Last year the program to promote micro and small-sized enterprises launched in Georgia.
The budget of the program implementing by the Entrepreneurship Development Agency (EDA) is GEL 20 million. Nearly 4 000 people are to be financed in the frames of the program. What is the state’s role in the development of business and what are the problems faced by start-up entrepreneurs in Georgia? – Mikheil Chelidze, Small and Medium-sized Enterprises Association President answers these questions.
– What is the main problem faced by those who wish to start a small and medium-sized business in Georgia ?
– If you ask entrepreneurs, everyone will mention taxes and access to finance as a major problem, which is clearly wrong. Taxes are paid in every country and to obtain finances is easy nowhere. I think that the problem lies more in a lack of knowledge. We are talking about simple things, tax code and financing – not macroeconomics.
A major plus of the state program is that the beneficiary receives a grant and not a loan. There is a high probability that the business will not succeed and in this case, the entrepreneur will not have a debt, – which is very important. He will be able to try out for the second time.
It is often said about the need of the tax administration reform. Does it really exist? And how serious is the problem of access to finance?
In terms of tax legislation, Georgia doesn’t face any problems. Platform for small business is quite good; it almost does not require an accountant. When you pay 5% of revenue, it is very easy to calculate. With regard to the availability of finance, the risks are very large, and banks are very close look at it.
Accordingly, the provision for loan is very high – it is almost 2-3 times higher than the loan amount. This is a big problem for startups, since due to such conditions, they have to work a long time to cover the loan and not on profit. And it is clear, as the banks are commercial organization, not charitable funds. However, to date, if someone really wants to do business, then such an opportunity always exists.
Many have succeeded. Many have started business with money taken from credit cards, GEL 3 000-4 000. But to get this amount to finance a startup is a not difficult at all.
How important is the state’s involvement in this process?
If the state does not interfere in this process, the small and medium businesses will not able to get out of the current situation and will definitely come to a standstill. In terms of taxes and administration, a system is very simple, and it is being further simplified. A new government program of donation expensive accounting software for the small and medium entrepreneurs, who cannot buy them has been ecentlyannounced.
I think that the state should be involved in encouraging small and medium-sized businesses at least 10-15 years. Georgia is only at the beginning, and the concept of “business” is still new for us. The country should adopt experience of developed countries and international organizations. Education and information is the main thing. We have to work precisely in this direction.
It is said that small and medium businesses will be able to develop on their own no less than in 50 years of existence in the capitalist country. In our country capitalism exists for about 10 years. So we still have a long way ahead.