‘Thirst for money is a normal occurrence!’

'Where are investment loans, where are low interest rates?'

Yan Art: Dear colleagues, good afternoon, let's begin. I would like to introduce you the participants of the meeting: Kitaytseva Lyudmila Romanovna — a chairperson of the Board of the Banking Association of Tatarstan, Sergey Georgyevich Bolotaev — the director of autonomous non-commercial organization Guarantee Fund of the Republic of Tatarstan, Dilyus Rasimovich Shavaliev – the head of the Center of Entrepreneurship Support of the Republic of Tatarstan, Emil Gataullin — an attorney, and Andrey Tatyanchikov – a participant of the project 'Kamsko-Ustinsky plant of gypsum plaster'. Unfortunately, Pavel Abramovich Sigal couldn't participate: it is a pity, because even if I disagree with him, it is always interesting to listen to him. But it's nice that the group from practitioners to representatives of the banking system allows to discuss the problem in the full extent. The forum name amazed me, when I was invited (well done in Tatarstan): 'Debts of small business' — it is more urgent. Some regions hold conferences 'Development of small business', but what development…

However, practice shows that in all conditions and any crisis of the last 25 years Russian small and medium businesses in spite of all laws of physics, morality, economics, etc. managed to survive. So, I think, let's make our conversation the most useful on the subject of survival: what mechanisms are there for cooperation between businesses and government agencies aimed at their support (guarantee resources, grant resources), what mechanisms there are for relations in the area of small and medium businesses and the financial market. I have very big request to the audience — to participate, to engage. Besides, Realnoe Vremya online newspaper prepared the collection of questions and, accordingly, in the second half we will ask the participants to answer to these questions.

I know that traditionally the regions begin with the authorities. Since I'm a visitor, I can permit myself. We have a logical order, so I would like to give the first floor to Andrey Tatyanchikov as a representative of the theme. I would like to hear your assessment of the current situation, the main problem points that small businesses facing.

Andrey Tatyanchikov: You know, 25 years that you have mentioned – it is a long period, almost the whole life. I have a diploma of a teacher of the Humanities, so the crisis that we went through in 1991, when the whole country — without exaggeration — was destroyed, when millions of people were, first, without money, second, they had to change the occupation… Those who survived this, I think, are able to survive anything. Despite, maybe, a war.

Now about the business. The experience we have gained in the 1990s, and those that we have to use from this experience today, in the second decade of 2000s, — are completely different things. Because 1990s have shaped our business and the whole economic structure of the country, focused on the production of raw materials to consumers outside the country, and out of businesses there should be only small businesses or medium business at least that serves the current needs of the population on the territory of our country. As for the situation of the 2000s – it has changed dramatically: after all, the construction of industrial enterprises has begun, restoration (not just the preservation of what has not been destroyed, looted, pillaged, scrapped in the 1990s, — thousands of such examples). And I'm glad that approximately in 1996 I tried for the first time to build a factory, which, by the way, was mainly focused on production for export. Now, in comparison with 1996, 1997 – it is much easier. When they say that it is a crisis, well… for someone it is a crisis, for us — the rise. The fact that now the sources of Western financing have gone, we have enough of our own resources, although, on the one hand, it is a path to autarky, but the world is not limited to Europe and the United States.

Now about, so to say, the perception of the crisis. A crisis always brings new opportunities. As for business debts and borrowed funds during a crisis. Now, of course, it has become much more difficult to borrow: first of all, huge collaterals are required. Second, the loan rate is very high – of course, it's not 300%, as it was in 1990s, but that time money was borrowed for a week, two, the maximum for a month, that is why that big rate was justified by the inflation. Everything went round and round, frankly speaking, more quickly, of course. Now, for example, we obtained a loan in 2015 – I have already told in an interview that in order to get a loan, even of the Prime Minister of the Republic had to intervene. Of course, there are banks with which relationships have been built over these years, we can work with them, but it's not a rule, it is more an exception.

