The smaller an en­ter­prise, the big­ger the loan prob­lems it faces

Kathimerini English - - Focus - BY YIANNIS PAPADOYIANNIS

The model of small and medi­um­sized en­ter­prises (SMEs) be­ing the back­bone of the Greek econ­omy has col­lapsed, as fig­ures show that al­most 60 per­cent of loans to SMEs are non­per­form­ing. Even worse, 70 per­cent of the loans taken out by free­lance work­ers are in the “bad” cat­e­gory.

Bank of Greece data put non­per­form­ing ex­po­sure to ma­jor en­ter­prises at 29 per­cent of loans to­tal­ing 51 bil­lion eu­ros, while the rate for SMEs stands at 59.9 per­cent of loans that add up to 39.2 bil­lion. The pic­ture is even more dis­ap­point­ing for very small busi­nesses and free­lancers, as bad loans amount to 67 per­cent of the sum of 25 bil­lion. This means that the smaller an en­ter­prise, the big­ger the prob­lems it tends to face.

The very small av­er­age size of en­ter­prises in Greece is one of the big­gest prob­lems in the do­mes­tic econ­omy as they are non-com­pet­i­tive busi­nesses that of­ten sur­vive by dint of luck and preva­lent eva­sion: of taxes, of so­cial se­cu­rity con­tri­bu­tions for staff em­ployed tem­po­rar­ily, of debts, etc.

Es­ti­mates show that just 400 en­ter­prises in Greece can qual­ify as medium-sized or large by Euro­pean stan­dards, while the vast ma­jor­ity of com­pa­nies em­ploy­ing fewer than three peo­ple (one in most cases, the en­tre­pre­neur him­self). This is a struc­ture that is not sus­tain­able in the con­tem­po­rary econ­omy un­less it con­cerns small firms in tech­nol­ogy and in­no­va­tion.

The con­se­quences of this com­bi­na­tion of very small size, poor man­age­ment and ac­cess to easy money are seen par­tic­u­larly in ar­eas such as tourism, where re­pay­ment de­lays reach up to 49 per­cent, and agri­cul­ture – de­spite ma­jor ad­van­tages – where de- layed pay­ments come to 63 per­cent.

Bank of­fi­cials say that tack­ling the bad loans of SMEs, along with those of house­holds, will de­cide the out­come of the credit sec­tor’s bat­tle to cut its NPL stock.

An­a­lysts note that the trans­for­ma­tion of the econ­omy through the cre­ation of big­ger cor­po­rate struc­tures for achiev­ing economies of scale is a nec­es­sary con­di­tion for a tran­si­tion to a new com­pet­i­tive model.

Such a struc­ture, how­ever, is ham­pered in Greece by the ab­sence of a cul­ture of co­op­er­a­tion, they add.

More than three-fifths (63 per­cent) of loans granted to pro­fes­sion­als in the agri­cul­tural sec­tor have be­come non­per­form­ing.

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