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AS Capitalia: Latvia lacks long-term planning on a national scale

Juris Grišins/LETA.
The government lacks long-term planning in its efforts to realize an economic policy to improve the situation in Latvia. A more stable tax policy is necessary in order to improve the business environment in the country, said Manager of AS Capitalia Juris Grišins in his interview to BNN.

The company now offers a new business service – Intelia credit rating. Intelia provides an individual solvency analysis for companies. Intelia reports can be used to assess customer solvency and appropriate loan rates in order to avoid losses caused by bad debts. This service was developed based on banking and finance institutions’ crediting methodology.

What are some of the most notable recent events in your sector?
Thanks to support form Latvian Guarantees Fund in July 2014, we have launched a new micro-crediting programme. Small and medium-size companies can use it to acquire financing notable cheaper. Considering banks’ relatively low interest when it comes to providing funds to small companies, the non-bank micro-crediting market is allowed to slowly develop on its own.

Can you say economic conditions are improving and there is a lot of potential for economic growth in the market?
Yes. The main market for small and micro enterprises is very regional and is based on domestic consumption. Considering the gradually growing purchasing power of local residents, small companies use every opportunity to develop, including by means of attracting additional funding for development.

How would you describe the government’s economy policy aimed at improving the economic situation in the country?
Considering my position to observe the process of planning support mechanisms in Latvia, I would say there is a lack of long-term planning on a national scale. I also believe there should be a more stable tax policy in order to improve the business environment. I also believe there should be a more liberal attitude towards involvement in the private sector.

How is the industry affected by Latvia’s policy? What changes to legislation would you like to see? What helps? What makes things more complicated?
In terms of improving the business environment, the country performs a number of positive measures. Unfortunately, there are also many negative ones. For example, increasing responsibility of Board members and increasing micro-enterprises tax only serve to reduce the interest of potential entrepreneurs to start a business. In the field of micro-crediting, on the other hand, the state realizes unreasonable and aggressive measures, such as introducing direct competition with private funding sector. This only serves to ruin the ecosystem of Latvia’s finance sector and increase ineffective use of state funds.

How would you describe the industry’s position in the Baltics? What about competition with Estonia and Lithuania?
Business micro-crediting is similarly developed in all three Baltic States. The only country to have the state be involved in micro-crediting is Latvia – with Altum. This, however, negatively impacts the private sector of this particular business field.

Specialized micro-crediting companies focus on situations when banking loans are not available for companies. This is a very small and specific niche. There is no competition with enterprises from neighbouring states, because micro-crediting is a very regional business.

What can you can call your ‘trump card’? What is your ‘Achilles’ heel’?
Our trump card is the fact that business micro-crediting is a new industry. It was formed in 2010. Micro-crediting companies have been present in Western countries and Eastern Europe for more than 20 years.

Our Achilles’ heel would be the fact that development of business micro-crediting depends on risk policies of commercial banks. If banks once again begin more aggressive crediting, as it was in 2007, the market share of non-bank crediting companies will notably decline.

Can you say there is a lack of skilled workers in Latvia?
No. Our industry has a large number of professionals.

What do you predict for the next five years? Will the situation in the industry improve, worsen or remain the same?
If we assume the tension between Russia and Ukraine is resolved successfully, there should not be any other notable signs of Latvia’s economy receiving any other nasty shocks. We believe the economic situation will continue to improve at the same rate as they do now.

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