ECONOMY

New loan guarantee fund to back setting up of small firms

Prime Minister Costas Simitis yesterday inaugurated a 100-million-euro public Loan Guarantee Fund for small and very small enterprises (SVSEs) employing up to 30 people, a measure he said was designed to overcome the frequent reluctance of banks to lend to them. «Such enterprises are often ignored by the banking sector because they are new enterprises, without a name and history in the market, which have not shown they can grow and prosper and cannot provide the relevant guarantees. Banks justifiably avoid the high credit risk involved and another form of intervention is called for,» he said at the fund launch after a Cabinet session that dealt at length with issues related to small and medium-size firms. The prime minister said the problem was a characteristic case in which the free market mechanism failed in its mediatory role, in an economy that is largely comprised of small firms. «The small enterprise is the backbone of the Greek economy. It provides dynamism and secures employment. Greece is not a country of large businesses, of big industries with economies of scale. We have the highest percentage of self-employed in the 15-member European Union, more than 26 percent of the economically active population,» he said. Simitis said the SVSE Guarantee Fund would not be an agency handling issues according to government directives, but a special bank that would reduce the credit risk for commercial banks. The president of the fund, Ioannis Daskalopoulos, said the new mechanism represented a new philosophy in state guarantees, with the fund underwriting 40-70 percent of the risk of lending to SVSEs. The fund will provide guarantees for bank loans of between 10,000 and 100,000 euros to small enterprises for innovative ventures in tourism, for mergers and acquisitions among them, as well as for investment programs, market research and sales promotion. It will also provide support to special groups of prospective businesspeople, such as the young, women, the long-term unemployed, heads of large families, and immigrants. Simitis said Greece was making fast progress in the adoption of information technologies in business, with 92 percent of firms using computers, compared to an EU average of 94 percent. The SVSE Loan Guarantee Fund is located at 26 Amalias Avenue, near Syntagma Square.