Christos A. Ioannou, Greek Crisis and SMEs as Users of Financial Services, 20 9 2011

Meeting of the Financial Services User Group

GREEK SMEs AS USERS OF FINANCIAL SERVICES BEFORE THE CRISIS

22

- Financial & Banking system skewed away from SMEs.

- Access to finance for SMEs & use of financial services denote a rather unbanked sector.

- Alternatives used: informal investors (mainly family), financing by using “post dated” checks, etc.

2008 GSEVEE SURVEY FINDINGS ON SME FINANCING

33

Equity: rely heavily on own funds, reluctant to raise new equity from sources outside the family (new tools venture capital, business angels etc sound as fiction)

Debt: have limited access to debt, they would use more, there is a financing gap in their access to debt finance.

Grant: marginal for micro and small firms. Information gap & policy design issues.

PREVIOUS FINDINGS ON GREEK SMEs AS USERS OF FINANCIAL SERVICES

44

Family members & close relatives provide ~49% of the funding required. Banks provide ~34%, government programs cover ~15% (GEM 2004).

Central role of the family in informal investment significantly higher than GEM average (GEM 2006).

High amount of informal investment (median in 2004-2007 is ~40.000 € vs. less 20.000 € in Ireland -where the investment role of family is comparably prominent), indicative of height of required capital, no glut of resources available for the financing of SMEs (GEM 2007).

CORPORATE CREDIT GROWTH CONTINUES TO SLOW

55

CREDIT STANDARDS HAVE TIGHTENED IN THE CRISIS

66

1= tightened considerably; 2= tightened somewhat; 3=remain unchanged; 4=eased somewhat; 5= eased considerably

FINANCIAL SQUEEZE OF PRIVATE SECTOR

77

4,2 79,9 15,5 0,4

1,6 83,6 14,4 0,5

6,9 74,0 19,1

3,2 82,1 14,7

2,0 86,1 11,9

12,7 62,0 25,4

6,2 74,4 19,4

2,4 79,6 17,7 0,3

2,4 85,5 11,7 0,3

1,9 85,5 11,7 0,8

4,7 80,2 14,2 0,9

2,1 79,7 18,2

2,4 83,3 14 0,2

0 10 20 30 40 50 60 70 80 90 100

SECTOR

Trade

Manufacture

Services

NUMBER OF EMPLOYEES

With no employees

1 person

2-4 persons

5-9 persons

10 and more persons

TURNOVER

Below 100 thousand

100-300 thousand

Above 300 thousand

AREA

Attica

Rest of Greece

Improved Deteriorated No change NA

ASSESSMENT OF MARKET CONDITIONS OF PAST SEMESTER (1st semester 2011)-per category-

88

EXPECTATIONS (January 2011) AND PERCEPTIONS (July 2011) FOR THE 1st SEMESTER 2011COMPARATIVE DATA OF IME GSEVEE SURVEYS JANUARY 2011 – JULY 2011

ImprovementDeterioration

No changeNA

6,7

68

19,9

5,43,3

81,3

15,1

0,3

The situation in the 1st half of 2011 The prospects on the 1st half of 2011

99

In the January 2011 ΜΕ GSEVEE survey a negative outlook for the 1st semester was recorded by 68% of the respondents, which was a quite optimistic expectation as in the July 2011 survey the figure on deterioration hikes above 81%. The prospects were confirmed to worsen further.

