Банкеръ Weekly



The silhouette of a national bank for development, yearned for by the Government's financiers, is already more clearly outlined on the Bulgarian economic horizon. However, it is not yet clear if it will become the State's investment bank or its activities will be limited to servicing the still unestablished guarantee fund for small and medium-sized enterprises (SMEs) and the Bulgarian Agency for Export Insurance (BAEI). But at least the Cabinet already seems resolute about setting it up. A huge resource is needed for establishing such a bank, but the idea is worth trying to make all necessary steps for its realization, Deputy Minister of Economy and Energy Nina Radeva told the BANKER weekly.
Of course, before setting up a bank that will be administrating the assets of the guarantee fund for SMEs, the rulers should set in motion the fund itself. And that task has been postponed multiple times. According to expectations, the initial
accumulation of funds in the new structure will amount to BGN35-40MN
to be released by the State budget. The calculations include also the money from the analogous funds of the Ministry of Labour and Social Policy because the guarantee fund will continue to service social projects. Ms. Radeva specified that the Cabinet had frozen the establishment of another fund with the Agency for SMEs in order to concentrate the available resource for setting up the guarantee fund. Only when a reliable practice for issuing and using guarantees for SMEs is established, we could think about alternative funds, the Deputy Economy Minister underlined.
The guarantee fund project is still discussed, but there should be a political decision about its establishment by mid-2006, Ms. Radeva believes. In that way there will be an institution insuring to companies better opportunities to use money from the structural funds if Bulgaria becomes an EU member as of January 1, 2007.
The work for establishing the bank for development started in the beginning of May by setting up a panel of experts, entrusted to prepare the respective strategy and the necessary amendments to the respective legislative acts. It's more important, however, to have the support from business because its sole purpose is to operate to its benefit and optimize the assistance which the State may render to SMEs, especially for promotion of exports, Ms. Radeva believes.
The bank for development
won't compete with commercial banks
and will rather be their partner, helping them to increase the number of its clients. The instruments which it will provide will be realized through the beneficiaries, i.e. the commercial banks. At the spring meeting of the Association of Commercial Banks (ACB) in Plovdiv on May 5 and 6, its Chairman Levon Hampartsoumyan said that the financial institutions were sceptical about that project, but it could assist the absorption of money from EU funds. Despite the rapid development of our bank system in recent years, a large part of the SMEs which should be the backbone of any economy by definition, do not have easy access to financing. The main reason is that just a few of them are able to present the required bank guarantees. Currently, the bulk of small enterprises ensure the necessary funds by using dubious schemes for drawing consumer credits with quite high interest rates.
It is not clear for the time being what guarantees the fund will extend to SMEs when they apply for financing from commercial banks. According to Nina Radeva, that issue is currently being discussed. The size and guarantees of credits will depend on the projects. But the guarantees will make banks more amenable because they will be sure they will get back the released credits. That
could bring about a reduction of interest rates
for SMEs. Moreover, the new financial institution will also offer purely bank instruments. For example, it will ensure additional crediting to projects for which loans, guaranteed by the fund, have already been received. That will additionally facilitate the firms' access to financial resources.
BAEI's place in the new bank is yet to be specified. According to Ms. Radeva, it is possible for BAEI to become its subsidiary. Thus, both access to financing and assistance to exporters will be gathered under one and the same umbrella. The policy for promotion of exports should have a key role, Ms. Radeva pointed out, because it is evident that even the measures for restriction of crediting have exhausted their possibilities. At the same time, the gaps in the country's balance of payments are still alarmingly huge.
Presently, Encouragement Bank is 100% state-owned and is managed by the Finance Ministry. However, it is not known who will head it after the restructuring. The bank is a state institution and should be implementing the State's policy, notwithstanding if the economic, finance or social ministry is its concrete source. That is in fact the purport of accumulating this resource - in order to coordinate at last the operation of individual institutions.

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