Strategies of the Development of Entrepreneurship and SME
Strategies of the Development of Entrepreneurship and SME
Strategies of the Development of Entrepreneurship and SME
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financial support to <strong>SME</strong>s can be included in <strong>the</strong> support infrastructure. Considering to nonbankingfinancial institutions, some part <strong>of</strong> <strong>the</strong>m get funding from international/foreign donororganizations which task is to support mainly <strong>SME</strong>s.Armenian <strong>Development</strong> Agency (ADA) mainly assists to companies, which are dealingwith foreign investment <strong>and</strong> import <strong>and</strong> export activities. Hence large enterprises are still <strong>the</strong>main target <strong>of</strong> <strong>the</strong> ADA’s support.Summarizing <strong>the</strong> analysis <strong>of</strong> <strong>the</strong> <strong>SME</strong> Support infrastructure it is worth to mention that<strong>the</strong> <strong>SME</strong> support infrastructure is not complete in <strong>the</strong> country, having into consideration <strong>the</strong>absence <strong>of</strong> many important components, <strong>the</strong> absence <strong>of</strong> linkages, as well as lack <strong>of</strong> counterinfluence <strong>and</strong> collaboration between some components <strong>of</strong> <strong>the</strong> infrastructure, indifference <strong>and</strong>inactiveness <strong>of</strong> <strong>the</strong> banking sector to <strong>SME</strong>s etc.5.2.4. Financing Start-upsSupport to establishment <strong>and</strong> fur<strong>the</strong>r development <strong>of</strong> new businesses has recentlybecome an issue <strong>of</strong> crucial importance for Armenian economy, although until recent years <strong>the</strong>rewere no mechanisms for financing start-up businesses in Armenia.Despite positive changes in <strong>the</strong> attitudes <strong>of</strong> banks, more difficult access <strong>of</strong> <strong>SME</strong>s to loanspersists. The banking sector is placing more emphasis on reducing risks in loans <strong>the</strong>y grant,which is reflected in loans for <strong>SME</strong>s. Banks concentrate on financing current operations <strong>of</strong>creditworthy <strong>SME</strong>s <strong>and</strong> perceive increased risks in long-term loans for <strong>the</strong>ir investment plans.Moreover, banks <strong>and</strong> o<strong>the</strong>r financial institutions operating in Armenia request to include<strong>the</strong> financial history <strong>of</strong> applicant in loan application in order to get loan. In <strong>the</strong> result <strong>of</strong> this,start-up businesses have no chance to get loan from banks.Since 2004 <strong>the</strong> Government elaborated a program measure on support to start-ups, whichinitially was called “Successful Start” <strong>and</strong> had technical character (training support). Forimplementation <strong>of</strong> this program measure <strong>the</strong> <strong>SME</strong> DNC <strong>of</strong> Armenia has collaborated withpartner international/foreign organizations, such as German Project “Pro<strong>SME</strong>”, UNDP throughBSPs selected by tender. This program measure has been mainly implemented throughoutregions <strong>of</strong> Armenia in order to even out <strong>the</strong> development imbalances between Yerevan <strong>and</strong>regions formed in <strong>the</strong> last decade. Starting from 2005 <strong>the</strong> scope <strong>of</strong> this program measure hasbeen enlarged thus containing not only training, but also pr<strong>of</strong>essional consulting <strong>and</strong>information components. At <strong>the</strong> ground level start-ups have been assisted by pr<strong>of</strong>essionaltraining courses <strong>and</strong> personal counseling in formation <strong>of</strong> a business concept <strong>and</strong> development<strong>of</strong> <strong>the</strong>ir own business plans. At <strong>the</strong> end <strong>of</strong> <strong>the</strong> program with more succeeded start-upbusinesses long-term cooperation has been conducted. According to statistics since 2004technical support has been provided 282 start-ups, 92 <strong>of</strong> which have been registered as soleproprietors <strong>and</strong> legal entities thus initiating entrepreneurial activities in <strong>the</strong> country.In 2006 for expansion <strong>of</strong> loaning opportunities for start-up businesses <strong>and</strong> improvement<strong>of</strong> loaning terms, <strong>the</strong> <strong>SME</strong> DNC <strong>of</strong> Armenia worked out a mechanism for provision <strong>of</strong> financialsupport to start-ups <strong>and</strong> herewith envisaged funding for business plans <strong>of</strong> start-ups awarded tohigh assesssment. The loaning is performed by ACBA Credit Agricol bank, <strong>the</strong> partner bank <strong>of</strong><strong>SME</strong> DNC <strong>of</strong> Armenia: <strong>the</strong> maximum amount is AMD 1 million (about 3200 USD), with 12%annual rate <strong>and</strong> up to 3 year repayment term. The <strong>SME</strong> DNC <strong>of</strong> Armenia provides 100%guarantee for loan obligation provided to start-up businesses.Initially for attraction <strong>of</strong> corresponding financial means negotiations were conductedwith foreign <strong>and</strong> international donor organizations <strong>and</strong> with projects implemented by <strong>the</strong>m. In<strong>the</strong> result <strong>of</strong> <strong>the</strong>se negotiations, for provision <strong>of</strong> financial support to start-up businesses ''topcapital'' amounted for AMD 12 million was established. For establishment <strong>of</strong> ''top capital'' AMD95