And now, as for that loan: we planned to obtain a loan last year within a month, but we obtained it within four. We gave such collateral that not only we but small businesses, -medium businesses cannot afford. As for the term of the loan, and it is investment loan: we had it for six months. Can you imagine an investment loan for six months? So, don't call it investment loans, because we don't have such products at all, except, perhaps, the largest banks — Sberbank, AK BARS Bank. As for the banks standing on the second stage, they offer mortgages, some loans secured by business, which is materialized in a certain asset in the form of buildings, premises, lands and it is unclear how they are given. I understand, it is a rhetorical question: but where are investment loans, where are low interest rates? It seems to me that it's time, but it's not at the level of our meetings, not at the level of Tatarstan but at the level of the National Bank and the government, at the level of Russia, but the loans should be divided into several types. And those loans that are investment one, must be extremely low, maybe even with a negative rate taking into account the inflation or 2-3% per annum — then it is an investment loan. Loans must be for some perspective. I've finished.

Art: Thank you. As a representative of the banking sector, Vice-President of Association of regional banks of Russia, I would like to stand up for banks in the following. On 11 February we held a big meeting for 500 people headed by Nabiullina, and one of the main problems was why for the banks now it is more profitable to give a mortgage secured by an apartment on the business purposes for small businesses. One of the problems today is the sharp reassessment of the quality of business borrowers, I mean within Russia. Of course, to grant loans to SMEs in these circumstances, knowing that reservesб unlike mortgagesб can be a changeable thing — it's just not profitable. As for an investment loan, we can hang on the banks in Russiatoday a poster: 'An investment loan – a path to the dock'. Here is a problem, although the claims of businesses are also understandable.

Nevertheless, you surprised us a little by your optimism, because I came from a region, where you can always to see signs 'Rent, rent, rent', and even on the beautiful glass newly erected buildings. Second, in our town the mayor demolished the whole small business to hell in 97 places. He promised to return very beautiful panorama to Moscow squares and streets… And third, there is a crisis. And in Kazan it's different: there is no crisis, 'rent' does not hang, business is booming, small businesses are not tortured by debts.

Tatyanchikov: Yes, with one hand I'm a project manager, with the other – the owner of premises, areas to let. Of course, the turn of 2014-2015 was a failure for some types of businesses, we have lost some tenants, but they are 10%, and we replaced them with other tenants. Not with new ones, but with those who were in the neighborhood and wanted to expand. It is first. Second, the only thing we have done is that we have not followed inflation and haven't raised the rent. Although traditionally we raise it by 10%, this time, we did not do it. More precisely, we did, but our tenants immediately yelled, and as a result, we made a deal that everything remains the same. Yes, those people must engage in business who are not just psychologically stable but viable.

'This amount could be more if banks would have used these guarantees'

Art: Thank you. Nevertheless, in addition to bank resources, alternative types of support are being created, including at the state level. Tatarstan is one of the regions where this structure, perhaps, is one of the first where it was created and today it is one of the most developed. So I would like to hear from Dilyusa Shavalieva how is the problem of inaccessibility of banking resources filled up with your structures?

Dilyus Shavaliev: Good afternoon. I would like to say, if your business is not built as trade or services, theoretically for entrepreneurs in Tatarstan it is not very difficult to work. There are procedures that need to be gone through, and there can be low-cost financing from banks or various funds, because the Ministry of Economy of our Republic supports manufacturing and agriculture; so the producers and manufacturers of any other products… they have support from the state. If talking about support of entrepreneurship, traditionally it is divided into the following types: financial (the most popular); the second type – the property type of support; consulting. Financial support — is the various subsidies and grants, the second — is the assistance in obtaining financing. We have tools for providing collaterals to banks for our entrepreneurs. Also, there is a tool for providing microfinancing — today it is up to 1 million rubles with the rate of 10% per annum. From April, entrepreneurs will be able to lend up to 3 million rubles for three years under 10% per annum.

