Damu Entrepreneurship Development Fund CEO Lyazzat IBRAGIMOVA:
DAMU TO SUBSIDIZE 1800 NEW PROJECTS THIS YEAR
8% of the projects whose interest rates are subsidized by Damu Entrepreneurship Development Fund failed to pay their interest rates and that is why Damu had to terminate the subsidy contracts with 428 projects. Damu CEO Lyazzat IBTAGIMOVA told Interfax-Kazakhstan in an interview about the ongoing and future programs of the Fund.
- What principles the Business Support Program is based on?
- The Program is a mix of sectoral programs, which were adopted earlier. The most efficient provisions contained in the sectoral programs were incorporated in the Business Support Program. The Business Roadmap that was launched in 2010 demonstrates the tendencies very well. Since that time, the revenue of the companies participating in this Program has totaled 3.464 trillion tenge, net profit has come to 77 billion tenge and paid taxes to 297.253 billion tenge. The Roadmap was used as basis for the Program.
- What is the expected outcome of the Program?
I believe that the three steps that are specified in the program (reduction of regional disparity, diversification and support for start-ups) will substantially increase the number of participants in the Program and will increase the share of the manufacturing industry in GDP to 12.5% (compared with 10.3% in 2014).
We can see some results of the Program right now. Many entrepreneurs who previously operated only in the urban areas, are now considering the possibility of moving to the rural areas.
Moreover, the government has removed sectoral restrictions for entrepreneurs who carry out projects in rural areas and in small single-industry towns. All enterprises located outside the administrative centers of the regions and outside the cities of Almaty and Astana, will now be able to get subsidy for the interests rates even at 10% per annum but not only 7% as it was earlier.
- Many people believe that Damu should finance projects directly without the help of the banks. How do you feel about such an opinion?
- It sounds nice but it is technically impossible. The Fund employs only 370 people, while the staff in the banking system exceeds 100 thousand employees. The Program involves 34 banks and 14 leasing companies. If all lending was through Damu, we would never have reached the coverage that we have today.
- Are the entrepreneurs normally well prepared when they file their applications and accompanying documents for financial assistance with the banks?
- As a rule, the entrepreneur comes to one of our Entrepreneurship Advisory Centers before going to the bank.
Our consultants explain all provisions of the programs, provide advice on how to structure the project and to use the financial assistance provided by the government in a most efficient way. Normally, all required documents are well prepared when entrepreneurs come to the banks.
There are 18 Centers throughout Kazakhstan: in each of the 14 administrative centers of the regions, in Almaty, Astana as well as in the cities of Semey and Turkestan.
These Centers have serviced 97,203 since the first one was opened.
- How many entrepreneurs do you think will receive financial support from Damu in 2015?
- The government budget allocated 28.2 billion tenge worth of subsidies for 2015, including 16.8 billion tenge to subsidize the liabilities arising from the previously concluded agreements and 11.4 billion tenge to subsidize new projects. The loan portfolio for the new projects will total 160 billion tenge. This year, we plan to subsidize 1800 new projects.
1.2 billion tenge was earmarked to provide support through loan guarantees. As a result, we will be able to provide 6 billion tenge as loan guarantees and 12 billion tenge as loans. We plan to support 1,000 new projects from these monies.
- How many companies have failed to pay interest on loans and defaulted?
- As at July 13, 2015 there were 5,411 subsidized projects that received 1.133 billion tenge from the banks. Subsidies have been suspended for 428 of these projects that failed to pay their interest rates.
As for loan guarantees are concerned, the situation is much better here. Since the start of the Program we have signed 1070 loan guarantee agreement totaling 22.222 billion tenge in value. In 2014 we provided 447 guarantees to the amount of 7.585 billion tenge, with the total value of loans at 15.982 billion tenge. Since January 2015 we have provided 360 guarantees amounting to 5.039 billion tenge in value, with the loans totaling 11.608 billion tenge. There have only been four cases of default to the total amount of 14.507 million tenge.
- What organization does Damu work with to fund SMEs?
- We are working towards raising funds for SME support programs from the World Bank ($200 million), the European Investment Bank (100 million Euros), the EBRD ($140 million), the third tranche of the loan from the Asian Development Bank ($228 million), public money from the Kyzylorda and Aktyube regions and the city of Astana (700 million tenge).
This year we attracted ten billion tenge from the EBRD, two billion tenge from the Almaty city administration and 500 million tenge from the Astana city administration.
- How do you think the Kazakh business will feel after Kazakhstan joins the WTO?
- I think that Kazakhstan’s accession to the WTO will mainly affect the medium- and large-sized enterprises, especially manufacturers as they will have to compete with the international producers whose costs are much lower and technology more advanced. The WTO accession will not affect the service sector, especially the small- and medium-sized businesses.
- Have SMEs learnt to react to devaluation expectations?
- If the businesses generate revenue in Tenge, they keep all their monies in the same currency. We have taught the small business to borrow money only in the national currency. The first and foremost rule of the small business is to take out loans in the currency of revenue they generate. In my opinion, Damu’s education programs have been a success here.
- Thanks for the interview!
August, 2015
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