IV IN TRANSITION ECONOMIES
important role as the driving engines of A N
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economic growth and employment creation. Accordingly, E
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the policy considerations for developing SMEs are N
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becoming very urgent and important for transition E T
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economies, especially through facilitating financial R
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mechanisms for them, as limited availability of financial S
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resources is the largest hindrance to their development.
IN P

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This publication gathers the proceedings of the Second N
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Workshop on "Financing Newly Emerging Private I
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Enterprises in Transition Economies" which was organised O
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in Paris under the aegis of the OECD’s Centre for C
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Co-operation with Non-Members with the sponsorship of CO I
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the Japanese Government. This volume contains in-depth
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studies on various schemes for financing these enterprises, M
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including credit guarantees, leasing, venture capital and ES
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capital market operations, as well as public schemes. In
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addition, it provides detailed and comparative information
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on the situation of SME development and the policy

measures towards it. R
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(14 1999 01 1 P) FF 380 D OECD
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ISBN 92-64-16140-6 99
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OECD PROCEEDINGS
FINANCING NEWLY EMERGING
PRIVATE ENTERPRISES
IN TRANSITION ECONOMIES
PUBLISHER’S NOTE
The views expressed are those of the authors,
and do not necessarily reflect those of the Organisation or of its Member countries.
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
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Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic
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OECD Convention).
OECD CENTRE FOR CO-OPERATION WITH NON-MEMBERS
The OECD Centre for Co-operation with Non-Members (CCNM) was established in January 1998 when the
OECD’s Centre for Co-operation with the Economies in Transition (CCET) was merged with the Liaison and Co-
ordination Unit (LCU). The CCNM, in combining the functions of these two entities, serves as the focal point for
the development and pursuit of co-operation between the OECD and non-member economies.
The CCNM manages thematic and country programmes. The thematic programmes, which are multi-country
in focus, are linked to the core generic work areas of the Organisation (such as trade and investment, taxation,
labour market and social policies, environment). The Emerging Market Economy Forum (EMEF) and the
Transition Economy Programme (TEP) provide the framework for activities under the thematic programmes. The
EMEF is a flexible forum in which non-members are invited to participate depending on the theme under
discussion. The TEP is focused exclusively on transition economies. Regional/Country programmes, providing
more focused dialogue and assistance, are now in place for the Baltic countries, Brazil, Bulgaria, China,
Romania, Russia, the Slovak Republic (a candidate for accession to the OECD), and Slovenia.
 OECD 1999
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FOREWORD
An important part of the development of market economies in the formerly Communist
countries of central and eastern Europe and the ex-Soviet Union has been the emergence of private
enterprises. These businesses, usually described as small and medium-sized enterprises (SMEs), have
accelerated market-oriented economic activity and created job opportunities, thereby helping to
provide a solid base for evolving market economies – although, of course, the extent of progress varies
from country to country.
The business environment for SMEs has been inhospitable, especially in those transition
economies which have only recently, enjoyed macro-economic stability, sufficient financial resources
and stable and rational regulatory and administrative procedures. And in all the transition countries,
difficulty in obtaining external financing is one of the biggest obstacles to SME growth, since banks,
the main traditional source of such funding, have been reluctant to provide substantial and longer-term
credit. In response to this shortfall, a number of financing schemes for SMEs have been developed,
with the aim of reinforcing bank financing directly or indirectly.
In order to exchange experiences on the financial schemes for SMEs among transition
economies and OECD countries, the OECD’s Centre for Co-operation with Non-Members organised
its Second “Workshop on Financing Newly Emerging Private Enterprises in Transition Economies” in
Paris in January 1998 with sponsorship from the Japanese government. The first Workshop, in January
1996, had appraised the situation of, and policies for, SMEs in transition economies in general; this
second meeting now focused on specific vehicles for financing SMEs, such as credit-guarantees,
leasing, venture capital and capital-market operations, and public schemes. This publication is based
on the papers presented at that Workshop and on discussion by the participants, from both the OECD
countries and the transition economies in central and eastern Europe.
SMEs will continue to be the most important engines of economic growth and job-creation
in transition economies as well as in other developing and developed economies, including those of
the OECD countries. The proceedings of the first Workshop were published in 1996, under the title
Systems for Financing Newly Emerging Private Enterprises in Transition Economies; this new volume
should serve as a further source of information on SME financing in transition economies in central
and eastern Europe and constitutes a reference book on SME financing for policy-makers and experts
in both public and private sectors.
