Bank Slates $1Bln Loan For Small Businesses

Russian Vneshtorgbank will lend small and medium-sized businesses $1 billion this year, bank head Andrei Kostin said after a meeting with President Vladimir Putin last week. No Russian commercial bank currently has a small-business lending program, though there are a few banks that lend to small companies through funds provided by the European Bank for Reconstruction and Development. Putin has called the small-business sector a top priority, but efforts to reform relevant legislation have done little to boost statistics. Small and medium-sized enterprises account for less than 15 percent of gross domestic product, according to the State Statistics Committee. In the European Union that figure is close to 60 percent. If Vneshtorgbank makes good on its promise to lend out $1 billion, it would constitute the largest investment by a single organization in the direction of small-business reform. One of the main reasons that the Russian small-business sector has not flourished is because it lacks infrastructure readily available in the West, such as lending institutions, according to a recent study by the World Institute for Development Economic Research, a United Nations-sponsored think tank. Russia's banks have traditionally catered to small groups of industrialists, living off a lending portfolio of two or three high-volume clients. Lending programs for private individuals and small companies require the creation of an expensive retail network and more personnel for branch offices.