Agency News / 11.05.2016

AK&M Rating Agency presents an up-to-date ranking (comparative review) of guarantee institutions (funds) operating in federal subjects of Russia in 2015.

AK&M Rating Agency presents an up-to-date ranking of guarantee institutions providing infrastructure support to small and medium-sized businesses in Russian regions.

We note that in 2015, Russian guarantee funds had to operate amidst a continuing stagnation in the segment of small and medium-sized businesses in the wake of a general macroeconomic decline. A characteristic feature of the sustained recession is a 9.3% contraction in lending to small businesses, while the overdue debt percentage soared almost twice (from 8.0% to 14.8%).

This has affected, even though more implicitly, the performance of guarantee institutions. In particular, the consolidated surety portfolio of the ranking participants decreased by more than 7% in 2015. The average weighted loss ratio indicating materialized delinquencies increased from 3.8% to 4.9% for the same period, although still fairly far from the upper limit set by the regulatory authority.

The guarantee capital multiple continued to slide reaching a mere 108% across the selected funds against 121% the year before, an evidence of the guarantee funds' extremely low efficiency in using budgetary resources to support small and medium-sized businesses.

Despite the loss by some of the guarantee funds of their bank deposits as a result of the continuing process of clearing the banking sector from unreliable banks, the total capitalization of the ranking participants grew by almost 5% both owing to their positive earnings and inflows from regional budgets. However, some of the guarantee institutions have not yet written off the funds deposited with delicensed credit institutions, which means that the official growth rate does not hold true, in a way.

The comparative review of guarantee funds is based on their performance in 2015. The ranking comprises 50 guarantee institutions. As usual, the basic background information was directly provided by the guarantee institutions agreeing to be officially ranked by AK&M Rating Agency. Besides, we used additional data accumulated from public sources (the Federal State Statistics Service, the Bank of Russia, etc.).

According to the existing comparative analysis methodology, AK&M Rating Agency ranked the guarantee institutions by an integral index factoring in both the funds' efficiency in attracting off-budget resources for the financing of SME businesses in the region and the exposure to potential risks related to the possible liquidity loss or financial destabilization of the guarantee institution.

Most of the changes in the ranking arise from a shorter list of funds ranked (50 funds against 60 the year before). Just as we expected, almost all ranking leaders maintained their positions. The guarantee institutions of Russia's two capitals were predictably on top of the ranking, despite their lower integral indices due to a contraction in the surety portfolios and an increase in the balance loss ratio.

The Small and Medium size Business Development Fund of Novosibirsk region, the "old new" ranking participant, rounds out the top 3 (2nd position in 2012 and 5th position in H1 2013). The guarantee institutions of Rostov region and Stavropol Krai swapped their positions, now ranking 4th and 5th, respectively. Due to somewhat weakened performance, the Entrepreneurship Support Fund of Yugra sank to the 6th position from third in 2014. The guarantee funds of Sverdlovsk and Chelyabinsk regions held almost steady taking the 7th and 8th positions, respectively, against the 7th and 6th positions the year before. The guarantee institutions of the Sakha Republic (Yakutia) and Ryazan region hit the top 10 again.

Speaking about the advancement leaders, of special note is Belgorod region (which soared from the 41st to the 16th position owing to a more than twofold growth of the surety portfolio and an extremely low loss ratio of 0.17%), the guarantee institutions of Amur and Vologda regions which advanced 15 positions in step, as well as the Association "Business Support Center – Microfinance Institution of Kursk region" which moved 16 positions upwards as its surety portfolio increased by 116%.

Guarantee institutions also achieved a powerful growth of off-balance sheet liabilities in Sakhalin region (70%), Republic Dagestan (51%), Republics Tyva and the Republic of Crimea (16 times and 46 times). For the two latter regions, the strong performance primarily resulted from the low base effect.