First guarantees - then money

Banks do not hurry to meet individual entrepreneurs

The volume of credit funds, which individual entrepreneurs attract, remains insignificant. Meanwhile, the low level of loans hinders the development of the entire economy of the country as a whole, because namely small and medium-sized business (and entrepreneurs are essential component of it) should become the driver of a new economic growth. But banks are ready to change their position in exchange for particular guarantees - both from the state and from the private sector.

Debt load is high, discipline is lax. According to the data of the Joint Credit Bureau, only 10% of individual entrepreneurs registered in Russia have active bank loans (according to the Information and Analytical system Globas®, there are 3,8 mln individual entrepreneurs in Russia as of the 7th of July). At the same time, the level of debt load by those who have unliquidated obligations is high: an average of 2,7 credits with a total debt of more than 2 mln RUB is accounted for each such individual entrepreneur. As a consequence, payment discipline of entrepreneurs is low: more than a quarter of them do not pay on their credit obligations on time, and 21% of loans are in default status (overdue is more than 90 days). The tendency of the reduction of credit granting is credit reduction is typical not only for individual entrepreneurs, but for the entire small and medium enterprise (SME) sector. According to the "Expert RA" agency, banks issued 5,3 trillion RUB to representatives of SME in 2016, that is by 3% less than in 2015.

The decision is negative. Commercial banks became the main obstacle on the path of individual entrepreneurs to credit resources, whose position on this issue is well known. Instability in the receipt of income, as well as the complexity of their forecasting are the main arguments for making a negative decision on credit granting to individual entrepreneurs. In addition, many registered individual entrepreneurs are not entrepreneurs in fact, they do not conduct economic activities, are created for saving in taxes or cashing in of money. As a result, issuing loans to individual entrepreneurs becomes for banks too risky and unprofitable.

Where there’s demand, there’s no supply. A number of entrepreneurs solves the problem of raising borrowed funds by obtaining consumer loans, that in practice is often easier and faster. However, it can not even partially solve the problem of the requirement of individual entrepreneurs in borrowed resources. The favourable credit facility for SMEs («Program 6,5%»), implemented since the end of 2015 by the SME Development Corporation (we wrote detailed about this in the Article "In chase of easy money" from 27.03.2017) does not solve the problem. Against the background of the number of loan applications from individual entrepreneurs, which increased by almost 1,5 times for the last year, the amount of approved decisions decreased. The loans, which are provided yet, are issued at over- and nonbeneficial rates for entrepreneurs.

Strong guarantees. In the current situation banks, having the final say in making a decision to grant a loan, are ready to meet individual entrepreneurs only under the sole condition – the provision of strong guarantees for timely and high-quality fulfillment of obligations. And only the help of state is not enough here. In order to obtain full access to the borrowed capital market, individual entrepreneurs must become more open and transparent, they will have to get rid completely of shadow accounting, and also learn how to plan their activity in such a way that their ability to receive constantly income and, therefore, make obligatory payments, will not cause doubts by banking sector.

The question of due diligence when concluding contractual obligations with individual entrepreneurs is actual not only for banks, but also for all economic entities. An effective way to prevent the risks of cooperation with an unreliable business partner is the use of the Information and Analytical system Globas®, which contains information on more than 24 mln legal entities and individual entrepreneurs.

About bank fraud

Banking sector problems still cause concern of the business community. It is not uncommon and influences business badly, when the next day after signing the agreement with contractor and money transfer into his account, it comes out that partner bank`s license is revoked. That is why it is necessary in estimating of the future contractor to check the financial stability of his credit organization. It is possible to do with the help of the Information and Analytical system Globas.

According to the Bank of the RF, on July 1, 2017 in Russia 947 credit organizations (CO) are registered. Among them: 591 CO having right to carry out banking operations; having licenses (permissions) to attract private deposits – 491 CO, to carry out operations in foreign exchange – 381 CO; with general license – 196 CO.

According to the analytics, in general, in Russia about 100 banks at average are closed annually. Besides, 80% of banking licenses were revoked because of criminal activities of owners and managers. Only for the last three years fraud bankers stole from depositors about trillion RUB. Inadmissibility of such situation was the main topic for discussion at the meeting of the interregional banking Council of the Federation Council on June 26, 2017.

At the meeting of the Council the most popular fraud schemes were marked: financing of own holders, overstatement of assets and false capitalization. Also immediately before bankruptcy bank assets are often turned into unsecured assets and promissory notes of nonexistent companies. Even the toughening of prohibition for the falsification of accounts does not restrict fraud bankers.

Among fraud schemes experts distinguish:

  • Opening of the off-balance accounts
    Banks open accounts off the books; money are taken from physical persons; in case of аlicense withdrawal account data are not included in the refunding procedure through the endowment insurance Agency.
  • Investment of funds to the correspondent accounts of foreign contractors
    Non-disclosure of leg of transaction related to the investment of funds abroad; similar schemes can be applied to securities.
  • Creation of non-real debtors
    Large amount of legal entities are founded, agreements are madebetween them, however, actual activity is not carried out. Special programs of a fraud bank watch in order to borrow money from one debtor a proper time and transfer it to another one to pay the debts and credits in time. The Central Bank determines such firms by payment of minimum amount of taxes be large amount of debtors at the same day.
  • Loan granting to retail debtors
    Clients of other banks are used as debtors; loan servising of such debtors, as a rule, is carried out without expiration to certain time.
  • Manipulations with deposits
    Bank uses funds of a depositor for own benefit, without informing him; or contracts with nonexistent depositors about transfer of funds through cash, that are derived from bank by loan granting later.

At the meeting of the interregional banking Council of the Federation Council measures against such fraud were suggested.

Among them:

  • to foresee the possibility of property arrest of a collapsed bank before the court takes decision on refunding or comeback to bankruptcy assets of the property that was output before withdrawal of bank license;
  • to strengthen criminal liability both for an owner of bank and for a cashier, for example, by increase of deprivation term in case of satisfied intentional fraud, falsification of bank documents, funds withdrawal, deception of depositors and the state;
  • and other measures.

Besides, the Central Bank of the RF suggests foundation of the unified register of depositors and affords the access by means of the State services web portal. However, question about when and how it will be realized is still open. Among benefits the enactment is marked that regulates refunding of banking deposits for small and medium business in amount to 1,4 mln RUB through the endowment insurance Agency in case when neglectful bank is closed.