site.btaBulgaria Has Much Higher Share of SMEs than EU - Study

Bulgaria Has Much Higher Share of SMEs than EU - Study

Sofia, April 27 (BTA) - At about 98 per cent of the total, Bulgaria has a much higher share of small and medium-sized enterprises (SMEs) than the EU, according to a study entitled "State, Dynamics and Prospects of Lending in Bulgaria" conducted by the Economic Research Institute of the Bulgarian Academy of Sciences. The EU average share of SMEs is two thirds of the total.

The study was commissioned by the Bulgarian Development Bank and covered 1,023 companies: 614 small, 210 medium-sized and 199 large ones.

Over 90 per cent of the SMEs have fewer than 10 employees. More than four in five of them provide services. The scientists note that such companies cannot form the backbone of a stable economy. It is large enterprises that help to generate a circle of SMEs, therefore the State should aim to create conditions, strengthen and support stable large national enterprises.

The manufacturing industries, agriculture, tourism, construction and the transport subsectors are key to an effective, sustainable economy in Bulgaria.

The study found that companies with an up to two-year history service their debts with the smallest difficulty and are most responsible in risk taking and management. Still, banks tend to ignore this segment due to its lack of a longer business record. Export-oriented companies most often have difficulties servicing their debts.

The economists predict that lending to businesses will not pick up as demand is unstable. A mere 30 per cent of Bulgarian companies borrow funds and prefer intercompany credit instead. This is borne out by data showing that over 22 per cent of companies are indebted to partners. Ten per cent of companies are financed by non-banks. In addition, one in three companies has been denied loans on the grounds of a low turnover, poor security for a loan or a bad credit history. Finally, 45 per cent of companies which had a loan approved decided against borrowing.

The study found that companies in the less developed regions of Vidin, Vratsa, Gabrovo, Lovech and Pleven are more interested in bank loans. Medium-sized companies with between 10 and 50 employees are most interested in loans, while 42 per cent of large companies are planning to apply for a loan in 12 months. Most companies which are planning to take out a loan say they need up to 500,000 leva for between five and 10 years.