Eric Burgeat
Director
Centre for Co-operation with Non-Members
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TABLE OF CONTENTS
Part I INTRODUCTION
Financing Newly Emerging Private Enterprises in Transition Economies
by Dietmar K. R. Klein..........................................................................................................................13
SME management and SME financing in the transition economies
Overviews and country notes..........................................................................................................14
Credit guarantee schemes in SME financing.....................................................................................18
Leasing industry in SME financing...................................................................................................18
Roles of venture capital and capital markets.....................................................................................19
Public schemes for SME financing....................................................................................................21
Concluding discussions: How to develop SME financing?...............................................................22
Part II SMALL AND MEDIUM-SIZED ENTERPRISES (SME) FINANCING
Chapter 1 SME Financing in Transition Economies: Management, Conflicts and Monitoring
by Kanichiro Suzuki and Michael Lacktorin.........................................................................................25
SMEs and the theory of the firm........................................................................................................25
SME phases of development and sources of finance.........................................................................26
SME management, organisational structure and environmental discontinuities...............................27
SMEs and conflicts of interest...........................................................................................................28
Monitoring SMEs..............................................................................................................................29
Role of public policy in SME financing in transition economies......................................................32
Conclusion.........................................................................................................................................35
Chapter 2 SME Development in the Transition Economies by Masaru Honma.................................41
Overview of SME financing.............................................................................................................41
Private facilities.................................................................................................................................43
Venture-capital funds and capital markets.........................................................................................44
Public financing facilities..................................................................................................................45
How can SME financing be developed?............................................................................................47
Chapter 3 SME Financing in the European Union by Antonio Espino...............................................51
General framework............................................................................................................................51
Venture capital...................................................................................................................................52
Stock markets.....................................................................................................................................54
Establishment of EMU and its impact on SMEs................................................................................55
Main EU initiatives to assist SME financing.....................................................................................55
Guarantees.........................................................................................................................................59
Chapter 4 Government Intervention in SME Development: Pro and Contra
by David Storey.....................................................................................................................................61
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Part III FINANCIAL VEHICLES FOR SME FINANCING
A. CREDIT GUARANTEES
Chapter 5 The Role of Guarantee Schemes in Transitional Economies:
Lessons from the Netherlands by R. J. M. J. Starmans........................................................................67
Role of government and banks in SME financing.............................................................................67
Role of guarantee schemes in improving SME finance.....................................................................68
Existing guarantee schemes for the SME sector in the Netherlands..................................................70
Historical development of the Dutch guarantee systems...................................................................75
Chapter 6 Credit-Guarantee Schemes: The Italian Experience by Sergio E. Rossi............................77
Origins and development of Confidi in Italy.....................................................................................77
Importance of the Confidi..................................................................................................................79
Confidi and politics............................................................................................................................82
Confidis in the north and south..........................................................................................................84
Confidi system: Data, figures and results..........................................................................................85
Confidi abroad...................................................................................................................................86
Can Confidi be exported?..................................................................................................................87
Chapter 7 The Credit Guaranty Association: Shared Risk-Management for SMES
The Association of German Guaranty Banks........................................................................................89
Fostering small and medium-sized companies in the private sector..................................................89
Establishing a Credit Guaranty Association......................................................................................90
Environment required for successful CGA operation........................................................................95
B. LEASING
Chapter 8 The Role of Leasing Industries in Transition Economies
by Dr. Hans-Christian Donnerstag......................................................................................................101
Benefits of leasing...........................................................................................................................101
Shortcomings in the banks...............................................................................................................102
Can the banks improve their performance?.....................................................................................104
Chapter 9 The Role of Leasing Industries in Transition Economies
by Veronika Chtelmakh.......................................................................................................................107
Definition of leasing........................................................................................................................107
Advantages of leasing......................................................................................................................108
Financial leasing in Russia...............................................................................................................110
C. VENTURE CAPITAL AND CAPITAL MARKETS
Chapter 10 Lessons from Venture Capitalism in the United States by Timothy Haynes.................113
Chapter 11 The Roles of Venture Capital and Capital Markets in SME Financing:
Experience in Germany by Dr Ramona Budde..................................................................................115
Financing of private enterprise in transition economies..................................................................115
Financing requirements of SMEs.....................................................................................................117
Problem-oriented financial network of the TBG.............................................................................118
Venture-capital market in Germany.................................................................................................120
Public venture-capital assistance programmes................................................................................122
Outlook............................................................................................................................................123
Chapter 12 EASDAQ – A Third Financial Revolution in Europe by Dirk Tirez.............................125
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D. PUBLIC SCHEMES
Chapter 13 EU Schemes FOR Sme Financing by Rudy Aernoudt...................................................131
Limits of a public scheme................................................................................................................131
