About the problems of SME development in Russia

The study is devoted to the problems of SMEs in Russia. It analyses the SME development and compares it with the situation of SMEs in other countries. The initiatives of the state to improve the conditions for SME growth are also studied.

SMEs in Russia

Small and medium-sized enterprises (SMEs) in most developed countries are the drivers of economic growth, innovation and employment. These enterprises are generally considered to be the most flexible and dynamic, able to quickly adapt to changes in the market and introduce new technologies. However, in Russia, despite the importance of this sector, its growth rate and level of development remain insufficient.

In Russia, the number of active SMEs per 1,000 people is well below the world average and stands at only 28. Moreover, the contribution of SMEs to the Russian economy is only half of the global average.

Small and medium-sized enterprises (SMEs) in Russia go through several key stages, each with unique challenges:

• At the founding stage, entrepreneurs face many challenges: registering a company, obtaining licences, setting up accounting and finding financing. Recruiting a team and organising internal processes are equally important matters.
• As the enterprise grows, management and automation come to the forefront. Companies expand their staff, introduce incentive systems and intellectual property protection, and begin to explore new markets.
• At the maturity stage, the main focus shifts to optimisation: taxation, cost reduction and risk management. It is important to retain the customers base and diversify sources of financing.
• If the enterprise faces a crisis, it may enter the decline stage, where the key tasks become anti-crisis measures and search for new opportunities.

At each stage, business success depends on the ability to adapt and effectively address the challenges that arise.

Government initiatives

In response to the challenges faced by small and medium-sized enterprises (SMEs) in Russia, the government is introducing a number of initiatives aimed at facilitating the business environment and stimulating business growth. Government measures include simplification of regulatory procedures, such as a moratorium on inspections and cancellation of fines on state contracts. Tax exemptions and deferrals have been introduced, as well as support in the form of product certification for export and educational programmes on international trade.

Financial support covers soft loans, cost subsidies, loan guarantees, insurance, and debt restructuring. To stimulate demand, measures are offered to support foreign purchases and limit the use of imported products in public procurement. Information and marketing assistance and counselling are also available.

Key challenges for SMEs

Financing remains one of the main challenges for small and medium-sized enterprises (SMEs) in Russia. At the startup stage, entrepreneurs are often forced to rely on their own funds, which may not be sufficient to fully develop their business.

Venture capital financing in the country faces challenges: unlike major global players in the venture capital market, startups in Russia receive late-stage investments, and investments are concentrated in certain regions, which creates unequal conditions for businesses in different parts of the country. Thus, we can conclude that Russia lacks a full-fledged ecosystem for venture financing.

Bank financing is also a challenge. SMEs have difficulty accessing loans due to strict requirements from banks, high interest rates and loan limits. These factors make it difficult to raise the necessary funds for business growth and development.

Although the share of SMEs in the IDF is stable at 35 - 40 %, the contribution of the IDF to the overall financing of SMEs is not significant.

Possible solutions

Improving access to bank financing is crucial for the successful development of small and medium-sized enterprises (SMEs) in Russia. Currently, centralised development institutions such as the Industrial Development Fund, the Russian Export Centre and the SME Corporation do not fully meet the needs of businesses. These institutions are often focused on narrow market segments or cannot provide the necessary financing for most SMEs.

To improve the situation, access to bank financing should be simplified. In particular, banks should be allowed to make their own provisions for loans of up to 150-200 million roubles and amend existing regulations. The creation of a new category of industrial banks is also proposed, which would help expand financing opportunities for SMEs

These measures can significantly improve the availability of financing, which in turn will contribute to the growth and development of SMEs in Russia.