Paper long abstract:

Access to finance is one of the biggest obstacles facing the development of Small and Medium-sized Enterprises (SMEs) all over the world. The studies show that growth and development of the SME sector is strongly linked with sustainable access to financial resources. This paper examines the SMEs' access to banking finance in the countries of the Eurasian Economic Union (EAEU): Kazakhstan, Russia, Armenia and Belarus. We analyzed macroeconomic indicators hampering SMEs' access to banking finance by using BVAR model (time series data) for Kyrgyzstan, Random Effects (RE) model (panel data) for EAEU member states and annual data from 1997 to 2017. As a result of the evaluation, for the SMEs in Kyrgyzstan factors hampering access to banking finance are the high level of non-performing loans, tax rate and money supply (M2) indicator. In the countries of the EAEU the following indicators hamper the small businesses' access to bank loans: high interest rate of loans given to small businesses, high volume of non-performing loans and the exchange rate of National currency to USD. What should be underlined that within EAEU area countries for SMEs access to banking finance the following indicators do not influence at all: political stability, competitiveness index and consumer price index (CPI). As for SMEs in Kyrgyzstan, the indicators that do not have much significance level are exchange rate of KGS to USD and money supply, which describes M2 aggregate. We argue that relying on the findings of the study it should enable banks and policy makers within Eurasian Economic Union to pay attention to and enhance their serving of the needs of SMEs. Finally, it also provides member states with useful insights into factors and issues relating to constraints in obtaining funds from banks, and some key factors to help develop their businesses.