European scheme as a model for the economies in transition?........................................................134
New SME financing instruments in transitional economies............................................................136
Concluding remarks.........................................................................................................................137
Chapter 14 Public Schemes for SME Financing in Transition Economies:
The German Experience by Andrea Herrmannsen.............................................................................139
SMEs in Eastern Germany...............................................................................................................139
Measures to promote SMEs.............................................................................................................140
Prospects..........................................................................................................................................144
Chapter 15 The Experience of the EBRD With SMEs in the Transition Economies
by Francesca Pissarides.......................................................................................................................145
SME financing in transition economies...........................................................................................145
Financial sector and its ability to finance SMEs..............................................................................147
What the EBRD can do for SMEs...................................................................................................148
Conclusion.......................................................................................................................................155
Part IV COUNTRY STUDIES: SME FINANCING IN TRANSITION ECONOMIES
A. OECD TRANSITION ECONOMIES
Chapter 16 Guarantee and Supporting Instruments for SMEs in the Czech Republic
by Lubomír Rajdl.................................................................................................................................159
Characteristics of SMEs in the Czech Republic..............................................................................159
Guarantee and supporting measures for SMEs................................................................................160
Supporting activities, 1992–97........................................................................................................162
The Czech and Moravian Guarantee and Development Bank.........................................................166
Chapter 17 Promoting The Financing of SMEs in Hungary by Klara Apatini.................................169
Government assistance through credit guarantee.............................................................................170
Operating principles of the Credit Guarantee Corporation..............................................................171
Prospects..........................................................................................................................................173
Chapter 18 SME Development and Polices in Hungary by Tibor Szakacks.....................................175
Structure of the business sector in Hungary....................................................................................175
Major processes in the business sector............................................................................................176
How Hungary promotes SMEs........................................................................................................177
Recent achievements and future tasks.............................................................................................179
Summary..........................................................................................................................................180
Chapter 19 Credit Guarantees for Small and Medium Enterprises in Poland
by Grazyna Gesicka.............................................................................................................................181
Programmes introducing credit guarantees......................................................................................181
Conclusions and recommendations for the Future...........................................................................184
Chapter 20 Public Schemes for Financing SMEs in Poland by Wieslaw Starostka..........................187
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B. TRANSITION ECONOMIES OUTSIDE THE OECD AREA
Chapter 21 The Development of the SME Sector in Bulgaria
Ministry of Finance, Ministry of Industry, Agency for Small
and Medium-Sized Enterprises and Bulgarian National Bank............................................................193
Background on Bulgaria..................................................................................................................193
Legal Framework for SMEs in Bulgaria..........................................................................................196
Financing SMEs...............................................................................................................................198
Profile of the SME sector.................................................................................................................201
Steps still to be taken.......................................................................................................................204
Priorities in the government policy for SME support......................................................................205
Chapter 22 The Development of SMEs in Estonia by Aleksander Bakirov.....................................207
Chpater 23 A Review of the Estonian Leasing Market by Ain Noormagi........................................211
Chapter 24 SME Development Policy in Latvia
Ministry of Economy of The Republic of Latvia................................................................................215
SME Development Programme.......................................................................................................215
Support to entrepreneurship.............................................................................................................217
Proposed co-operation projects........................................................................................................222
Chapter 25 SME Development in Lithuania by Izolda Kruitkiene...................................................223
Recent developments in Lithuanian SME policies..........................................................................223
SME financing in Lithuania.............................................................................................................229
Chapter 26 Financing SMEs in Russia by Veronika Chtelmakh....................................................233
Recent developments in Russian SME policy.................................................................................233
Role of credit-guarantee schemes in SME financing.......................................................................235
Role of leasing.................................................................................................................................236
Public schemes for financing SMEs................................................................................................238
Developing SME financing in the future.........................................................................................240
Chapter 27 SME Policies in the Slovak Republic by Juraj Matjan...................................................243
SME development in Slovakia.........................................................................................................243
Government attitudes to the promotion of SMEs............................................................................248
Financing SME development...........................................................................................................249
Role of venture capital and capital markets.....................................................................................250
Obtaining finance for SMEs............................................................................................................252
Public schemes for developing SMEs..............................................................................................252
Results and prospects of public schemes in Slovakia......................................................................255
Chapter 28 Public Schemes for Financing SMEs: The Slovenian Experience
by Staša Baloh-Plahutnik.....................................................................................................................257
Small-business sector in Slovenia: Overview..................................................................................257
Small-business development strategy..............................................................................................259
Institutional support to small-business development.......................................................................261
Development of financial markets in Slovenia................................................................................263
Organisation and instruments of small-business financing..............................................................264
Conclusion.......................................................................................................................................269
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