Strategies of the Development of Entrepreneurship and SME

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3.1.4. FINANCING SMEsProf. Dr. Selami Xhepa and Msc. Mimoza Agolli from Institute for ContemporaryStudies/Albanian Center for International Trade (ISB/ACIT) in their paper “Small and MediumSized Enterprises Development”, (Tirana, 2004), access to finance for SME sector describes asfollowing.3.1.4.1. General description of the banking sectorBanking sector in Albania continues to be underdeveloped primarily due to thelegacies of the pre-transition heritage. With the starting of transition, it was in mid-1992,for the first time a two tier banking system had to be established and a totally newbanking industry had to be developed based on market principles. The reform package onthe banking sector included measures of reforming state owned banking system, througha process of mergers and splits and the encouragement of the entry of new private banks.With the privatization of Savings Bank in January 2004 by an Austrian bank, theGovernment of Albanian totally withdraws from the banking business. Actually thebanking sector is composed of two joint venture banks, 12 privately owned by foreigninvestors and 2 owned by local investors.However, due to the dominant position of the Savings Bank, with 60 per cent oftotal deposits and 80 per cent of T-bill holdings, competition on the banking sectorremains rather limited.Banking legislation was visited frequently during the ‘90s, mostly due to the effectsof the 1997 crisis and the need to strengthen the environment on which they function. Inaddition to establishment and function of the industry, other important legal reformincluded the strengthening of the financial infrastructure. Special attention was paid tolegislation on secured transaction (enacted in 2001); strengthening of the bankruptcylegislation with a new law enacted in 2001. and reviewed (2003.) to comply with the EUdirectives; development of the deposit insurance schemes (2002.) where the deposits ofup to 5,000 USD are ensured by the established agency and development of legislation onmoney laundering, etc. Increasing the banking system transparency has been the focus ofthe reporting requirement procedures developed by the supervisory authority. On thatrespect, the Bank of Albania adopted a new accounting system consistent with theInternational Accounting Standards. Another important area of development is that ofpayment system, with a new RTGS (real time gross settlement) in operation by early..In terms of the funds intermediated through the system to the private sector, therole of banking continues to be very modest, albeit the very impressive dynamicsregistered during the last two years.The total loans to GDP continue to be at very low levels, reaching the highest 7.4%of GDP by end 2003 or a more 14.9% of total deposits on the system. While the depositsof the residents placed in the banking system rose from 29% of GDP in 1995 to 44% ofGDP by November of 2003 they share extended to private sector loans varied between 8-14% during this period.Several surveys of resource financing firms’ economic activities confirm that thebanking system has played a highly limited role. The data obtained from interviews offirms (EBRD, 1999 & 2000) show that more than 20% of the large enterprises interviewedin Albania refer to state funds as their principal resource of financing. 5% of largeenterprises and 2% of the SMEs interviewed confirm that they have got hold of financingresources only through the banking system. 2% of the SMEs list local banks as providing22
credit for their activities and another 2% mention foreign banks. The country coveragewith the banking services is rather limited. Especially after the restructuring of theSavings Bank which had a country wide network, this is a real issue, particularly for therural areas.The positive trend is that private banks are expanding their regional network. Thisis a clear trend observed during the last two years. The system today operates asindicated on the following table 5:Table.5.The lack of the competition on the banking system is also reflected on the highspread on interest rates. However, due to a combination of domestic factors anddevelopments on the international financial markets, the interest rate spread hasnarrowed. The detailed data are presented on the following table 6.Table 6.The following are the citations from the legislation in force regarding the collateraland the risk management regulations adopted by the Bank of Albania applicable by thecommercial banks operating in Albania.A loan is well protected if the collateral or guarantee is sufficient to protect thebank in case of nonpayment of principal and interest. Sufficient collateral or guaranteeentails the existence of a legal documentation, which ensures that the execution ofcollateral or guarantee will cover the amount of principal and interest, as well as itscollection or collateral execution costs.Collateral or guarantee is considered sufficient if one of the following conditions isfulfilled:• the loan is secured adequately (100%) with a guarantee in Lek by the Albaniangovernment or the Bank of Albania, for loans denominated in Lek;• the loan is secured by government securities. The loan amount does not exceed80% of the collateral or guarantee;• the loan is secured adequately (100%) by international financial institutions;• the loan is secured adequately (100%) by central governments or central banksof countries of zone A in their own currencies (such countries are listed in theregulation “On Capital Adequacy”);• the loan is guaranteed from another solvent bank, for branches of foreignbranches, other than the parent bank. The loan amount shall not exceed 70% ofthe collateral or guarantee;23
