The Role of Credit in the Development of Small and Medium-sized Entreprises in Belarus: Estimating the state of the Microfinance Sector

Summary

This publication discusses the results of the research on the access to credit by small and medium-sizedenterprises (SMEs) in Belarus, and the role of microfinance and credit unions in this process. The research has established that the vast majority of small and medium enterprises in Belarus does not borrow. Also, they do not perceive a lack of credit as a problem. In Belarus, bank microcredits are the most widespread form of borrowing, while loans provided by credit unions occupy a very small share in the total volume of loans. The weak development of microfinance sector and the loan market in general are tended to be caused by a relatively high inflation (until recently), gaps in the existing legislation regulating the functioning of credit unions, the absence of necessary information for small and medium business, underutilization of international loans, and, finally, a range of psychological factors. Currently, companies spend a lot to pay taxes and fines and to cover the costs related to accounting. A fraction of these expenditures could certainly be redirected for investment into fixed assets. Also, it can be used to increase the volume of circulating assets. Finally, the policy recommendations made for the development of microfinance sector could be used, in the first instance, by local authorities: 1) the creation of local information centers for supporting of private business; and 2) cooperation with international financial organizations.