I won't tell much about subsidies, grants. I will only say that traditionally our Republic holds leading positions among the regions: we distribute the most to all entrepreneurs. As for concessional financing from banks, today we have a programme for the non-trading sector, for manufacturers, developed by the Corporation for the development (if you've heard about it). How does it work? For medium businesses a loan interest rate is about 10% per annum in the region, for small businesses – about 11%. The loan amount can be from 10 million rubles to 1 billion rubles. In total, one borrower can borrow in several banks up to 4 billion rubles, i.e. this programme works in Russia in 12 banks, where you can get this loan. In Kazan, there are 11 of these banks. In these banks you can get financing in the framework of this programme. Besides, there is the Development Fund of Industry (federal), you can go there and get funding. It is quite inexpensive, it also has its own procedures, but all this is available to entrepreneurs. So, to say that the loan market is closed for our entrepreneurs… but we are ready to provide the manufacturing sector in the Republic with support.

Also, we have some tools of the Guarantee Fund; the director of the Guarantee Fund, Sergey Georgyevich, I think you can tell about it.

Sergey Bolotaev: Good afternoon.

Art: I have a qualifying question. You have told about the support of the Corporation of Aleksander Braverman, does it mean that Tatarstan has already have support?

Shavaliev: Yes, 11 banks are already in the programme. And I forgot of another programme: we together with Corporation are creating federal networks of the company, that is, our Republic is one of the major regions for the establishment of such regional network. Appreciation rate is not more than 4% on equipment, if we talk about bank interest, it will not exceed 18% per annum. That is, the leasing companies of the country's corporations together with companies will transfer them to small businesses, re-equip SMEs in order small businesses had the opportunity to supply good products.

Bolotaev: Good afternoon again. The problem is that banks require the collateral, but not all entrepreneurs have the ability to secure new loans, because everything has already been mortgaged.

Tatyanchikov: May I interrupt you. The thing is: we availed your suggestion, and the Center for entrepreneurship support actually contributed to the providing the guarantee of the Guarantee Fund. But the bank ignored it.

Bolotaev: It falls on a conscience of the banks, the attitude to guarantee, but there are banks that use these mechanisms, and do it quite successfully. In 2015, 1.390 billion rubles was attracted through the guarantee of the Guarantee Fund – it is a substantial amount, and it could be more if banks would have used our guarantees more actively.

Sergey Bolotaev: 'In 2015, 1.390 billion rubles was attracted through the guarantee of the Guarantee Fund – it is a substantial amount, and it could be more if banks would have used our guarantees more actively.'

'You are virtually robbing small businesses by the rent'

Iya Kulikova, an entrepreneur (a question from the audience): The subject of the leasehas been raised, and not only tenants are interested in that subject, but also banks, small businesses in general. Small business, in fact, is a weak place among us, but it's not the reason for a strong one to eat a weak. The medium business can only grow out of small. The situation is that lease contracts are practically not balanced. How many of those who can't repay their loans, because not the rates, but the terms of the contracts do not respect the balance of interests of parties!.. Do you or maybe the banks have any idea how to balance the interests of tenants and landlords? Because in this case you are virtually robbing small businesses by the rent, it is impossible to go on a rental site, for example, in the retail sector when major shopping centres limit the entrance of entrepreneurs into the market.

Art:You scared me with words: 'A weak one has no place among us'.

Kulikova: No, I was quoting the colleague.

Tatyanchikov: I never said this. You have no choice. Either you become strong, or — don't.

Iya Kulikova: 'Small business, in fact, is a weak place among us, but it's not the reason for a strong one to eat a weak. The medium business can only grow out of small. The situation is that lease contracts are practically not balanced. How many of those who can't repay their loans, because not the rates, but the terms of the contracts do not respect the balance of interests of parties!..'

Art: We have a paper that is called the Russian Constitution, which states that we live in a social welfare state. Is it valid yet?

Kulikova: Theoretically, it may be work, but in fact, if major shopping centers have more money, more legal experience…

Art: You, basically, say to yourself that actually this formula — it is bad because the rental center is stronger, a weak has no place among us.

Kulikova: A small business owner just cannot do anything because the judicial practice is initially in favor of the shopping complex.

