In support of SME development
Azerbaijan, Baku, 7 November / Trend /
Leyla Abdullayeva, expert Trend analytical center
The situation in Azerbaijan shows that the conditions created in the country due to political and macroeconomic stability in order to accelerate the development of small and medium enterprises (SMEs) are not used fully. The number of entrepreneurs is less than the existing capacity, and most importantly - in this sector the enterprises possessing sufficient capacity do not develop sufficiently.
The number of opened SMEs in Azerbaijan can significantly increase if crediting is simplified. According to a survey conducted by the International Finance Corporation (IFC) within the development of the business environment project in Azerbaijan amongst 1,800 small and medium enterprises (SMEs), the main problem is the limited business loans. According to the survey, it became clear that entrepreneurs are dissatisfied with high interest rates, as well as the huge number of formal and informal payments, which bring to the inhibition of the private sector.
Bank percentages for the commercial activity are maximally high (more than 20 percent), but privilege credits in the National Fund are unfortunately sufficient not for all. All these, plus to inflationary development leads to the fact that developing small enterprise is considered a risky matter.
According to a survey by IFC, in this situation, entrepreneurs provide 85-90 percent of the capital from their own savings or through debt to start and further develop business. According to the surveyed entrepreneurs, the situation could be discharged if at least short-term loans are provided in amount of 1,000 manat.
The practice of world business testified that the small enterprises take an important place in the national economy of any state. Indeed, in many respects it determines the rates of economic growth, structure and quality of gross national product. In the developed countries of the world, the small and medium business (SME) has long ago been named the motor of the economy. In the budgets of these countries, significant share fell on SME.
Any steps directed toward the development of small business are useful because the activity of small enterprises, which makes it possible to timely redistribute human and material resources and timely react to changes in the demand. Small entrepreneurship is an important social tool to combat unemployment. It provides an opportunity to develop and adapt different forms of new technologies, prepare basis for the future development of industry, in the form of training qualified and semiskilled staffs.
There is other important moment. We expect joining the World Trade Organization (WTO), after which Azerbaijani market will be completely opened for the foreign products. Most probably, the market will be full of imported goods, which will be more qualitative and cheaper, and Azerbaijani producers will not be able to compete with them. It means that Azerbaijan's economy will directly depend on foreign products. Therefore already today Azerbaijan should develop production, make them competitive so that tomorrow when the borders are opened, Azerbaijani products could take solid niche in the commodity market of not only Azerbaijan, but also other countries. And certainly significant role in settling this problem belongs to the SME.