Schriftenreihe der Fritz & Renate Grabau Stiftung

Die Fritz und Renate Grabau Stiftung dient der Förderung von Wissenschaft, Forschung und Bildung, Kunst und Kultur sowie der Völkerverständigung. Die Förderung erfolgt durch die Pflege der internationalen und wissenschaftlichen Zusammenarbeit und die Vermittlung eines umfassenden Deutschlandbildes durch Informationen und Veranstaltungen über das kulturelle, wissenschaftliche, gesellschaftliche und politische Leben. Die Förderung richtet sich vorwiegend an den kulturellen und wissenschaftlichen Nachwuchs der als Multiplikator auf allen gesellschaftlichen Ebenen dem Satzungszweck dienlich sein kann.

Die Stiftung fördert im Rahmen ihrer satzungsmäßigen Ziele, ihrer Förderrichtlinien und ihrer finanziellen Möglichkeiten Internationale Projekte von Einzelpersonen, Instituten / Initiativen und gemeinnützigen Vereinen, die der Förderung von Wissenschaft, Forschung und Bildung, der Förderung von Kunst und Kultur sowie der Völkerverständigung dienen.

Zusammen mit dem GRIN Verlag gibt die Grabau Stiftung die vorliegende Schriftenreihe heraus. Diese greift aktuelle und grundlegende Themen auf und legt sie in vertiefender und zugleich allgemein verständlicher Form dar. Sie leistet damit Beiträge zur Diskussion von politischen und sozialen, wirtschaftlichen und kulturellen Grundsatzfragen.

Redaktion der Schriftenreihe

Prof. Dr. Irina Hundt Maybachstr. 1 06112 Halle/Saale

Sammelband   

Finanzierung  von kleinen und mittleren Unternehmen in Osteuropa  

Inhaltsverzeichnis   

Vorwort   

1.  The Relationship between the concentration of the banking Sector  

and  the loans provided to the SME  8

Ing.  Iveta Řepková / Karvina, Czech Republic  

1.1  Introduction  8

1.2  Concentration and its measures.  8

1.3  Concentration of the Czech banking sector.  10

1.4  Credits granted to small and medium sized enterprises  12

1.5  Relation between the concentration of the banking sector  

and  loans granted to SME  19

1.6  Conclusion.  20

2.  Socially responsible investing in SMEs  23

Ing.  Pavel Adámek / Karvina, Czech Republic  

2.1  Introduction  23

2.2  Actual approach of the SRI in E.U  24

2.3  The ability of European SMEs to gain access to capital  27

2.4  Situation in Czech Republic (relation between SRI and SMEs)  37

2.5  Conclusion.  40

3.  The Impact of the Payment Services Directive on SMEs in the Czech Republic  43

Ing.  Rostislav Šárek / Karvina, Czech Republic  

4.  Subventions of small and medium sized companies in Business Incubators.  54

Ing.  Lucie Veličková / Ostrava, Czech Republic  

4.1  Objectives.  54

4.2  Methodology  54

4.3  Discussion  54

4.4  Conclusion.  61

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5.  Clusters and possibilities of development SME  63

Ing.  Petr Němčík / Ostrava, Czech Republic  

5.1  Introduction  63

5.2  Definition of the term of a cluster  63

5.3  Historic development of the cluster concept  64

5.4  Financial support of clusters in the Czech Republic  64

5.5  Clusters in the conditions of the Czech Republic  65

5.6  Contributions of clusters for firms, higher education institutions and regional self-  

governments   65

5.7  Objectives of clusters  67

5.8  Competitiveness of enterprises, clusters and regions.  67

5.9  Selected aspects of cluster development  71

5.10  Conclusion.  71

6.  Legal aspects of state aid for small and medium enterprise in Poland.  74

Hanna  Rosiak / Wrocław, Poland  

6.1  Introduction to the Polish small and medium-sized enterprises (SME) sector  74

6.2  Polish state aid and its legal basis  76

6.3  Conclusions  80

7.  Import rates in small and large open economy  83

Nadezda  Ovcharenko / Moscow, Russia  

8.  Mission Related Investments: a Valuation Approach  87

PhD  Tomáš Krabec / Mlada Boleslav, Czech Republic  

8.1  Introduction  87

8.2  Mission Related Investments  88

8.3  Implications for the Basis of Value.  89

9.  Wie sicher sind Einlagen bei russischen Banken?  93

Prof.  Dr. Fritz-René Grabau / Madgeburg, Germany  

9.1  Einleitung  93

9.2  Europäische Banken in der Finanz- und Wirtschaftskrise  94

9.3  Einlagensicherung in Deutschland  95

9.4  Die russischen Banken  96

9.5  Einlagensicherungsfond  97

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10.  Bewertung von Kreditsicherheiten bei KM.U  100

A.  Vladimirowitsch Lisichkin / Kislowodsk, Russia  

10.1  Bürgschaft  101

10.2  Garantie  102

10.3  Grundpfandrechte - Hypothek und Grundschuld  102

10.4  Sicherungsabtretung.  103

10.5  Sicherungsübereignung  104

10.6  Bewertung  105

10.7  Permanente Sicherheitsbeobachtung.  106

11.  Finanzierung von KMU in der Automobilbranche  109

V.  Bosijanoy / Zaparoshje, Ukraine  

11.1  Beteiligungsfinanzierung kann in zwei Arten erfolgen  110

11.2  Kurzfristige Fremdfinanzierung.  111

11.3  Langfristige Fremdfinanzierung.  112

11.4  Innenfinanzierung  114

12.  Chancen und Risiken einer Direktinvestition in der Ukraine -  

Korruption  und Branchenanalyse.  116

Svetlana  Makowski / Saparoshje, Ukraine  116

12.1  Einführung.  116

12.2  Korruption  116

12.3  Branchenanalyse  121

12.4  Zusammenfassende Beurteilung der Branchenanalyse - Chancen.  126

13.  Cost Claims nach FIDIC  129

D.  Gergova M. Ivanyuk A. Malatschenko / Kaliningrad, Russia  

unter  Mitarbeit von Prof. Dr. I. Hundt / Dresden, Germany  

14.  Capital Market and Bank Financing of Non-Financial Companies in the CEE  

Countries  : Selected Issues  136

PhD  Romana Nývltová / Mlada Boleslav, Czech Republic  

14.1  Introduction  136

14.2  Financial Systems Classification.  137

14.3  CEE Countries’ Financial Systems  138

14.4  Implications for CEE Countries and Local Companies  141

15.  Reengineering of the Company Russian Railways to Process Management.  144

Mikhail  Isakov / Moscow, Russia  

15.1  The Process Management  144

15.2  Conclusion.  148

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16.  Unternehmensfinanzierung und Kreditprüfung.  149