'For trade, it is easier to get access to bank resources'

Airat Kaveyev, the head of department of business development of JSC KPMG in Kazan (a question from the audience): Actually, I would like to expand the question. We have, as it has been noted, the support of agricultural producers and manufacturers. At the same time, medium and small enterprises, which are engaged in the trade, do not have support. Here's a simple question, any of you can answer: how does an entrepreneur, a business get the money to repay the loan?

Art: Do you mean that the manufacturer cannot do without trade?

Kaveyev: The manufacturers sells the goods. If we limit the development of small and medium trading businesses we will not allow small and medium entrepreneurs to enter the trade. Because large networks are not interested neither in agriculture nor in consumer goods, no one is interested in working with an entrepreneur who produces at 10 or even 100 million rubles, they need all chain to be secured…

Art: Do you agree that our colleagues representing the government proceed from a logical ideology of the state: to support a manufacturer primarily for two reasons. The first is to create the region's GDP, of the country, but the trade practically does not create GDP. The second point: if proceed from that any production is more complicated than trade from the point of view of the length of the resources and the production is more interested in long and cheaper investments rather than trade… Mister Tatyanchikov has told about this: in trade, with 30% per annum it is possible…

Kaveyev: I agree with your reasoning, but this reasoning is like the birth of a child, but then you stopped bringing him up, in other words, you gave an opportunity to start the production, but why you limit the further implementation and market entry.

Art: Let's give the floor to the colleagues from the state institutions. Do trading and small businesses have no chance at all?

Airat Kaveyev: 'The logic is simple: everyone can produce but not everyone can sell. Simple axiom: if you don't sell, why do you have the production?'

Shavaleyev: You need to understand that if there is a production in the Republic, new jobs are created, wages are raised, taxes, and all derivatives (trade, restaurants, cafes) are also developing, because if there is a production then everything else also appears. The logic is simple.

Kaveyev: The logic is simple: everyone can produce but not everyone can sell. Simple axiom: if you don't sell, why do you have the production?

Art: How come? I have no skills to engage in metallurgy but I do know how to sell it.

Azat Murtazin, Director General of KASKO Service (a question from the audience): You are mistaken here. I would support colleagues: initially, customers for the production are the sellers. Demand creates supply.

Art: Colleagues, you are right.

Murtazin: An example: the Great American Depression – what is it? The crisis of overproduction. They produced, built everything they needed — but couldn't sell. Second: the Soviet Union produced the irons, pots, because there was a state order. But if people don't buy, why would you produce? Here are two global examples: the American Depression, the Soviet crisis of overproduction. American people are smart, they managed to redirect, and we didn't.

Art: In macroeconomic extent I agree with you, but now a crisis of overproduction is not threatened to our country, I assure you.

Murtazin: I will clarify about the support of lending: for example, someone comes, the loan rate is 18% per annum, etc. In fact, to announce the interest rate makes no sense: I have been working in the credit system for 10 years, I know that there can be written '15%', but in fact it is more than 18%. There is an open gate — take 18%, if you want cheaper – go and get some kind of grant, subsidy and so on. The problem is in other: now we cannot even get a benefit, you get nothing even in an open gate. The result is that discussions on concessional lending remain at the level of ritual dances. The second point: any subsidy models in terms of lending and funding — is clearly a corrupt scheme business, because where there are benefits, there just a bunch of obsessive persons, a lot of intermediaries. I know a lot of entrepreneurs who are interested in loan resources who will not go there, because it makes no sense. It turns out, the state artificially creates a corrupt manner — to support small and medium businesses, believe me, it has nothing to do. In this case, I agree with my colleague, because trade, like water, finds where to flow: where people buy, they sell. And only then we find what to sell, if not, we call a manufacturer, the manufacturer produces it in needed amount, and we sell. That's it.

Bolotaev: About the state support, we know the famous saying: 'I have not read Pasternak, but I condemn him'. Here is the same. Have you ever turned to the government for support? At least once for concessional lending, for subsidized interest rate?

