A report commissioned by the international accountants body ACCA paints a rather glum picture of the SME sector in
But the conclusions are somewhat optimistic, if only the government would adopt, or at least consider key points from the survey that has constructive suggestions of how to divert money from public funds into new entities, but not burden the state with intervening in the private sector.
The report, conducted by the research company RTD Talos looked into ways of improving SMEs' access to finance, as well as ACCA's response and policy recommendations. It is based on a series of stakeholder interviews and member input following a global call for evidence by the ACCA.
"Neither worked quite as envisaged, with evidence of sharply reduced lending, rising delinquencies and continued deposit flight throughout the country. The combination of a banking system and a government powerless to assist businesses has exacerbated what was already a very difficult situation."
In response to these challenges, the ACCA recommendations based on the study by
It also suggests that the banks limit the repayment of Emergency Liquidity Assistance (ELA) and use part of the unallocated ELA to ensure continued liquidity.
On the other hand, the government should consider creating a development bank exclusively for SMEs, possibly by converting any one of the 18 Cooperative banks that came out of the state bailout of
"To fund such a development bank with, say, a capital of
"This would allow there to be public ownership of the bank and its funding procedures, but outside of government," Gold said.
The most that the government would be expected to do, would be to underwrite loans, he added.
He said that credit rationing "is only the beginning of the problem. Only 35% of SMEs would prefer to finance from bank loans, down from 50% before, while at present that figure could fall even further."
To put the problem of cash-strapped companies into perspective, Gold said that "approximately 40% of would-be borrowers need less than
Going back to recommendations for the government, the ACCA/
The report concluded that with appropriate government support, credit providers can lead the development of online invoice auctioning platforms, and online product and service bartering marketplaces, an area where ACCA has experience with the
On the one hand, banks keep giving the excuse that "we have too many" borrowers, but on the other hand, the
"Banks should consider hiring accredited external independents for their arrears management work and not rely on internal committees, members of whom may be unqualified to deal with such issues," Savvides said.
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