S.D.  Maksimenko und A.S. Boltiwetz / Kiew, Russia  

16.1  Problemstellung.  149

16.2  Kreditwürdigkeitsprüfung  150

16.3  Risikobetrachtung  152

16.4  Vertrauensverhältnis zwischen Bank und Kunde  153

17.  Finanzierung von kleinen und mittleren Unternehmen  155

Mgr  Malgorzata Urbanowicz / Poznan, Poland  

17.1  Charakteristik der Quellen der Finanzierung von kleinen und mittleren  

Unternehmen   156

17.2  Bedeutung der Rechtsform des Unternehmens  158

17.3  Äußere Quellen der Finanzierung von kleinen und mittleren Unternehmen  159

18.  Erneuerbare Energien in Russland - Ein Schritt in die Zukunft  165

Ilya  Barbashin / Perm, Russia  

18.1  Wirtschaftliche Potentiale  169

18.2  Windkraft  171

18.3  Solarenergie.  172

18.4  Geothermie.  174

18.5  Meeresenergie  176

18.6  Biomasse  176

18.7  Gruben-, Deponie- und Klärgas  179

18.8  Fazit.  180

19.  Untersuchung der Aussagekraft anerkannter Unternehmens-  

bewertungsmodelle   185

Cornelia  Höntzsch / Dresden, Germany  

19.1  Planung und Prognose der Zahlungsüberschüsse  187

19.2  Kapitalisierungszinssatz.  189

19.3  Der risikolose Basiszins  189

19.4  Die Marktrisikoprämie  190

19.5  Der Betafaktor.  191

19.6  Fazit zur Ermittlung des Kapitalisierungszinssatzes.  192

19.7  Ausweg aus dem Bewertungsdilemma?  192

19.8  Zusammenfassung.  194

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20. The human capital strategy in a small company...................................................196 Pokusaev Oleg / Moscow, Russia

21. Probleme der KMU-Finanzierung in Russland ....................................................201 Dr. V.E.Zarembo / Saint Petersburg, Russia

22. The competitiveness of a railway transport company ..........................................208 Vladimir Zhakov unter Mitarbeit von Prof. Dr. Tereshina / Moscow, Russia 22.1 The transport market as a sphere of formation of competitive relations............208 22.2 The organization of transportation process as the factor of management of

competitiveness of a railway transport company. ..............................................211

23. Auswirkungen der Eigenkapitalvorschriften im Rahmen von

BASEL II für KMU .................................................................................................214 Prof. Dr. Wolfgang Ortmanns / Dresden, Germany

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1. The Relationship between the concentration of the banking Sector

and the loans provided to the SME

Ing. Iveta Řepková / Karvina, Czech Republic

1.1 Introduction

The goal of the article is to analyze the concentration in the Czech banking sector and its impact to provide credits to SME. First of all I will explain the concentration and its measures of particular indicators of concentration. In the next chapter I will analyze the concentration of Czech banking sector in the year of 2000 to 2007 and the concentration of the market of credits for SME. The banking sector is represented by three largest banks - Česká spořitelna, ČSOB andKomerční banka. I will provide an evaluation of the concentration using the concentration ratio and the HHI. Furthermore I will outline the development of loaned credits to SME in the above mentioned period and will provide a correlation between the concentration of banking sector and the volume of granted credits.

1.2 Concentration and its measures

The importance of the concentration indicators comes from the ability to determine the structure of the market. Hence are often used in structural models, which explain the competition in the banking sector caused by the market structure. The indicators of the concentration are able to show the changes in the concentration as a result of entering the bank into the market or its business operations (merging, acquisition). The structure of concentration indicators can be discrete or cumulative. Concentration ratio belongs to this class of discrete measures. Practical advantages of discrete measures are simplicity and limitation of required data. Cumulative or summary measures of concentration explain the entire size distribution of banks. They imply that structural changes in all parts of the distribution influence the value of the concentration index. Cumulative measures of concentration include the Herfindahl-Hirschman index (HHI), the comprehensive industrial concentration index (CCI), the Rosenbluth Index (RI) and The Hall-Tideman Index (HTI). 1

The concentration ratio (CR k ) measures the share of the largest banks in the sector. The simplicity of the calculation causes, that the rate is one of the mostly used ones among

¹ BIKKER, HAAF, (2000), p. 5.

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the concentration indicators. It represents a share of certain number of banks k, which has the biggest share of particular provided product. The indicator counts up the market shares k of the largest banks in the market, what could be expressed by the equation:

∑ = k = s CR

i k (1) i 1

CR gives the same stress on k of the largest banks and small meaning to the remaining small banks in the market. The value of the concentration ratio ranges between 0 and 1. The outcome closer to 1 represents, that the k bank comprised in the index, produces the whole production of the sector and the concentration is high. If the concentration ration is closer to 0, means that the market is formed by endless number of banks with similar size. If the sector is formed by n same sized banks, then we may use the following equation: k ∑ =

s CR i k

= 1 i

HHI is one of the most used indicators of concentration. It helps to determine other concentration indicators as well. HHI takes into account the number of the banks in the banking sector and their market shares. It enables to value the concentration even in the case of lacking data of small banks. It decides about the influence of active companies in or out of the sector and their concrete products. The equation of HHI has the following form:

⎛ n ∑ ⎜ ⎜ = HHI

⎝

= k 1

The index is based upon hypothesis, that the impact of the bank in the sector is a function of the second square of its market share. HHI highlights the impact of the big banks, which is calculated with bigger weight than small banks. HHI result ranges between 1/n and 1. Its smallest result shows, that the market shares of all measured banks are same and are distributed to all banks evenly. The value of HHI reaches the number 1, when the banking

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sector contains relatively small number of banks, which cover the biggest production in their sector. In case of monopoly, HHI reaches the top 1 as the upper bound of the index. The ministry of justice of USA splits the results of HHI index to three categories. If the measured value is up to 0.1 (1000), the market is considered for unconcentrated. The range from 0.1 to 0.18 (1000 to 1800) signalize slight concentration in the sector. High concentration is characterized by bigger volume than 0.18 (1800). 2

1.3 Concentration of the Czech banking sector

The process of concentration in times of merging and acquisitions is determined by the market competitiveness and the need of decreasing the production costs. The market is controlled by small group of largest companies. Small and medium sized banks usually specialize in certain banking areas and using thus the existing market gap. In the region of Central and Eastern Europe, the process of concentration was highly depended on the way of privatization. In the Czech Republic the process of concentration is displayed by the growing influence of medium sized banks, which are continuously developing their business activities. The concentration is visible in the EU countries as well, mostly caused by the vast number of mergers and acquisitions. The concentration relates to privatization of partly owned state banks, which is usually are usually sold to new investors as their daughter companies.

Figure1 Concentration ratio of the group of the three largest banks

Source: Author’s calculation

² CHAN, SCHUMACHER, TRIPE (2007), p. 6.