Azat Murtazin: 'Any subsidy models in terms of lending and funding — is clearly a corrupt scheme business, because where there are benefits, there just a bunch of obsessive persons, a lot of intermediaries.'

Murtazin: See, that's about macrophilosophy you talk. Let's proceed from macrophilosophy and not from my personal experience. You should understand that the money that is sold, is a product. It is sold, surplus value, profits – it is a usual business. It's about macrophilosophy. Let's proceed from that.

Art: You know it is doubtful.

Bolotaev: You said that many entrepreneurs believe that this is unrealistic. For example, 140 of businesses that have received guarantees from the Guarantee Fund in 2015, it is no doubt, disagree with you. How many people who received state support, they do not agree with you too. It is more people than in this room disagree with you. They just do not come to the microphone and do not speak that it is so great that they got it. And what if there are no manufacturers, what will you sell? Foreign?

Murtazin: We are not saying that they do not need to be supported.

Bolotaev: The share of trade in small and medium business is more than 50%. We have no manufacturers. Now sanctions are imposed against Russia — we have shelves empty, and we begin to support cheese producers, etc. Because it was imported by whom? By those who were engaged in trade. You didn't buy from our manufacturers, so they did not develop. It's not an accusation to you, we are talking about that it is necessary to support production, they are now in a less advantageous position than trade. They need investments, fixed assets. Trade very quickly rebuilds but it is more difficult for manufacturers in this regard.

Art: Frankly speaking, I agree for one simple reason: for trade, it is easier to gain access to banking resources. Banks with great pleasure lend to the 'turnover' than to the organizations represented by our colleagues.

Murtazin: Why is a bank more interested to lend to the trade than the production?

Art: Term of realization of pledge on business lending should be a maximum of 180 days. The bankers say they can't issue a loan to the factory, because in the conditions of crisis in Russia, there is no guarantee that the factory will be able to be sold within 180 days.

Murtazin: Why is the trade more profitable to lend than the production, can you explain it briefly?

Art: I have already said…

Murtazin: In the production there are more risks, in trade — less. What are the risks? If a manufacturer is not confident in the selling of the product, of course, a bank does not want to lend. If a manufacturer produces what is in demand not only in Russia but also abroad, he does not need loans. Today there are sustainable entrepreneurs who are not credited in a bank at all because they sell.

Art: I'm not ready to argue about it — here the turnover is different. A big problem is with collaterals, the risks have nothing to do with it. I would like to ask – Emil Gataullin also wanted to comment on.

'Where is the law that ugly things to be demolished?'

Emil Gataullin: Dear friends, the problem is at the legal level: we are all equal, but some are more equal than others. It is manifested in the fact that someone is forgiven with serious or non-serious sins, but someone is charged in full extent. We all know from observing trials of recent years and how they end for the defendants. Similar cases with less serious consequences end very tragically for the other defendants. The issue of equality: someone is allowed to break the law, someone is not. There is a paradoxical situation where in order to comply with all the norms of the law, you actually start losing, because you need to attract resources, to consult with lawyers, to do all that rules that govern your business but your neighbor is free of them. Accordingly, your neighbor starts to win in this competition, just because he doesn't comply with these norms. At the same time you should understand that a neighbour is a neighbour… a neighbour lives prosperously until the inspection. Here comes another moment that defines that those win who have a short way to power resource, in other words, whose actions are covered up. This problem of equality before the law has been existing for a long time and has not been solved. You say: why is there no equality, why the attitude towards the production is one, to trade — the other, how is our unequal position expressed, which led to that unequal position?

Another problem, which appeared, by the way, in connection with the recent demolition of kiosks in Moscow (to which, I think, my local colleagues responded poorly), in my opinion, in the opinion of a lawyer, is the following: in fact, the executive power said that the judicial power does not mean anything. Because all those who traded had relevant papers that have passed through the appropriate courts. The executive power said: nobody needs your papers. It doesn't happen in a constitutional state. No matter whether these court orders were bought or not – it is an attitude to a court decision. Thus, the court decision that states that this is your property and no one can encroach on it, – no, it is all, it's a new legal reality, a court order means nothing, because right at the conference you can easily declare that it is not a court order but just a piece of paper. And then we will remain in absolute obscurity, what will happen tomorrow. The issue of equality is an issue of the relation between executive power and judicial power, this is a serious problem.

