In 2003, small and medium enterprises (SMEs) in Russia accounted for 94 percent of the total number of businesses in the country. However, despite their numbers, SMEs produced only 13 percent of GDP in 2004 and commercial credit available to help SMEs grow met only one percent of demand. High transaction costs, perceived riskiness of commercial lending to SMEs, lack of sound risk assessment methodology, and unfavorable regulations governing collateral possession in case of default discouraged banks from lending to SMEs. SMEs that wanted to borrow did not have sufficient collateral to meet bank requirements and faced burdensome interest rates.
Last updated: August 12, 2013