6867,1

65,2

55,4

34,8

32

44,6

32,9

0

10

20

30

40

50

60

70

80

90

100

FEBRUARY 2010 JULY 2010 JANUARY 2011 JULY 2011

Outlook for deterioration

Outlook for improvement/ stabilisation

OUTLOOK FOR ENTERPISE’S SITUATION DURING THE NEXT SEMESTER COMPARISON WITH IME GSEVEE PREVIOUS SURVEYS

1010

74,3

66,9

64,7

55,5

35,3

25,7

44,5

33,1

0

10

20

30

40

50

60

70

80

90

100

FEBRUARY 2010 JULY 2010 JANUARY 2011 JULY 2011

Oulook for decrease

Outlook for increase/ stabilisation

LIQUIDITYLIQUIDITYOUTLOOK FOR THE NEXT SEMESTER

COMPARISON WITH IME GSEVEE PREVIOUS SURVEYS

1111

3,1 20,4 74,6 1,9

4,6 41,5 51,3 2,6

4,6 79,6 12,6 3,2

2,9 82,6 13,7 0,8

5,9 77,9 15,6 0,6

4,5 80,0 14,8 0,7

0 10 20 30 40 50 60 70 80 90 100

TURNOVER

DEMAND

LIQUIDITY

ORDERS

INVESTMENTS

EMPLOYMENT

Increase Decrease No change ΔΑ

ASSESSMENT OF THE PAST SEMESTER (1st Semester 2011)SUMMARY CHART

1212

2,9 17,6 75 4,5

4,6 34,6 54,3 6,5

7,8 63,8 21,1 7,3

6,2 64,7 23,8 5,3

9,1 62,8 23,2 4,9

8,3 64,7 21,7 5,3

0 10 20 30 40 50 60 70 80 90 100

TURNOVER

DEMAND

LIQUIDITY

ORDERS

INVESTMENTS

EMPLOYMENT

Increase Decrease No change NA

OUTLOOK FOR THE NEXT HALF (2nd half of 2011)SUMMARY CHART

1313

1,0

53,5

4,7

4,8

4,3

3,4

3,8

6,8

1,6

3,5

3,3

9,3

0 10 20 30 40 50 60

About 10%

About 20%

About 30%

About 40%

About 50%

About 60%

About 70%

About 80%

About 90%

About 100%

I am not using checks in mytransactions

ΝΑ

0

10

20

30

40

50

60

70

July 2009January 2011July 2011

63

48,145,5

Which is the amount of your BTB relations made through checks in %?

•The use of checks is decreasing.

•27,8% of enterprises uses mainly checks in its

transactions.

17,7

27,8

Using checks

COMPARATIVE CHART JULY 2011 - JULY 2009

1414

2,1

0,7

1,1

0,4

0,9

0,9

3,2

2,3

14,3

12,2

17,7

20,8

8,2

15,2

0 5 10 15 20 25

up to 2 months

2 months

3 months

4 months

5 months

6 months

7 months

8 months

9 months

10 months

11 months

12 months

More than 12 months

NA

How long does the post date time usually last?-Enterprises using checks in their BTB relations-

Average post-dating time: 4 months

1515

4,3

17,0

14,0

18,3

46,4

0 5 10 15 20 25 30 35 40 45 50

2 months

4 months

6 months

No

NA

Would you ask for a time limit in checks payment, and if so, how long? Two, four, or six months?

- Enterprises using checks in their transactions-

1616

0

5

10

15

20

25

30

35

40

January 2011July 2011

37,933,7

Yes ("dishonoured" already)

33,7%

Yes (great risk not to

be covered/ insecure)

5,2%

No60,0%

NA1,1%

Do you hold checks not covered or insecure? - Enterprises using checks in their transactions-

Hold “dishonoured” checks

COMPARATIVE CHART JULY 2011 - JAN. 2011

*15,7% of entrepreneurs surveyed

*

1717

33,7% of respondents already holds “dishonoured” checks, while 5,2% of entrepreneurs runs great risk of holding “dishonoured” checks in the near future. Compared to IME GSEVEE previous survey (January 2011), the “dishonoured “checks hold by enterprises have been decreased, a fact that may be due to the intense suspicion of the entrepreneurial world towards transactions made through checks.

Officially declared42,2%

Have not officially

declared them32,6%

Some of them officially

declared, some not

24,1%

ΝΑ1,1%

Have you officially declared the “dishonoured” checks that you hold by customers or not?- Entrepreneurs holding “dishonoured” checks by customers -

1818

According to the data of TIRESIAS S.A. (Banking Information Systems S.A.), the number of pieces of dishonoured checks is 111.290 and their value EUR 1.381.356.399. According to IME GSEVEE survey findings, there is a figure of 40% of pieces that are “dishonoured” and not officially declared. Therefore, TIRESIAS S.A. data understate the actual extent of the problem.

1919

GREEK SMEs AS USERS OF FINANCIAL SERVICES DURING THE CRISIS : OPEN ISSUES

2020

- Banks without banking services for SMEs. More banks – more open system.

- Financial Services to SMEs not subject to competition compliance assessment.

- How to move from informal means (informal investors, “post dated” checks, diverted financial practices) to normal financial tools.