Art: Thank you. I would like to clarify. In Moscow, of course, not stalls have been demolished — in Moscow the excellent nice modern shopping pavilions have been demolished. I have not seen demolished kiosks. Near my office a magnificent glass pavilion was demolished. It's the press says that it is stalls.

Gataullin: It doesn't matter whether it is a stall or not. There is an excuse: that birdhouses are ugly. Where is the law that ugly things to be demolished?

Art: In the background, maybe, of the mayor's house – it is ugly, in my background – it is quite nice.

'Speculators are the blood cells in a normal market economy'

Irek Galyamov (a question from the audience): As an economist, I would like to hear an economic point of view. First, the ultimate consumer of any business is its target audience, and now the economic situation shows that consumption is dropping, unfortunately, and due to consumption not only small businesses have problems but also medium and large businesses, as they say. I would like to say that now the population redistribute money towards savings, consumption is reduced. I would like you to comment on this economic situation. According to figures of Realnoe Vremya, in 2015 the amount of loans in foreign currency dramatically increased to 18.4 billion rubles. Mr. Art, does it indicate that people have begun to speculate on the rise of dollar, or the money being invested in the business? However, judging by other indicators, the amount of loans decreased by 25% and liabilities increased by 19%. It suggests that not only current projects, business plans are not being realized, but also it doesn't work with consumption.

Gataullin: I personally did not like the concept of speculation – it is clearly negative connotation, because those who engaged in trade, can also be called speculators, profiteers. Why do we have to talk about it? Is it a banned kind of activity?

Galyamov: Nevertheless, it is not beneficial for the economic situation. Due to the growth in the market value of the currency…

Gataullin: Nobody cares about it, everybody wants to make money. Thirst for money – it is not a bad thing. We are not working in the name of the party.

Galyamov: I'm not talking about the specific motivations of entrepreneurs, I'm talking about the course of Russia, the economic situation created by Russia.

Art: The stalls have been demolished. What is next — speculators will be imprisoned? In the world where they speculate on the currency at the exchange, the turnover of money accelerates for some reason, and it is a positive economic process, which is also beneficial for the development of the economy, and speculators are those who are the first to transfer money flows into new growth opportunities. But for some reason it is still a problem for Russia. Maybe we are still immature, so for us the problem is red blood cells in the blood that movement… speculators are the blood cells in a normal market economy.

Galyamov: Thank you.

Lyudmila Kitaitseva: 'When 15-18 years ago we went abroad for the first time, we met with foreign banks, and when one of the speakers said to us, Soviet bankers, that banks are the speculators, we wondered: how?'

Lyudmila Kitaitseva: I would like to say a little about the speculators. When 15-18 years ago we went abroad for the first time, we met with foreign banks, and when one of the speakers said to us, Soviet bankers, that banks are the speculators, we wondered: how? Some give us resources for one price, we give it to others, we live on the difference. 'And all speculators live like this?' We were so indignant.

Galyamov: Speculators in the market conditions are the donors, I agree, but… Here is an example: in Tatarstan, 40% of the housing built in 2015 is not commissioned. What does it indicate? The population has less money? No, it means that they are waiting for preferential money, to take margin on the mortgage, because they can't reduce the price. This is not an economic way, it is a state clamp of the ultimate consumer.

Art: Thirst for money, if without any emotion, it is normal occurence! There are people to tackle this problem, we have prominent economists. But thirst for money in cases when actions prevent the development, — is still an objective economic factor. So, such market, what can we do. You can apply some stimulating moments, for example, to raise taxes. For example, Sobyanin proposed to raise taxes. Developers will be able to commission buildings sooner, then the tax will be less.