Stilian Vatev, CEO of United Bulgarian Bank: Private entrepreneurs must be braver and more active with respect to new ideas

diana.iosifova@klassa.bg

- Mr. Vatev, UBB (the United Bulgarian Bank) is one of five banks which signed an agreement for €78 mln with the EIF (European Investment Fund). Under the agreement guarantees, loans worth €400 mln will be granted at low interest rates. What is UBB's share in these credits?
- In the process of application and negotiation under the JEREMIE (Joint European Resources for Micro to Medium Enterprises) programme, we were required to suggest ourselves the volume of loans which we are ready to provide in compliance with all terms and conditions stipulated by the programme. Other equally important details of the contest referred to the specific lending conditions such as interest rates, deadlines, etc. for crediting micro, small and medium-sized enterprises. UBB managed to negotiate €125 mln out of a total of €400, or nearly one-third of the volume of loans guaranteed under the programme for Bulgaria. I should emphasise that the negotiated amount of credits will be secured entirely by the bank's resources, while EIF funds will cover only partially the final loss by virtue of the granted guarantees. As I said at the press conference after the signing of the agreement, the Fund is of a revolving nature - the fewer resources are used for covering losses at the end of the first cycle, the more effective the programme is. Meanwhile, the Fund's available resources can be used repeatedly for providing new guarantees for the development of small and medium-sized businesses in our country.

- For the business sector, the most important point refers to the scheme for easing credit terms and conditions. And, perhaps, one of the most important questions concerns the related preferential interest rates.
- As a result of the portfolio guarantee provided by the EIF, there are exemptions for the business sector in several respects. First, there is the lower cost of the loan reflected in the lower interest rates and service fees. Second, there is easier access to the credit line, especially in cases when the borrower is not granted sufficient collateral. Besides, there are alleviated and standardised procedures suggesting much faster credit decisions. Interest rates will be at least two or three points lower than those applied to this segment but, of course, their specific levels will continue to be determined in accordance with the risk assessment of each borrower, type of financing, loan maturity, currency, etc.

The most important effect expected by us after the launching of the programme refers to the greater courage and activity on the part of private entrepreneurs for the implementation of new ideas and the business expansion after the long stagnation prompted by the economic crisis. We realise that, in the beginning, this will not be quick and easy. Therefore, we are projecting additional resources and schemes for the appropriate training of our employees. Besides, we envisage active marketing and advertising campaigns for clients, etc.


- What growth in corporate lending can we expect this year along with the hopes for economic growth and the resurgence of small and medium-sized businesses? What are the biggest difficulties faced by small and medium-sized companies?
- It is well known that precisely small and medium-sized businesses (SMBs) are the backbone of any developed economy. In the EU, for example, 99% of the active companies operate in this segment. They also provide two-thirds of the employment and 50% of GDP. In Bulgaria, the picture is similar, SMBs contribute over 60% to GDP and about 76% to the total number of people employed in the real economy. This segment is highly flexible, adaptable and responds quickly to the changing economic trends. However, it is very delicate and suffers gravely by economic crises, particularly by the economic shocks witnessed by all of us over the last 2-3 years. As a result, many small companies dropped out of the market, while most of the others still continue to struggle to survive.

The good news is that our economy is gradually recovering. As a result, new opportunities arise for the activation of small and medium-sized businesses in Bulgaria. Nevertheless, this segment continues to suffer from the weak consumer demand, poor inter-company payment discipline, as well as from the difficult access to bank financing. Particularly heavy losses are incurred by these companies due to the overdue payments of their partners, as well as of the large companies. It is hardly a coincidence that the financing under EU programmes is targeted at aiding SMBs and this is happening right now - at the end of the economic crisis. In terms of bank financing of the corporate sector this year, I expect a modest but positive growth of 2-3% year-on-year.

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