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The lowest concentration is signified mostly in the market of credits. The biggest concentration however persists in the retail banking. The final balance of each banking groups shows about the permanent role of three largest banks with slightly decreasing share.

In the market of credits the position of three largest banks is gradually weakened. The biggest fall was recorded in years 2001-2003 due to restructuring process of privatized banks, followed by cleaning up their loan portfolios and selling their lower ranked credits. The rest of the banks in contrary increased their share on the total amount of loaned customer credits. The growth of credits was most remarkable in the group of medium and big sized banks. In the market of credits the banking activity is still oriented to the segment of small clients. Small and medium sized banks can compete against the big banks. The progress of the retail banking of credits was significantly used by the banks from the group of saving banks. In the market of customer deposits the concentration of three largest banks in the measured period was slightly decreasing. Big concentration of banking activity was achieved by three largest banks with biggest share on the profit and costs. In the whole period the concentration ratio reaches more than 50 % of the whole market for the three largest banks. In the market of client’s deposits is kept high concentration of three largest banks. The reason is that the clients seek safety in the big banks despite the lower interest rates comparing to competition.

Figure 2 Herfindahl-Hirschman index of the group of the three largest banks

Source: Author’s calculation

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The change in the structure of Czech banking sector and the development of the market share in the domestic banking market was registered in the values of HHI. From the graph 2 is visible, that if the banking was measured by the total assets, it could be claimed as softly concentrated sector. HHI balance amount in the period fluctuates up to value 1000 until the year 2002. It declares the unconcentration of the market. Since 2002 the HHI reduces in the market of credits meaning the competition increases. The competition was enhanced by decreasing the share of numerous groups of big banks and by opening the market for new competitor. In the market of deposits was visible, that he HHI values were decreasing. The lower competition was influenced by well spread and working branch network for saving operations. The advantage lies in the side of big banks and products supported by the state like the house savings. The market was until the year 2002 very concentrated and since 2003 the values of HHI have been decreasing. HHI and the concentration ratio of three largest banks signalize, that the concentration ratio in the banking sector has been after 2000 reducing, and one may assume, that the competitiveness of the market has risen. The situation in the Czech banking sector in the international scale is not exceptional and working competitiveness is maintained. The market of banking services is widely open. There are no regulations for entering the market. After joining the EU the local market is even more open to all European financial institutions, which may want to start business here. 3

1.4 Credits granted to small and medium sized enterprises

The main characteristic of small and medium sized enterprises (SME) is the number of employees, which is claimed to be fewer than 250. These companies can be categorized to group of very small (up to 9 employees), small (from 10 to 49 employees) and medium (from 50 to 249 employees).

Since the beginning of nineties we can follow a long trend of growth of registered SME, mostly because of the transformation process of the whole economy from central planned to market one. The last years we can see that the process is showered. However the number of service oriented companies is rising. The volume of agricultural based companies is reduced.

The discussion on the corporate sector is mostly based on analyses of large enterprises. However, as regards the number of non-financial corporations, SME sector is definitely

³ http://www.cnb.cz/m2export/sites/www.cnb.cz/cs/verejnost/pro_media/tiskove_zpravy_cnb/2005/

download/Stanovisko_CNB_mat_MF_14062005.pdf.

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more important (with SME accounting for 99.6% of the total). SME are usually owned by local entrepreneurs, instead of foreign owned big companies. It can be assumed, that the company activities will be depended on the domestic financial development. Their access to capital markets is very limited. Funding is increasingly derived from the domestic banking sector, respectively own resources. Approach of bank is to SME with great caution given the increased-risk segment. The financial stability of the banking sector from the perspective of finance companies has contributed significantly arise the Central Register of Credits (CRC) in October 2002, which was also an important element in managing credit risk. Banks have made available information on the credit load current and potential clients, and can better manage their credit risk portfolios. These data remain in the registry for 10 years after repayment of debt.

CNB does not provide data about the structure of loans by size of company do not, moreover, part of SME sector held in non-financial firms in the sector of home-business. They only source of information on lending to SME in the data from CRC operated by the CNB. The paper also used publicly available data from the CNB, which usually include credit for non-financial businesses and trades. Figure 3 Development of loans granted to SME and total loans granted

Source: Author’s calculation

The amount of loans granted to SME from 2001 - 2003 has declined significantly, and since 2004 can be seen the growth of the amount of loans granted to SME again. The growth of SME loans follows the trend of total granted loans that in those years fell too.

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Figure 4 Proportional ratio of loans granted to the SME to total loans

Source: Author’s calculation

The figure 4 shows that share of loans to SME to total loans granted was slowly decreasing in the years analyzed. The main funding source of SME comes from bank loans. That confirms the fact that the most important components in the structure of assets of the Czech banking sector are long-term loans to businesses. The Czech economy is characterized by a high ratio between the credits granted and the creation of GDP. Economic recession in 2000 was replaced by a slight recovery, which continued in 2001. Right up until the end of 2000, the reduced lending activity - resulting from the shortage of creditworthy projects and from the cautious approach of banks (which are still struggling with the consequences of difficult-to-enforce credits granted at the beginning of the 1990s) - had led to a persistent decline in credits as a percentage of total assets. However, the results from the end of 2001 suggest a modest recovery in lending related to the upward trend of the Czech economy. 4

Lending to SME was flat or falling year on year up to 2003. In firms this was due to generally worse economic performance, whereas in foreign controlled corporations domestic resources were replaced by foreign funds obtained directly from their owners. Lending to small businesses is being hampered by information asymmetry and by the fact that this sector has the highest proportion of bad loans. Within the corporate sector, private domestic corporations are contributing most to credit growth, but even they are being

⁴ http://www.cnb.cz/m2export/sites/www.cnb.cz/en/financial_market_supervision/

banking_supervision/banking_sector/analytical_publ/download/eng_bd_2001.pdf, p. 24.

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constrained by persisting information asymmetry and a still short credit history. The massive declines recorded in 2001-2002 were also due to transfers of bad loans from banks to the Czech Consolidation Agency. Despite this, we can detect pro-cyclical, slightly lagged corporate lending behaviour. Another factor underlying the slowdown in lending was the use of alternative sources of financing by corporations. ⁵ According to the Central Register of Credits, the loan growth in 2005 was due mainly to loans to SME with 10-99 employees. Lending to micro-enterprises (1-9 employees) saw relatively low growth. The tendency of faster growth in lending to smaller enterprises may suggest a gradual elimination of their liquidity restrictions ⁶ , associated with their lower indebtedness as measured by the ratio of bank loans to sales. The low growth in loans to micro-enterprises is linked with the lower quality of such loans. The rate of new defaults on loans to enterprises broken down by number of employees indicates that the degree of risk of SME is significantly higher than that of large enterprises with more than 250 employees. Overall, the current increase in lending to SME seems to be natural, being associated with their improving financial indicators. ⁷ In 2006, the rapid tempo of credit growth is slowing. The increased tempo of previous years was due to a low comparative base and the decrease of the interest rates. The reason was the change in bank’s policy, because they have been interested more in offering the loans. They have substantially improved the quality of its loan proposal and have reduced the conditions for providing almost all types of loans and credits too. Since 2002, when the credit breakpoint appeared, is the growth rate of debts increasing. The positive trends recorded for corporate financial indicators are generating a rising rate of growth of loans to corporations. This growth started to pick up in 2003 and has continued rising since then, mainly due to the SME sector. The share of bank loans to SME in total loans to non-financial enterprises has gradually risen. The highest credit growth is still being recorded by small enterprises with 1−9 employees. Many banks are targeting

⁵ http://www.cnb.cz/m2export/sites/www.cnb.cz/en/financial_stability/fs_reports/FSR_2004.pdf, p. 19.

⁶ Liquidity restrictions can be associated with the existence of information asymmetry and the related

problem of adverse selection. A bank does not know a borrower's real financial situation hen providing a

loan, unlike the borrower itself. Setting stricter lending criteria leads to higher risk borrowers

participating. Liquidity restrictions can also be associated with moral hazard, i.e. a situation where a bank

cannot prevent the borrower from behaving in a way leading to a rise in credit risk after the loan has been

granted.

⁷ http://www.cnb.cz/m2export/sites/www.cnb.cz/en/financial_stability/fs_reports/FSR_2005.pdf, p. 28 - 29.

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special packages at this segment. Alongside credit to households, this segment generates most income for banks. 8

The following figures show the evolution of concentration on the loan market of SME. Figure 5 Concentration ratio of the loans granted to SME and total loans granted

Source: Author’s calculation

The figure 5 shows that on the loan market of SME is the share of the three largest banks very small. The concentration ratio of those banks ranges from 28 % to 38 %. Whereas the concentration ratio of the three largest banks to total loans reaches values around 50 %. Figure 6 Herfindahl-Hirschman index of the loans granted to SME and granted loans total

Source: Author’s calculation

⁸ http://www.cnb.cz/m2export/sites/www.cnb.cz/cs/financni_stabilita/zpravy_fs/fs_2006/FS_2006_realna

ekonomika.pdf, p. 19 - 20.

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In comparison with the total loan market where the value of HHI is about 800, results of HHI on the loan market of SME confirm a very low degree of concentration of the three largest banks. Values achieved in all years are significantly below 1000, which can be described as non-concentrated sector. Figure 7 Debt ratio of SME (% of GDP)

Source: Adapted from CNB

The sector's debt continued rising, the growth rate of loans granted to SME decreased over the year 2007. This may indicate a future downswing in corporate sector performance associated with the expected weakening of economic activity due to global and domestic factors.

Despite the increase in the corporate debt-to-GDP ratio, this indicator for the Czech Republic is still half that of the EU12 countries and since 2001 has been roughly at the same level as in the USA, where, however, corporations are traditionally financed more through the capital market. 9

⁹ http://www.cnb.cz/m2export/sites/www.cnb.cz/en/financial_stability/fs_reports/fsr_2007/FSR_2007_2_

real_economy.pdf, s 23.

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Figure 8 Credit growth (in %)

Source: Adapted from CNB

The figure 8 shows year-on-year growth in credit to corporations by number of employees in %. Despite non-financial corporations' relatively positive results, some signs of slowing corporate sector performance are visible. These are associated with the expected economic slowdown due to global and domestic factors. At the end of 2006 bank loans to SME had shown record annual growth rates of almost 21 %, whereas at the end of 2007 the rate returned to a more restrained figure of just over 17 %. Compared to 2006, when the growth in loans had been driven by small and medium-sized enterprises, the growth in 2007 was very heterogeneous. The fastest growth in bank loans was recorded for enterprises with 100−249 employees. Enterprises with 250 employees or more, which can rely more on cheaper sources of financing, such as the capital market or loans from their parent corporations, as usual showed the lowest growth. 10

¹⁰ http://www.cnb.cz/m2export/sites/www.cnb.cz/en/financial_stability/fs_reports/fsr_2007/FSR_2007_2_

real_economy.pdf, p. 23.

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Figure 9 Year-on-year credit growth by sector (in %)

Source: Adapted from CNB

The annual growth rate of credit granted to SME is increasing year-on-year. In mid 2003, credit growth came to positive values. The average year-on-year rate of growth between 2000 and 2002 was minus 20 %, 2.5 % between 2002 and 2004 and 15.6 % between 2004 and 2007. The annual rate of growth of loans to SME at the end of 2006 was 20.9 %. The rate of growth of bank loans to SME has decreased slightly in 2007 to 17 %. In international comparison, this growth rate is below the average value achieved of the European Union.

1.5 Relation between the concentration of the banking sector and loans

granted to SME

The concentration of the banking sector in each year is decreasing significantly. A group of three largest banks reduced the proportion on the loan and deposit markets, while strengthening overall position in the proportion of total assets. Activities of whole sector are mostly concentrated in the group of the three largest banks, which have mostly over 50 % of the value of the market. Market shares of the group of the largest banks in the banking sector are decreasing slowly, despite the competition of the banking sector is strengthening and the internal structure of the banking sector is changing. In my opinion, the banking sector of the Czech Republic, represented by the three largest banks, can be described as slightly concentrated. Loans granted to SME in absolute terms are growing each year, the dynamics of growth of loans is increasing, although in 2007 is apparent a slight decline in growth rate of credits.

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The paper cannot state that the concentration of the banking sector does have an impact on granting credits to SME. The three largest banks have approximately 35 % share on market of credits to SME. And although credit market concentration is generally decreasing significantly, the growth of SME credit market is variable. Competition in the segment of credits to SME is significant. The banks are thank to an economic growth increasingly disposed to expand funding opportunities for business activities and thus contribute to the expected profits. Equally important criterion is the possibility of competition from new players which are entering the credit market.

1.6 Conclusion

The goal of my paper was to analyze the relationship between the concentration of the banking sector and credits granted to SME. First the concept of concentration and its measurement is described. In the practical part of the paper is analyzed the concentration of the Czech banking sector using the concentration ratio and the HHI in period from 2000 to 2007. It also describes the relationship between the development of credits granted to SME and the concentration of SME credit market.

The paper suggests that loans granted to SME are more affordable with decreasing degree of concentration of the banking sector and its growing competition. The credit providing to SME, however, affect other factors too. Therefore, we cannot say that the decreasing degree of concentration does have an impact on growing the credits to SME. From the paper is also apparent that the concentration of the market of credits to SME is significantly lower than the concentration of the market of total credits.

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RUTHENBERG, D. Competition in the Banking Industry: Theoretical Aspects and Empirical Evidence from Israel. In An International Perspective. 2006, p. 47. URL: < http://www.biu.ac.il/soc/ec/seminar/data/6.11.06/competition.pdf>

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Annual Reports Česká Spořitelna in years 2000 - 2007 URL:

Label=downloads&dtree=cs&selnod=17> [10. 10. 2009]

Annual Reports ČSOB in years 2000 - 2007 URL:

pololetni-zpravy.htm> [10. 10. 2009] Annual Reports Komerční banka in years 2000 - 2007 URL: [10. 10. 2009] Annual reports on banking supervisory activities 2000 - 2005 URL:

supervision/banking_sector/analytical_publ/publikace_rz.html> [10. 10. 2009] Basic indicators of the banking sector

URL:

sector/banks/index.html> [10. 10. 2009] Financial market supervision reports in years 2006 - 2007 URL:

index.html> [10. 10. 2009] Financial stability reports 2004 - 2007

URL: < http://www.cnb.cz/en/financial_stability/fs_reports/> [10. 10. 2009] [10.10. 2009]

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2. Socially responsible investing in SMEs

Ing. Pavel Adámek / Karvina, Czech Republic

2.1 Introduction

The terms “social”, “ethical”, “responsible”, “socially responsible” and “sustainable” are all used in a multitude of overlapping and competing ways. Nevertheless, the constant within this area is that sustainable and responsible investors are concerned with long-term investment, and environmental, social and governance (ESG) issues are important criteria in determining long-term investment performance. According to these tendencies it should be split into three areas:

Responsible Investment (RI) is an area developing particularly among the institutional investors and remains most connected to the mainstream financial community. Responsible investors take into consideration the long-term influence of extra financial factors such as environmental, social and governance (ESG) issues in their investment decision-making. They integrate ESG factors into their stock portfolio analysis and management, bringing together social and sustainability indicators with traditional financial analysis. Socially Responsible Investment (SRI) is an important area for the retail financial sector and may incorporate ESG issues as well as criteria more closely linked to a values-based approach. For example, it can involve the application of pre-determined social or environmental values to investment selection. Investors choose to exclude or select particular companies or sectors because of their impact on the environment or stakeholders.

Sustainable Investment (SI) is a growing area where investors align their investments with emerging environmental and social realities. This area brings together those in the financial sector committed to the sustainability imperative along with those interested by the investment opportunities that the ongoing shift in regulations and market practices are creating ¹¹ . A good example of this would be High Net Worth Individuals (HNWI) ¹² choosing to invest in thematic funds (clean energy, water, etc.) because of their financial and sustainable returns prospects.

¹¹ The emergence of sustainable investing” - Nick Robins, 2008. Eurosif “HNWI & Sustainable

Investment”, 2008.

¹² http://www.eurosif.org/publications/hnwi_sustainable_investment

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Accordingly to Eurosif ¹³ SRI means: „A generic term covering ethical investments, responsible investments, sustainable investments, and any other investment process that combines investors’ financial objectives with their concerns about environmental, social and governance (ESG) issues”.

A key challenge for sustainable and responsible investors is in investing for the long-term while facing short-term pressures. There is rarely a simple answer to the complicated puzzle of combining money-making with ‘sustainability’ criteria. For example, in evaluating a company’s ESG issues, some investors will find the environmental policies to be the key input while others will point to the company’s human rights practices as the critical issue. Therefore there are multiple approaches for conducting SRI. 2.2 Actual approach of the SRI in EU

Sustainable & Responsible Investment (SRI) is an investment strategy that meets both financial and values-driven needs. These same values drive a developing sustainability agenda that creates business risks and opportunities. The inclusion of sustainability analysis into the core investment process thus aims to yield both investment and ethical value. For this to hold true the SRI process must be able to identify, and weight properly, the most important issues in this developing social and political agenda. There exist number of an approaches and one of the important should be developed by Fortis Investments´ proprietary ¹⁴ with a tool that allows us to identify the most important sustainability issues, and highlights consequent investment risks and opportunities. To analysing the issues of our concern fall into three categories: Environmental (e.g. climate change, waste), Social (e.g. human rights, health and safety), and Governance (e.g. transparency, corruption).

For identifying the related investment risks and opportunities by monitoring those issues and their underlying drivers, there exist the sustainability as opportunity themes: Clean & Efficient Energy, Water & Pollution Control, Organic Food, Health Technology, Fair Trade, Green Materials & Buildings and Waste & Recycling Technologies. The role of EUROSIF (European Social Investment Forum)

¹³ European Social Investment Forum

¹⁴ http://www.sri.fortis.com/sri_home.asp

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Eurosif is a pan-European group whose mission is to Address Sustainability through Financial Markets. Current member affiliates of Eurosif include pension funds, financial service providers, academic institutes, research associations and NGO’s. Current member affiliates of Eurosif include pension funds, financial service providers, academic institutes, research associations and NGO's. The association is a not-for-profit entity that represents assets totalling over €1 trillion through its affiliate membership. ¹⁵ Eurosif’s proprietary “Fortis Sustainability Radar” is the core framework for all SRI funds. The individual SRI funds differ in terms of SRI approach, regional focus, and other criteria. Businesses face a constantly evolving social and political agenda that is ultimately driven by society’s values and shifting understanding of key trends. A range of factors including new scientific evidence, developing public opinion and changing political priorities form a complex landscape.

Importantly, ESG issues are not static but tend to develop towards legislation driven by new scientific evidence, NGO activities and changing political landscapes, public opinion and consumption patterns. The figure below shows selected ESG issues in different phases.

Figure 1: ESG issues in process of developing from “emerging to establishing”

Source: http://www.sri.fortis.com/sri_sust_radar_agenda.asp

¹⁵ http://www.eurosif.org

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The key features and indicators of each phase are outlined into:

1. Emerging phase - low scientific evidence of and consensus on the social and environmental impact; uncertainty as to how policy makers will tackle the issue; risks and opportunities cannot be quantified.

2. Momentum phase - strong scientific evidence & consensus; high media attention and NGO Activity; strong political momentum and increasing clarity of future policy frameworks; likely corporate winners and losers can be identified; feasible for ESG investment specialists to quantify risks and opportunities; the market tends to misprice risk sand opportunities.

3. Established phase - regulations and norms are established; risks and opportunities are identified and integrated in mainstream analysts’ valuation models; the market efficiently prices companies in relation to these issues.

The momentum phase is the most important phase for SRI investors. This is where market mispricing on ESG issues occurs, which we can exploit by employing our specialist understanding on ESG issues and their underlying dynamics.

SRI moves closer to financial mainstream

The socially responsible investment market has grown considerably in the past few years and, now valued at €1,000bn in Europe, shows signs of moving closer to the financial and corporate mainstream. Across Europe we could see the rising SRI strategies involved more business and other partners. One of the biggest factors driving the shift is public awareness of climate change, which is having an impact on investment values and leading to a more widespread use of SRI strategies by institutional investors. Statement on Environmental and Social Principles and Standards 16

The EIB ¹⁷ approach to environmental sustainability - as well as the closely related concept of social well-being - is described in “The EIB Statement of Environmental and Social

¹⁶ http://www.eib.europa.eu/about/news/eib-statement-of-environmental-and-social-principles-and-

standards.htm

¹⁷ European Investment Bank

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Principles and Standards”. During 2008 the Statement was revised and a public consultation was held to collect comments from civil society. The constructive contribution to this consultation of civil society organisations, in particular the NGOs that traditionally scrutinise the Bank, was very much appreciated by the Bank and resulted in a statement that provides a much greater sense of urgency about the problems of climate change, expands the social dimensions of sustainable development and recognises the importance of biodiversity.

Following the approval on 3 February 2009 of the EIB’s new Environmental and Social Statement, the Management Committee decided to review the structure of the Projects Directorate with the aim of increasing the Bank’s ability to deliver sustainable projects. The proposed changes focus on the Environmental and Social Office, which replaces the Sustainable Development Unit.

2.3 The ability of European SMEs to gain access to capital

The European Union provides support to European SMEs. This is available in different forms such as grants, loans and, in some cases, guarantees. Support is available either directly or through programmes managed at national or regional level, such as the European Union’s Structural Funds. SMEs can also benefit from a series of non-financial assistance measures in the form of programmes and business support services. For brief introduction is important to state schemes which have been divided into the following four categories: 18

1.Thematic funding opportunities with specific objectives - environment, research, education. SMEs or other organisations can usually apply directly for the programmes, generally on condition that they present sustainable, value-added and trans-national projects. Depending on the programme, applicants can also include industrial groupings, business associations, business support providers and/or consultants. Co-funding is the general rule: the support of the European Union usually consists of subsidies which only cover part of the costs of a project.

2. Structural funds (European Regional Development Fund and European Social Fund) are the largest Community funding instruments benefiting SMEs, through the different thematic programmes and community initiatives implemented in the regions.

¹⁸ http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&doc_id=4619&userservice_i

d=1&request.id=0

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3. Financial instruments - most of the financial instruments are only available indirectly, via national financial intermediaries. Many of them are managed by the European Investment Fund.

4. Support for the internationalisation of SMEs - generally consist of assistance to intermediary organisations and/or public authorities in the field of internationalisation, in order to help SMEs to access markets outside the EU.

After this brief introduction of the EU basis, the research will be concern in some specific areas which have the impact for SRI. Form there are of concern it is important to focus and more detailed to target on the possibility gain capital especially for SMEs from the investment funds. The area of the will be divided funds into three parts. Our concern will be focused on private equity and venture capital which will be more detailed. From the research area of SRI in European SMEs is possible to state and mentioned the basic;

1. Funding opportunities divided intro parts:

Environment, energy and transport - LIFE +; Competitiveness and Innovation Framework Programme (CIP); Marco Polo II;

Innovation and Research - The Seventh Framework Programme for Research and Technological Development pays special attention to the SMEs through its different programmes: “Co-operation” (circa €32.3 billion), “Ideas” (circa €7.5 billion), “People” (circa €4.7 billion) and “Capacities” (circa €4 billion);

EUREKA - A Network for market oriented R&D;

Education and training;

Culture and media;

Employment issues- Information, consultation and social dialogue; Health and safety at work.

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2. Structural Funds - European Regional Development Fund; European Social Fund; Rural Development Fund; Joint European Resources for Micro and Medium Enterprises (JEREMIE); Joint Action to Support Micro-finance Institutions in Europe - JASMINE. 3 .Financial instruments - Competitiveness and Innovation Framework Programme (CIP); European Investment Fund (EIF) own investments; European Investment Bank (EIB) loans.

The survey mentioned above could get some clear review from European help to support and developed the SRI through these four categories. For further details follow http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&doc_id=4619 &userservice_id=1&request.id=0.

1.1 Investment funds

There are many different ways to break down the alternative investment market into different fund types. There is the focus on EC’s convention and looked at four different markets: Hedge funds - these funds offer investors a wider range of investment and trading activities than other investment funds (such as commodities or real estate) and apply non-traditional portfolio management techniques such as through using leverage or pursuing absolute returns on their investments i.e. profits both in rising and falling markets; Private equity and venture capital funds - these funds provide investors with the opportunity to invest in non-listed companies; Real estate funds (otherwise referred to as property funds) - these funds provide investors with exposure to investments in property, land and other property related assets. Investment trusts - these funds are closed-ended investment vehicles investing in a diversified portfolio of assets that are structured as listed companies.

It is useful to consider the role that investment funds play and why it is that investors might seek to use investment funds rather than other forms of investment. There are a variety of advantages of using investment funds including diversification, cost advantages and professional management.

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Start-ups and SMEs

According to the EC, 99% of all businesses in the EU are SMEs and these companies provide two-thirds of all European private sector jobs. ¹⁹ It is primarily to these types of firms that venture capital and mid-market private equity provide capital. The European Central Bank has studied the effects of private equity investment in Europe on business creation and the importance of private equity financing to small business. ²⁰ They concluded that countries with relatively large private equity sectors had disproportionately higher market entry (or firm start-up) than countries with lower levels of private equity funding. This is especially the case in industries where entry rates are naturally higher and/or where they are more research and development intensive. It means that private equity in Europe has tangible and positive effects on new business creation. This was even more apparent when looking at markets with mature private equity industries. It was shown that countries with more stable and long-term private equity funding provide more incentive for entrepreneurs to create business. Figure 2 shows the number of companies in Europe that have private equity or venture capital funding. In total, some 25,000 companies in the EU are currently financed by private equity or venture capital.

¹⁹ Facts and figures - SMEs in Europe, see http://ec.europa.eu/enterprise/entrepreneurship/facts_figures.htm.

²⁰ European Central Bank Working Paper Series No 1078, On the Real Effects of Private Equity Investment.

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Graph 2: Private equity and venture capital funded companies in the EU

Source: Source: Provided to CRA by the EVCA

Use of private equity and venture capital

The private equity and venture capital industry provides a source of capital for many types of companies in Europe including the character of SRI. Private equity provides capital to unlisted companies, including those that are de-listed as part of a public to private transaction. These investments range from buy-out deals (acquisition of the majority of shares in a company) to early stage investments (such as seed capital to help in start-up phase of a company), also known as venture capital.

Private equity and venture capital funds provide capital and often the management and operational expertise needed to increase value in the underlying company. In this sense, these funds provide a service and source of capital that neither bank lending nor mass shareholder equity (such as public shareholders) could provide. ²¹ Table 1 shows the proportion of buyout and growth investments compared to venture capital investments in 2007 and 2008.

²¹ see European Central Bank Working Paper Series No 1078, On the Real Effects of Private Equity

Investment. Also see the Impact Assessment, page 53

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Table 1: European private equity by investment stage (€ billion)

Source: EVCA

Private equity funds are also very international in their use of capital raised. Hence funds that are managed in one location do not only invest in that location but invest in companies in a range of different countries. In this way countries that are neither the location of the domicile of the fund nor the location of the management of the fund receive benefits from investment in the underlying portfolio companies.

Private equity and venture capital funds have direct impacts on the real economy through their role as providers of capital to small businesses. Around 9-10 million people in the EU are currently employed by private equity and venture capital funded companies and up to 30 million are employed by a business that has received such funding in the past. As well as providing capital, AIFM ²² provide the management and operational expertise needed to increase value in the underlying portfolio company (which neither bank lending nor mass shareholder equity could provide).

Companies supported by private equity are more likely to be growing and increasing employment opportunities, although there is some evidence of declines in employment in the immediate aftermath of investments. Furthermore, private equity funded companies were found to create 6% more “greenfield” jobs than other firms.

There is little evidence to suggest that funding provided by private equity through buyouts would be drastically reduced as a result of the AIFMD. This is because non-EU funds can continue to invest in EU businesses while raising funds elsewhere supported by local offices to oversee investment opportunities. (EU managed funds already raise 46% of capital from outside the EU, suggesting switching to non-EU funds by these investors would be straightforward.)

²² Alternative Investment Fund Managers

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Venture capital funded firms have high employment growth rates. In addition, a large proportion of employees funded by venture capital focus on jobs such as research and development, biotechnology and health care, and university spin-offs, which seek to innovate and are key drivers in economic growth.

The impact of AIFMD is more significant for venture capital funding relative to private equity funding as local knowledge and expertise is comparatively more important in funding start-ups than for buyouts. Therefore it is more difficult for non-EU based funds to increase investment in the EU in the short term. Any reduction in venture capital is a concern since start-ups and early stage companies are extremely important to economic growth and employment across the EU. Funds raised by private equity

Fundraising by EU-managed private equity funds has increased substantially over the past five years. As shown in Figure 14 below, fundraising by private equity funds peaked in 2006 but has remained at a high level over the past two years. Fundraising from 2004 to 2008 totalled €357.5 billion.

Graph 2: EU private equity and venture capital fund raising (€ billion)

Source: own research from EVCA

Private equity and venture capital funds raise money from a number of sources, including investors both within the EU and outside the EU. Graph 3 below shows a breakdown of funds raised by EU managed private equity and venture capital funds.

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Graph 3: EU private equity and venture capital funds raised by investor type

Source: Provided to CRA by the EVCA

In addition it is estimated by the EVCA that there are around 4,200 private equity and venture capital funds managed in the EU. ²³ Replacement by other sources of funding

It is clear that private equity provides a source of funding that traditional bank lending or public shareholder equity cannot fill. There are a number of explanations for this: the benefits include expertise in particular industries and markets as well as access to funds; alternative sources of funds such as banks are often unwilling to lend to SMEs due to higher uncertainty, information asymmetry and agency costs; and public listing is often not a viable choice because of the early stages of development of businesses at issue. However, one obvious substitute for EU private equity and venture capital funds from the perspective of EU enterprise is to obtain such funding from outside Europe. It is already the case that a substantial portion of the money that is raised by European private equity funds comes from outside the EU.

²³ Provided to CRA by EVCA

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SMEs Survey and the EIB’s Initiatives in favour of SMEs

The EIB Group is one of the pillars of European support for SMEs. As a whole, the EIB Group provides assistance to some 150 000 to 200 000 SMEs every year. The economic structure of the EU is characterised by the importance of the SME sector. There are over 23 million SMEs in the EU, representing 99% of all enterprises, and SMEs are responsible for more than half of the EU’s GDP and employment. Their capacity to grow and innovate is crucial for ensuring EU economic growth and competitiveness. They are, however, more exposed to financial turbulence, the business cycle and contractions in final demand. Preserving access to finance on attractive terms is therefore critical in helping them to realise their full growth potential.

EIF has provided specialised support for SMEs based on two major product lines. First, by acting as a fund of funds in the venture capital area, it has invested in funds with a specific focus on high-tech and innovative SMEs. The EIF’s total equity investments amounted to EUR 4.7bn invested in more than 280 funds at end-2008. Second, by providing guarantees for SME loan portfolios, it has shared with financial intermediaries the risk they run on their SME lending activity. The EIF’s guarantee portfolio amounted to EUR 13bn as at end-2008.

Under the Competitiveness and Innovation Programme (CIP), the European Commission mandated the EIF to invest a total of EUR 1bn of budgetary funds on its behalf in venture capital funds providing seed capital or equity to innovative SMEs with high growth potential and to issue guarantees for loan and equity portfolios, including microcredit portfolios. EIB and EIF will cover the whole spectrum of financial products needed by SMEs and midcaps to realise their full growth potential and ensure that the benefits of the support are genuinely passed onto the companies themselves.

EIB loans for SMEs

Before the crisis erupted, the EIB developed a new lending product, dubbed EIB loans for SMEs. Available since October 2008, these new loans are simpler, more flexible and more transparent, making it possible to reach a greater number of European SMEs. From the budget will be made available to small businesses in the 27 EU Member States by 2011 to help them weather the global financial storm in total EUR 30 billion. At least half of this amount will be allocated by the end of 2009.

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Also one of the reasons was that EIB revealed that four types of company often have difficulty gaining access to credit. In particular: micro-companies with fewer than 10 salaried employees have difficulty finding financial products that suit their specific circumstances; “gazelles” (i.e. SMEs in a high-growth and/or transfer phase) have to manage, simultaneously, the need both to increase their equity capital and to secure medium-term financing; innovative SMEs have difficulty financing intangible acquisitions with a view to supporting their R&D or using new technologies; and SMEs’ investment in “eco-technologies” or sustainable development (e.g. in order to reduce CO2 emissions) are regarded by banks as having an abnormal risk profile.

The EIB lends money to commercial banks e.g. in Czech Republic are involved: Česká spořitelna - Erste Group, Komerční banka - Societe Generale Group, Československá Obchodní Banka, UniCredit Bank Czech Republic, Raiffeisenbank, Volksbank CZ. All independent SMEs with fewer than 250 employees in the 27 EU Member States. The subsidiaries or holding companies of industrial groups with more than 250 workers are not eligible. Amounts are provided from very small projects to investments with a maximum cost of EUR 25 million. The EIB’s contribution cannot exceed EUR 12.5 million and also all expenditure necessary for a small business to develop, such as:

• Tangible investments: purchases of plant and equipment.

• Intangible investments: particularly the expenditure involved in R&D, building

Advantages which create the EIB for SMEs through partner banks to on lend to SMEs the funds that it provides at favourable rates, adding an equivalent amount from their own funds. For each euro provided by the EIB the partner bank undertakes to lend at least two to SMEs, so creating a leverage effect.

EIB has interaction between the core principles of CSR ²⁴ at the heart of its strategy, objectives and policies and SRI. The Bank aims to add value by enhancing among other things the environmental and social quality of the projects that it finances. There is

²⁴ The final report is avaliable from: http://www.eib.org/about/publications/eib-2008-corporate-

responsibility- developments.htm

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important to mention the SRI-tailored product: the Climate Awareness Bond. 25 Regular EIB bonds have for some time attracted demand from SRI investors. However, in 2007 the Bank substantially widened this appeal through the issuance of a product specifically geared to the SRI market.

2.4 Situation in Czech Republic (relation between SRI and SMEs)

SMEs are the driving force of business, growth, innovation and competitiveness and play a key role in job creation. In the Czech Republic, SMEs account for 61.52% of the employment and contribute by 35.17% to the production of GDP. SMEs portion from all investment in CZ is 56 %.

From the zone of the national´s financing investment programme of Czech Republic in areas of health, social protection, culture and public administration is responsible Ministry of Finance and line ministries responsible for investments in selected eligible sectors. For the purpose of the research was chosen the last project which is focusing on SRI area and was signed in 13/10/2009. Description of project is multi-sector facility devised to support the Czech Republic's multi-annual public investment programme in priority eligible sectors, namely in health/social care, culture and public administration, through the acquisition of the government bonds. The objectives of the project are the pre-selected investment programmes aim at several objectives, such as enhancement of quality of life, effective public management and prosperity. The Project is expected to comprise schemes eligible under the Convergence objective as well as investments located in Prague (classified as a Competitiveness and Employment region) which will be justified under other EIB objectives (human capital, RDI, sustainable communities). Proposed EIB finance is stated: up to CZK 12.4 bn. and total cost approx. CZK 25.5 bn. The project included the environmental aspects and some of the schemes may fall under the requirements laid down in the EIA Directive 85/337/EEC. ²⁶ The Bank will request to be informed of the actions taken by the Promoter on the necessity of undertaking an EIA. Had any scheme a negative impact on an area forming part of Natura 2000 network, the Bank would require the promoter to act according to the provisions of the relevant directives as transposed into the national law.

²⁵ The bond offered a unique combination of environmental characteristics. The proceeds, which have

meanwhile been disbursed, were earmarked for the Bank's future projects supporting climate protection, in

the fields of renewable energy and energy efficiency. It incorporated an option to purchase and cancel

CO2 allowances (European Carbon Allowances or "EUAs") via the European Union's Emission Trading

Scheme.

²⁶ http://ec.europa.eu/environment/eia/full-legal-text/85337.htm

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Table 2: Finance contracts signed in the year 2009 for Czech Republic

Source: http://www.eib.org/projects/loans/regions/european-union/cz.htm

JEREMIE as an instrument of European investment bank is implemented in the Czech Republic through the banks. For instance loan for Komercni banka in 2006 was in amount 37.5 million EUR, or in 2008 was made agreement with group of Société Générale in amount of 100 million EUR. From this programme should be also support SRI activities. That opportunity can bring lower interest rate, to not only SMEs, but also for corporations

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up to 3000 employees and companies owned by public sectors. The cheaper borrowings could be advantage in starting vision of Socially Responding Investing in SMEs. That instrument is possible to be used for co-financing main source of money - Structural funds, especially European Regional development fund and European social fund. Disparities among regions of the CR are significant. Capital´s city region has 120% GDP of level of EU on the other hand all other regions are bellow limit 75% GDP and some smaller area, in case of high unemployment, are listed on special Government regulation as regions with intensive subsidy of state. There for example belong to Moravian-Silesian region and North-west Bohemia region which are still restructuring from heavy industry. Through Czechinvest are offered grants and Czech-Moravian Guarantee and Development Bank ²⁷ are offered favored loans.

The National Strategic Reference Framework of the Czech Republic The National Strategic Reference Framework (NSRF) ²⁸ for 2007 - 2013 was drafted while respecting the principle of partnership in line with the Article 11 of the Council Regulation No. 1083/2006, laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No. 1260/1999 (hereinafter "General Regulation"). The Ministry for Regional Development (MRD) ensured the overall co-ordination of the preparation for the programming period of 2007 - 2013, including the preparation of the National Development Plan (NDP) ²⁹ and the NSRF. During this process, the attention was paid to ensure a functional partnership as one of the key preconditions for efficient use of the EU Structural Funds and the Cohesion Fund.

For SMEs are included these programs which also impeach the SRI. There exist 26 Operational programmes and according to area of concern the SMEs have to choose the right one which is available for SRI approach. As an example we will be concentrate on programmes of guarantees for SMEs GUARANTEE, Programmes of support START, PROGRESS, DEVELOPMENT, ICT IN ENTERPRISES, ECO-ENERGY, INNOVATION,

²⁷ For more information see http://www.cmzrb.cz/index.php?lchan=1&lred=1

²⁸ http://www.strukturalni-fondy.cz/CMSPages/GetFile.aspx?guid=2ddd8ee6-bdf9-419c-9993-

7a2e9f58292f

²⁹ http://www.strukturalni-fondy.cz/Informace-o-fondech-EU/Regionalni-politika-

EU/Dokumenty/Strategicke-dokumenty/Narodni-rozvojovy-plan-Ceske-republiky-2007-2013

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INNOVATION - Patent, POTENTIAL, COOPERATION - Technological platforms, PROSPERITY. 30

Graph 4: Structure of the financial sources supporting SMEs for Czech Republic in 2008

Source: Own research from Czech Statistical Office

We can see the structure of the financial support of SMEs which the basic role plays the combination of the public sources from EU and CR financial instruments.

2.5 Conclusion

The direct financial supports of SMEs are not one of the effectual tools for the entrepreneurship support. The business development is immediately influenced by the business environment´s quality. The SRI investment strategy that meets both financial and values-driven needs for the future prosperity and entrepreneurship development. The few sources in Europe detailing the sustainable and responsible investment (SRI) market, both in terms of the amount of capital invested in SRI as well as highlighting European and National trends. There continues to be a strong demand for information about the size of the SRI market across Europe, and therefore this research is important for all participants in European SRI trends.

³⁰ Avaliable from: http://www.mpo.cz/en/business-support/opei/default.html

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