SME access to finance in Cyprus: No stone left unturned?
Nearly a year after the bail-in of March 2013, Cyprus is still facing a severe credit and liquidity crunch. Particularly hard-hit are small and medium sized enterprises (SMEs), which account for 75% of the country’s economic output and 81% of employment.
ACCA’s continued commitment to our members and students in Cyprus, and to working in the public interest globally, has prompted us to commission independent research into the potential for improving SMEs’ access to finance in these challenging times.
ACCA’s call for evidence
To help inform our findings and proposals, ACCA issued a public call for evidence in March 2014, looking for suggestions on what options were still open to finance providers, entrepreneurs and policymakers for financing Cyprus’ SMEs.
In particular, we wanted to hear about realistic options to:
- Help Cyprus’ SMEs access public funding from Europe and beyond
- Use the leeway provided by State Aid rules in order to allow the government to better support Cyprus’ SMEs
- Unlock credit and liquidity in the supply chains of major corporates and the government
- Help banks overcome restrictions placed on them by liquidity and capital requirements, without jeopardising financial stability
- Help banks assess the creditworthiness of informationally opaque businesses or lend to businesses with insufficient collateral
- Help businesses sidestep the banks and appeal directly to investors, including through the capital markets
- Provide retail savers and investors with instruments and incentives, that would allow them to become involved in financing SMEs in Cyprus
- Adjust the insolvency regime so that solvent but cash-strapped SMEs can be better identified and protected while liquidity is being restored.
- Adjust capital controls (while these remain in effect) in order to secure business liquidity.
- Improve financial literacy and business planning skills in order to help SME owners and managers successfully bid for external finance.
The call for evidence closed on 10 April 2014 and a series of follow-up interviews with stakeholders continued until the end of April 2014. Independent experts RTD Talos then reviewed the evidence received and submitted a set proposals for ACCA’s consideration.
In June 2014, ACCA published Talos’ findings along with our response in a single report titled ‘Financing SMEs in Cyprus: No Stone Left Unturned?’