In modern economic conditions, conducting business activity of any kind without availability of debt finance is improbable. The private sector in Bulgaria face the challenge of maintaining sufficient amount of capital to successfully satisfy both working and investment needs. Debt finance products offer an ideal way to satisfy those needs.
Small- and medium-sized enterprises are main employment generator and key economic growth factor. They play primarily role in forming both GDP and Value Added of the country. However, SMEs have experienced a vast amount of economic and social problems. Main problems groups can be brought down to:
- Inappropriate business environment for the development of SME (administrative, legal, poorly developed business consulting services and regional business centers etc.)
- Insufficient financial assistance
Since capital markets in Bulgaria are still underdeveloped and alternative sources of finance are hardly present, bank loans/credit lines along with supplier/customer debt prove to be a primary source of capital for small- and medium- sized enterprises. In a bank-based financial system like Bulgaria, banking system is a key factor of economic growth with a major role in productivity, investment levels, innovation and expectation of entrepreneurs.
All those factors explain the importance of the chosen topic on regional and national level. Purpose of this work is to create a comprehensive profile of the SME sector in Bulgaria; to pinpoint and analyze its problems toward access to external capital as well as to evaluate trends and challenges in SME debt finance.
Key question on which this work attempts to answer is:
What are the trends and challenges in the corporate debt financing sector?
In order to get there, specific tasks will need to be accomplished
- Creation of a comprehensive profile of the SME sector in Bulgaria and illustration of its growing importance for the national economy.
- Evaluation of the supply and demand for debt and determination of potential barriers to limited external finance access for SMEs
- Formulating and analyzing trends and challenges of corporate debt financing in Bulgaria
[...]
Table of Contents
INTRODUCTION
CHAPTER I: SME Sector in Bulgaria
1.1 Emergence and Early Development- Economic Overview (1990-2001)
1.2. Relative Importance for the National Economy
1.2.1. General Outlook
1.2.2. SME Economic Profile
1.2.3. Competitive Position
1.3. Recent Developments and Trends
1.4. Sectoral Barriers to Economic Growth
CHAPTER II: Financial Intermediaries in Bulgaria - Key Facilitator of SME Growth
2.1. Overview of the Bulgarian Banking Sector
2.2. Supply of Debt Capital
2.2.1 Types of Bank Loans in Bulgaria
2.2.2. Group I Banks in Bugaria - Role in SME Financing
2.3. Demand for Debt Capital
2.3.1 Debt Structure
2.4. Problems and Obstacles for Bulgarian SMEs in Obtaining Bank Loans
2.5. Suggestions for Improvement of Debt Accessibility for SMEs
CHAPTER III: Challenges and Future Outlook for SME Debt Financing
3.1. Alternative Sources of Finance - Project and Institutional
3.2. Trends in SME Debt Financing
3.3. Cost of Borrowing
CONCLUSION
Objectives & Research Themes
This thesis aims to create a comprehensive profile of the small and medium-sized enterprise (SME) sector in Bulgaria, analyzing its financial performance and its challenges regarding access to external capital. The core research question addresses the prevailing trends and obstacles in the corporate debt financing sector for these enterprises.
- Economic contribution and importance of SMEs in the Bulgarian national economy.
- Evaluation of supply and demand for debt capital among SMEs.
- Identification of barriers to external finance access, including regulatory and banking-sector limitations.
- Analysis of ongoing trends and potential future outlook for corporate debt financing.
- Exploration of alternative finance structures and governmental programs.
Excerpt from the Book
1.1 Emergence and Early Development- Economic Overview (1990-2001)
The official regulation of Bulgaria’s private sector was initiated with the issue of “Directive 56”1. The rules however, were insufficient and not clearly defined resulting in sporadic and rather unregulated initial stage of business development. Furthermore, it served to promote the inflow of capital of unclear origin and present opportunities for a number of illegal organizations to amass huge profits. As a result, the private sector in Bulgaria was growing at relatively low rates and the share of the “grey” economy was increasing.
The deficient private sector regulation and heavy financial crisis that followed hit the economy and led to hyperinflation. The process of privatization was abandoned and currency board was introduced, tying Bulgarian “Lev” to DM in an attempt to reduce inflation and stabilize the financial state of the economy. Interestingly enough, the crisis (1996-1999) did not hit the private SME sector, as the number of small- and medium sized enterprises did increase during the above mentioned period.
Summary of Chapters
CHAPTER I: SME Sector in Bulgaria: Provides an overview of the emergence of the SME sector since 1990 and evaluates its significant role in national employment, GDP, and value-added creation.
CHAPTER II: Financial Intermediaries in Bulgaria - Key Facilitator of SME Growth: Analyzes the Bulgarian banking system as the primary provider of debt, detailing available products and the structural barriers SMEs face when seeking loans.
CHAPTER III: Challenges and Future Outlook for SME Debt Financing: Examines future trends in the debt financing sector, evaluates the role of alternative funding programs, and discusses the impact of EU integration on the cost of borrowing.
Keywords
Bulgaria, SME, Debt Financing, Banking Sector, Currency Board, Credit Access, Economic Growth, Value Added, Collateral Requirements, Basel II, Financial Intermediaries, Investment, Corporate Debt, Small-sized Enterprises, Medium-sized Enterprises
Frequently Asked Questions
What is the core focus of this thesis?
The thesis focuses on the role and challenges of small and medium-sized enterprises (SMEs) in Bulgaria, specifically analyzing their access to debt financing and the structural barriers within the national economic and banking environment.
What are the primary themes discussed in the work?
Central themes include the economic importance of SMEs, the role of financial intermediaries in facilitating growth, the evaluation of banking products for businesses, and the analysis of barriers such as lack of collateral and underdeveloped risk assessment.
What is the primary research objective?
The main objective is to identify and analyze the trends and challenges in the corporate debt financing sector for SMEs to better understand how access to capital can be improved for these businesses.
Which scientific methodology is applied?
The research relies on statistical data from the National Statistical Institute (NSI), reports from the Bulgarian National Bank (BNB), and specialized sociological surveys concerning SME conditions conducted by agencies like Vitosha Research.
What is covered in the main section of the thesis?
The main body treats the historical development of the SME sector, the current supply and demand of debt capital, the specific challenges like banking regulations and corruption, and alternative financing instruments currently emerging in the market.
Which keywords define this work?
Key terms include Bulgaria, SME, Debt Financing, Banking Sector, Credit Access, and Economic Growth.
How did the introduction of the currency board affect SMEs?
The introduction of the currency board in 1998 led to restrictive financial policies and a "credit crunch," which significantly reduced the credit capacity of financial intermediaries, making it harder for SMEs to secure funding during the subsequent period.
Why is the "growing up" of enterprises relevant to the analysis?
The "growing up" effect refers to the shift in size structure where micro-enterprises develop into small or medium-sized firms, indicating a positive development in the private sector that necessitates changing requirements for external capital and banking support.
What impact does the shadow economy have on debt financing?
The shadow economy acts as a major barrier because "grey companies" cannot prove their turnover or income sources, making them ineligible for bank loans and thus limiting the overall expansion of the official credit market.
What role do alternative finance sources play?
Alternative sources, such as PHARE projects, the National Innovation Fund, and micro-financing programs, serve as vital tools to supplement traditional bank loans, providing support specifically for startups and high-growth, innovative enterprises.
- Citar trabajo
- Dimitar Vasilev (Autor), 2009, Small and medium-sized enterprises in Bulgaria, Múnich, GRIN Verlag, https://www.grin.com/document/180859
