Small bussines

Small business has become an important research topic for economists 
and policymakers working on economic development and regional growth. Its 
importance and significance is due to the fact that small businesses are the 
fundamental basis for building a competitive environment, as well as the basis for 
forming a middle class society. The small business sector provides flexible and 
fast satisfaction of consumer needs; it serves as an effective tool for resolving 
social and economic problems both at national and regional levels. Small 
businesses create 50% of GDP¹, provide jobs for more than half the population 
of Western Europe and the U.S.², make a significant contribution to the export 
potential, facilitate implementation in manufacturing the latest achievements of 
science and technology, and so on.

 

The role of financing is particularly important in supporting small firms. 
"SMEs tend to be more financially constrained than large firms and the lack of 
access to finance is an important obstacle to their growth. In particular, SMEs 
find it difficult to obtain external financing from banks and capital markets given 
their size and characteristic opaqueness.³" Banks financing SMEs face difficult 
financial constraints due to the lack of accurate reliable information on the

financial condition and performance of small firms. In particular, banks usually 
hesitate to finance startups and young firms, those with insufficient collateral, or 
firms which demonstrate the possibilities of high returns but at a significant risk of 
loss. Despite efforts by financial institutions and public-sector bodies to close 
funding gaps, SMEs continue to experience difficulty in obtaining needed capital 
(K. Dietrich, 2003).

The aim of this paper is to determine the factors that drive banks' 
decisions to provide loans to small informationally opaque enterprises. This 
paper combines three important aspects related to small business lending - 
asymmetry of information, bank efficiency, and regional economic performance - 
and hopes to establish the complex ties between them and understand how

banks can use the information available for the benefit of SMEs, and ultimately 
regional growth.

In regard to the first aspect, the lack of hard information about SMEs 
creates asymmetry of information between banks and small enterprises. For 
example, "a lack of audited financial statements prevents banks from engaging in 
what is known as financial-statement lending, by which the loan contract terms 
are set on the basis of the company's expected future cash flow and current 
financial condition as reflected in audited statements" (Berger and Udell, 2006). 
Other lending technologies, such as business credit scoring, asset-based lending, 
and factoring, also need hard information on the SMEs. Therefore, it is important 
for banks to be able to find available information, which can be used as a proxy

 

for measured entrepreneurial performance when it is difficult to get hard 
information on them.

Specifically, this paper tests hypotheses about the effect of 
entrepreneurial information regarding firm turnover available in the region and 
small business density on the amount of lending to small businesses. This paper 
tries to find out whether the information that banks can get about the number of 
firms established in the particular county and the number of closeouts per county 
influence the distribution of loans to SMEs in a particular county. Thus, banks 
can make their lending decisions knowing already the history of successes and 
failures of small businesses in a particular county and in particular industries. 
This gives them more insight on the level of lending risk in the county and 
answers the question of whether a particular sector or industry in this county can 
be successful.

Also, along with entrepreneurial information in the region, the economic 
conditions in a particular county matter. For example, a county with a high 
income, population, and level of human capital has a higher probability of being 
more business active than the counties with these characteristics being low.

Furthermore, bank financial distress may be an important determinant of 
loan availability. "Healthy" banks are better able to provide loans to young, small 
firms with risky projects than are less healthy banks. These banks' profits are 
high enough to offset losses associated with lending to small businesses. All

 

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these factors need to be taken into account when analyzing bank lending to 
SMEs.

Another issue that this paper examines is the relationship between the 
degree of small bank competition in local geographic banking markets and the 
total volume of small business lending in those markets. This paper tests whether 
increases in competition in a banking market would be expected to be associated 
with increases in small business loan volume in a county.

The novelty of this paper lies in the regional character of the modeling. 
This paper is going to investigate how factors and their influence on the small 
business lending change across different geographical levels. Specifically, we 
will split the geography down to metro, micro, and rural counties in order to 
uncover the effect of the size and geography factor in the small business lending.

 

This data split allows us to find out whether the factors that influence SME 
lending in metro counties will have the same impact on the lending practices in 
the rural counties and vice versa.

This research tries to shed light on all these issues through testing the 
hypotheses using a rich data set provided by the Federal Reserve Bank. It 
contains information on counties' economic conditions, entrepreneurship density, 
their loans, and the Call-report data for all banks across the regions. In all, the 
hypotheses are tested using US county data from 1999-2007, representing a 
mixture of economic conditions at the county level.

 

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The four main obstacles to business are high taxes, limited access to finance, an inadequately educated work force and corruption. Medium-sized companies complain more about access to finance and work force qualifications than small-sized companies. The sources of finance are concentrated in Almaty and Astana, and most banks remain focused on catering to MSMEs in the two main cities only.

 

Business Advisory Services (BAS) and the Enterprise Growth Programme (EGP) activities with MSMEs in Kazakhstan are guided by the BAS and EGP country brief which is included in the overall EBRD strategy for the country. This strategy also gives a useful MSME market overview of Kazakhstan.

 

 

 

   Статья 19. Государственная поддержка и  развитие 
                 малого предпринимательства      

1. Основными принципами государственной  поддержки малого предпринимательства  являются:     

 приоритет развития малого  предпринимательства в Республике  Казахстан;     

 комплексность государственной  поддержки малого предпринимательства;      

 доступность инфраструктуры  поддержки малого предпринимательства  и осуществляемых мер для всех  субъектов малого предпринимательства;      

 международное сотрудничество  в области поддержки и развития  малого предпринимательства.     

2. Государственная поддержка и  развитие малого предпринимательства  осуществляются путем:     

1) оказания финансовой поддержки;      

2) организации сети центров  поддержки малого предпринимательства;      

3) организации деятельности бизнес-инкубаторов;      

4) передачи субъектам малого  предпринимательства в доверительное  управление или аренду не используемых  более одного года объектов  государственной собственности;     

5) безвозмездной передачи субъектам  малого предпринимательства в  собственность объектов, переданных  в аренду или доверительное  управление для организации промышленного  производства и развития сферы  услуг населению по истечении  года с момента заключения  договора в случае выполнения  предусмотренных им условий в  порядке, установленном Правительством  Республики Казахстан.     

 Данные условия не распространяются  на субъекты малого предпринимательства,  осуществляющие торгово-посредническую  деятельность.     

3. Финансовая поддержка субъектов  малого предпринимательства осуществляется  путем: