Romania

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  • Type: Publication series
  • Date: 10/16/2012

KPMG to help SMEs access funding by offering financial training 

            

Jacqueline Laye

Director, KPMG Enterprise

The EU´s Small Business Act (SBA), passed in 2008, reflected the Commission's political aim to recognise the central role of SMEs in the EU economy and to put into place a comprehensive SME policy framework for the EU and its Member States. 

 

 

A review of the SBA in February 2011 put particular emphasis on three areas:

  • "Think Small First" encapsulating all initiatives geared towards reduction of the administrative burden. 
  • "Access to finance" asking to reinforce all instruments which help SMEs to improve their financial situation.
  • "Access to markets" including expansion into international markets as well as markets created through public procurement.


To facilitate SMEs' access to funding, the European Investment Bank (EIB) Group increased the range of financial products it offers to SMEs, particularly mezzanine finance. In addition, more funds will be made available by the Commission for micro-credit and access to cross-border venture capital will be facilitated.


As at February 2012, in Romania, only 3 banks have access to the EIB (BCR, Bancpost and ProCredit Bank) as well as 3 leasing companies.

 

Most Member States have adopted policy measures to facilitate SMEs’ access to finance through public support for guarantee schemes.

 

However, according to the Romanian SMEs White Book 2012 - Carta Alba a IMM-urilor din Romania 2012, only 1.57% of SMEs have used guarantees from the National Fund for guaranteeing credits.

 

The survey conducted by the National Council of privately owned Romanian SMEs - Consiliul National al Intreprinderilor Private Mici si Mijlocii din Romania (CNIPMMR) and the Agency for Implementation of Projects and Programmes for SMEs - Agentia pentru Implementare Proiectelor si Programelor pentru IMM-uri (AIPPIMM) in partnership with the Romanian Fund for co- guarantees - Fondul Roman de Contragarantare (FRC) pointed out that:

 

  • 74.90% of SMEs were self-funded.
  • 30.4% of SMEs had obtained bank loans (up to 37.22% for SMEs with a seniority over 15 years).
  • 16.54% of SMEs had obtained facilities from suppliers.
  • 7.80% of SMEs had concluded leasing contracts.
  • 2.27% of SMEs did not pay their liabilities to suppliers or to the State to finance their activities.
  • 2.10% of SMEs had received grants.
  • Less than 0.5% of SMEs used factoring.

 

Financing needs are 55% for investment and 47% for working capital.
Romanian SMEs consider that the best ways to access finance are to use banking institutions (69.25%), guarantee schemes (10.89%), Governmental public policies (5.82%) and the Romanian Counter Guarantee Fund (FRC) (4.60%).
In terms of credit risk, the Romanian Counter Guarantee Fund (FRC) reports the default rate (%) of loans taken out by non financial companies.

  
 
 

Source: Ministry of Public Finance, National Bank of Romania, FRC analysis


The default rate of loans taken out by small and medium-sized enterprises reached nearly 20% at the beginning of this year, up from 2% in 2008, according to statements made by Ioan Hidegcuti, President of the Romanian Counter Guarantee Fund (FRC). "This poses a major problem to the banking system and, in general, to the philosophy and market conditions of banks. Construction, trade and processing companies turned out to be the riskiest, '' said Hidegcuti. SMEs which are the best at servicing their debt are in agriculture and utilities.


SMEs in the FRC portfolio service their debt better than Romanian SMEs as a whole:  the default rate generated by SMEs counter guaranteed by the FRC is 4.2% compared to 18.8% for all SMEs (in December 2011). Medium sized enterprises generate the lowest risk credit in the FRC portfolio. 

 

Micro enterprises are the most risky, irrespective of the used criterion, default rates vary in inverse proportion to the size of the SME.

The FRC considers that to improve funding:

 

  • There should be wider use of guarantees and counter guarantees offered by guarantee funds and the FRC (change in ratio guarantees and public counter guarantees vs. real estate guarantees).
  • Lending should be more balanced in terms of currency (credits in foreign currency ought to be oriented particularly to debtors which are hedged to currency risk).

 

The International Finance Corporation (IFC), a division of the World Bank (WB), grants a credit line of EUR 15 million to Banca Transilvania (BT). The line is dedicated to SMEs in need of finance for international trade. The credit line is granted through the Global Trade Finance Program that supports trade on developing markets by offering guarantees for individual transactions supported by the AAA IFC rating, according to a joint press release issued on 5 October 2012 by the WB and by BT.

 

To support SMEs in Romania, KPMG has launched a new brand, KPMG Enterprise, with professionals devoted exclusively to helping business owners and entrepreneurs to build value into their businesses and grow thriving enterprises. It’s all KPMG Enterprise does and at an affordable price.

 

As part of SME week, KPMG Enterprise is organising a training session in partnership with CCIFER to provide entrepreneurs with skills in finance to better assess the impact of their decisions upon the SME’s financial position, to understand the criteria used by financial institutions for approving or rejecting an application for a loan and finally, to enhance their access to finance.

 

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