Page 4 and 5: 1. SME DECLARATION AND WORKING GROU
Page 6 and 7: While comparing the BSEC and EU doc
Page 8 and 9: cooperation with the United Nations
Page 10 and 11: GENERAL ASSESSMENT OF THE BSEC WG O
Page 12 and 13: “Armenia's new law introduces a n
Page 14 and 15: (iii)Share of the labor force of SM
Page 16 and 17: The following data represents some
Page 18 and 19: RankDocuments for export(number)Tra
Page 20 and 21: • Industrial zones/Business incub
Page 24 and 25: • the loan is secured with movabl
Page 26 and 27: 3.1.4.3. Mutual and loan guarantee
Page 28 and 29: introduction of e-signatures, only
Page 30 and 31: The Code of Conduct for Civil Serva
Page 32 and 33: Trading Across Borders Enforcing Co
Page 34 and 35: as with all non-governmental organi
Page 36 and 37: Bulgarian SMEs obtain additional ca
Page 38 and 39: • Project BG 2004/016-711.11.04 -
Page 40 and 41: usiness is not approaching them oft
Page 42 and 43: • Romanian citizens are recognize
Page 44 and 45: The preparatory project of the NDP
Page 46 and 47: • To support participation in eco
Page 48 and 49: In 2004, the National Institute of
Page 50 and 51: Incubators host on average 11 SME,
Page 52 and 53: Programs. The program is implemente
Page 54 and 55: development instrument is extremely
Page 56 and 57: accounting standards, including med
Page 58 and 59: corporations and open held corporat
Page 60 and 61: promoting SME sector, cooperation w
Page 62 and 63: • for unemployed (micro credit)
Page 64 and 65: are private pension funds, broker h
Page 66 and 67: very early steps of its democratic
Page 68 and 69: Another negative factor that is mor
Page 70 and 71: economy. The so called in the organ
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Federal funds, private capital, esp
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4.3. MOLDOVATable 14.Dimensions Neg
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Related andsupportingindustriesDome
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Technological:Internetaccessibility
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Domesticdemand• Still not many pe
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international investments• Govern
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3. Hamel, G., Prahalad, C.K. (1994)
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5.2 DEVELOPMENT OF THE SME SECTOR I
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General Characteristic of SME Devel
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Index of SME Development in Armenia
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The same problem exists in getting
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SME support infrastructure in Armen
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5 million was provided by UNDP and
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5.3 DEVELOPMENT OF THE SME SECTOR I
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Diagram 1. The number of small ente
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The privatization process of object
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13.Cabinet Provision on “Distribu
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5.3.3. SME support infrastructure i
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The role of the state in technical
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General situation of credit marketT
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After creation and starting impleme
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At the meantime, small enterprise s
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Table. 32.Ease of businessDoingBusi
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people who start small businesses t
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are salaried and the medium - sized
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Technology Foresight in Greece 2001
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Greek VC market started to develop
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In the area of bankruptcy and restr
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enterprises. According to TURKSTAT,
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small size enterprise or micro ente
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industrial enterprises. Undersecret
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individuals, rather than well struc
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7. SUGGESTIONS FOR THE SME DEVELOPM
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Annex 1.MAP OF THE BLACK SEA COUNTR
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17-18 June 2005 1 st Moscow Interna
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ARMENIASTRENGTHS• Application of
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BULGARIASTRENGHT• Flexibility and
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GREECESTRENGHT• They have a vital
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ROMANIASTRENGHTWEAKNESS• Stabilis
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REPUBLIC OF SERBIASTRENGHT• Longe
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UKRAINESTRENGTHS• Well educated l
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In compliance with the Resolution m
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1. Please provide definition of SME
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7. Did you establish a dedicated bo
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11. Do you have any suggestions for
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Strategies of the Development of Entrepreneurship and SME

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