Is it Easy to be an Entrepreneur?
15 February 2018
A panel discussion entitled ‘Is it Easy to be an Entrepreneur? Perspectives from Business and Government’ organized by Sberbank of Russia took place as part of the business programme on the first day of the Russian Investment Forum.
Speakers discussed the entrepreneurial experience and associated issues, educational programmes and conditions for business development, and emphasized the need for transition by small and medium-sized businesses to a digital basis.
The discussion moderator, Sberbank CEO and Chairman of the Executive Board Herman Gref, noted that growing small businesses is an objective of economic diversification. Russia has been lagging behind the rest of the world in this area. “Entrepreneurs are the mainstay of our society. They create added value, pay taxes and create jobs. Their efforts create all things of value”, he stressed. The moderator cited a NAFI study listing the issues small businesses face in Russia: high taxes and charges, weak demand and a lack of skilled workforce. In addition, entrepreneurs find it hard to compete with the shadow economy and to parry frequent inspections by regulators. “The digital economy, the new opportunities and technologies that are developing very fast today are capable of changing the situation; moreover, they have already started changing it”, the speaker said, adding that the lowering of barriers in banking was already under way.
Sberbank’s 2015–2017 SME loan portfolio exceeded the pre-crisis level by 19%, said Sberbank Senior Vice President and Head of Corporate Business Division Anatoly Popov. The process of lending to SMEs has accelerated thanks to introduction of smart loans. “Even before an entrepreneur comes to us, we use machine learning and big data to analyze their transaction activity to see if the borrower is reliable and if we can approve a certain credit limit for them”, the expert explained. Sberbank has approved RUB 45 bn of such loans, which only take one day to process.
To resolve the tax issues, Russia’s Minister for Economic Development Maxim Oreshkin invited small entrepreneurs to work directly with aggregator platforms. “Take the well-known Yandex.Taxi service, for instance. People who work for it are prepared to pay 15–20% of their income to do their reporting. All they need to do is register. That’s the kind of mechanism we need”, said Oreshkin. Moreover, according to the Minister, small businesses need to work openly with the banking system and feel safe.
Minister for Open Government affairs Mikhail Abyzov believes that the problematic relations with supervisory and regulatory authorities stem from frequent changes in the rules of the game. According to him, while the number of federal-level inspections has fallen, the opposite applies in the regions and municipalities. “The controller is neither an executioner nor a punisher. The controller is a partner, assistant and coach that should help businesses understand the ins and outs of government laws, regulations and requirements in order to comply with any requirements for ensuring safety, rather than destroying businesses or creating problems for them. A change in mentality is in order”, Mikhail Abyzov said.
Mikhail Mamuta, Head of the Central Bank’s Service for Consumer Protection and Financial Inclusion, called on businesses to transition actively to new technologies. “There is no such thing as a half digital technology. We cannot have digits on one side and paper on the other”, he noted.
According to the IMF, a record 33% of Russia’s economy operates in the shadows. On the subject of the shadow economy, individual entrepreneur Dmitry Petrulyov, Director of the FOL’GA creative agency, noted that 60% of his peers work under the table because they cannot afford the tax burden. His own taxes account for 40% of payroll. “I cannot pay high wages to my employees. That is important”, he said, singling out his tax expenses. He added that entrepreneurs need access to financial and accounting training and that their confidence in the future must be built step by step.
Just 20% of Russian entrepreneurs feel the need for a training course compared to three times as many in Germany. Olga Suslova, Google Russia Director for Strategic Partnerships, spoke about ‘Business Class’, a free programme conducted jointly with Sberbank. Since the programme was deployed in Russia, 36,000 entrepreneurs from 30 Russian regions have received business training, 30,000 of them in Tatarstan alone. The programme takes fewer than three hours a week. “More than half the enrollees have seen their performance indicators improve; for instance, a fifth of the beginner level students have opened a business”, she added.
Speakers discussed the entrepreneurial experience and associated issues, educational programmes and conditions for business development, and emphasized the need for transition by small and medium-sized businesses to a digital basis.
The discussion moderator, Sberbank CEO and Chairman of the Executive Board Herman Gref, noted that growing small businesses is an objective of economic diversification. Russia has been lagging behind the rest of the world in this area. “Entrepreneurs are the mainstay of our society. They create added value, pay taxes and create jobs. Their efforts create all things of value”, he stressed. The moderator cited a NAFI study listing the issues small businesses face in Russia: high taxes and charges, weak demand and a lack of skilled workforce. In addition, entrepreneurs find it hard to compete with the shadow economy and to parry frequent inspections by regulators. “The digital economy, the new opportunities and technologies that are developing very fast today are capable of changing the situation; moreover, they have already started changing it”, the speaker said, adding that the lowering of barriers in banking was already under way.
Sberbank’s 2015–2017 SME loan portfolio exceeded the pre-crisis level by 19%, said Sberbank Senior Vice President and Head of Corporate Business Division Anatoly Popov. The process of lending to SMEs has accelerated thanks to introduction of smart loans. “Even before an entrepreneur comes to us, we use machine learning and big data to analyze their transaction activity to see if the borrower is reliable and if we can approve a certain credit limit for them”, the expert explained. Sberbank has approved RUB 45 bn of such loans, which only take one day to process.
To resolve the tax issues, Russia’s Minister for Economic Development Maxim Oreshkin invited small entrepreneurs to work directly with aggregator platforms. “Take the well-known Yandex.Taxi service, for instance. People who work for it are prepared to pay 15–20% of their income to do their reporting. All they need to do is register. That’s the kind of mechanism we need”, said Oreshkin. Moreover, according to the Minister, small businesses need to work openly with the banking system and feel safe.
Minister for Open Government affairs Mikhail Abyzov believes that the problematic relations with supervisory and regulatory authorities stem from frequent changes in the rules of the game. According to him, while the number of federal-level inspections has fallen, the opposite applies in the regions and municipalities. “The controller is neither an executioner nor a punisher. The controller is a partner, assistant and coach that should help businesses understand the ins and outs of government laws, regulations and requirements in order to comply with any requirements for ensuring safety, rather than destroying businesses or creating problems for them. A change in mentality is in order”, Mikhail Abyzov said.
Mikhail Mamuta, Head of the Central Bank’s Service for Consumer Protection and Financial Inclusion, called on businesses to transition actively to new technologies. “There is no such thing as a half digital technology. We cannot have digits on one side and paper on the other”, he noted.
According to the IMF, a record 33% of Russia’s economy operates in the shadows. On the subject of the shadow economy, individual entrepreneur Dmitry Petrulyov, Director of the FOL’GA creative agency, noted that 60% of his peers work under the table because they cannot afford the tax burden. His own taxes account for 40% of payroll. “I cannot pay high wages to my employees. That is important”, he said, singling out his tax expenses. He added that entrepreneurs need access to financial and accounting training and that their confidence in the future must be built step by step.
Just 20% of Russian entrepreneurs feel the need for a training course compared to three times as many in Germany. Olga Suslova, Google Russia Director for Strategic Partnerships, spoke about ‘Business Class’, a free programme conducted jointly with Sberbank. Since the programme was deployed in Russia, 36,000 entrepreneurs from 30 Russian regions have received business training, 30,000 of them in Tatarstan alone. The programme takes fewer than three hours a week. “More than half the enrollees have seen their performance indicators improve; for instance, a fifth of the beginner level students have opened a business”, she added.
