OREANDA-NEWS. May 15, 2008. Director of the Directorate for Small and Medium-Sized Businesses at Bank Electronika, Elena Vasilyeva, in an interview with B&FM’s correspondent Ekaterina Gurkina, discussed approaches to competition in crediting small and medium-sized businesses (SMEs).
B&FM: What is the current size of credit to small and medium-sized businesses and what is its share in your credit portfolio?

E.V.: So far, this category of clients holds a rather small share in our total portfolio – just a little above seven percent. But we must consider that we began working in earnest with SMEs only at the end of 2007. By size of credit, 83 percent has gone to enterprises in the regions and 17 percent – to Moscow businesses. By size of credit, 44 percent are small enterprises and 56 percent are medium-sized.

B&FM: What size company do you assign to medium-sized business and what to small?

E.V.:
 Medium-sized:
Annual income – 101 million to 300 million rubles
Number of employees – 101 to 250 individuals

 Small:
Annual income – 31 million to 101 million rubles
Number of employees – 16 to 101 individuals
Micro enterprises:
Annual income – to 31 million rubles
Number of employees – to 16 individuals

B&FM: Do you relate to these SMEs as a segment of retail?

E.V.: No. When we use the word retail, we understand that as service to individuals. The bank has apportioned those services in a separate area.

B&FM: What are Bank Electronika’s crediting parameters for SMEs?

E.V.: The line of credit products that the bank has developed is quite broad and gives clients in the SME segment much to choose from. Maximum credit is 25 million rubles for a 24-month term. The bank offers its clients a choice of credit products based on the specifics of the client’s business and its financial opportunities.

B&FM: The number of SME clients. Companies from which sectors of the economy are of interest as clients for this segment of your business?

E.V.: The number of clients in this segment is close to 7,000. We define our target group as enterprises in the B2C (Business to Customer) segment. These companies produce and sell products to the final customer or render services directly to the populace.

B&FM: Would you tell us a little about the SME sub-brand, its name, geographical presence.

E.V.: The bank’s strategy for the period 2008 through 2010 calls for organizational-functional segregation of three primary areas of the institution’s business: services to individuals, work with small and medium-sized businesses, operations for large clients.

Each of these categories of clients is served in offices of the bank that have been specially designated for him. Each category is offered its own product line. These factors were the primary impetus for the bank’s rebranding. Inasmuch as all the business lines operate within the framework of one legal entity, we decided to unite them under one umbrella brand with a single logo; however, each line has its own sub-logo, its own style, and specific nature of work with clients. For work with corporate clients, the bank set its mission as one of creating comfortable conditions for the development of small and medium-sized business in Russia and sees itself as a bank that services more than half of the earnings of its clients. Our goal is to become one of the ten leading banks working in the segment of small and medium-sized businesses within four years. We have positioned ourselves as a financial helpmate, offering individual solutions for small and medium-sized enterprises, as a result of which clients obtain significant opportunities to advance their businesses.

The new brand will become an important element in our successful development. It presents a common idea, philosophy, business model of the company and is linked with the categories of clients we anticipate.

Bank Electronika already has 16 offices in 15 cities of the Russian Federation under the sub-brand В2В, which we paraphrase as Bank for Business. By the end of 2010, we expect to have 50 В2В offices in six federal districts of Russia, in all the main cities with populations exceeding 400,000.

B&FM: Do you have distinct offices that are engaged exclusively in crediting small and medium-sized businesses, and if so, how many and in which regions?

E.V.: As I noted earlier, we have established a separate, specialized network to assist small and medium-sized enterprises and a distinct retail network to service individuals. We do not have offices engaged exclusively in crediting SMEs. From the clients’ perspective, that would not be efficient; clients, as a rule, want to obtain a complex of banking services. Under the sub-brand B2B, we are creating offices that will office services to the business and to the employees that work in our client-enterprises. We pay very close attention to the quality of services to clients, to the training and motivation of our employees.

B&FM: Do you extend micro-financing to clients, crediting for start-ups?

E.V.: For us, this is a promising area, and there is no question that we shall be involved here in the near future. We are gratified that at this moment the bank has clients that have become fully grown, with the involvement of Bank Electronika, and remain our clients to this day. At the same time, we want to gain sufficient experience and, if you like, obtain certain statistics, analyze everything, and enter the market with interesting credit programs. We are also consulting with our partner-banks in Eastern Europe and Ukraine on these issues. The bank plans to take an active part in government programs to support small and medium-sized businesses, and this will give us opportunities to begin crediting start-ups.

B&FM: How competitive are the lending terms of the bank in comparison with other offers in the market?

E.V.: This is a matter of what we mean when we speak of competitive advantages. Without question, we orient ourselves to the average interest rates in the market. At the same time, we do not forget that for the client the speed with which decisions are made on extension of credit is important, as is simplicity of the procedures for the credit accommodation – without higher demands on the client. In order to meet those criteria, we have organized our credit application procedures precisely and have been able to achieve a period for granting credit that does not exceed three working days.

B&FM: Which banks do you regard as your competitors in this segment?

E.V.: Today it is difficult for us to compete with the top-ten banks; they have large capital resources and extensive regional networks, Sberbank or Uralsib, for instance. However, there are banks in the median range that are comparable to us when measured by capital and asset size. They have a particular niche in that market; they are expanding. It is with them that we are competing for clients. The first results on the realization of our strategy give us optimism and confidence that we have chosen our directions correctly.

B&FM: What share of the market do you plan to take in this highly competitive segment?

E.V.: In our strategy, we envision that by the end of 2010 that share will be in the area of three percent in the regions where the bank is present.

B&FM: You are not fearful that, because of the competition with analogous products from different banks, this type of services will become low margin for your bank?

E.V.: No, we are not worried about that, despite the tendency toward lower banking margins. First, competition between banks is not, by and large, characterized by price, and second, reduction of margins can be compensated for with volume growth. The potential for development of small and medium-sized businesses in our country makes its possible to do that.