Following their first general meeting, president of the small businesses and self-employed coalition Stavros Alambritis said that the new bank will look to support small family-owned businesses and stop them from closing down. “Approximately 25 small enterprises have been closing down daily for the past two years,” he added.
Alambritis also said that businesses have been hard hit by the taxation policies of each government and also the high interest imposed by bankson business loans, adding that the new bank aims to protect and safeguard the best interests of the coalition's members and society at large.
The bank will start with a capital of €5 million, which is the minimum required to set up a financial institution in accordance with Securities and Exchange Commission (SEC) regulations.
The coalition aims to raise the money by issuing 5,000 shares worth €1,000 each which will be sold to small businesses with no more than 49 employees and self-employed workers, with the maximum interest rate set at 2%.
"All the loans will be given with the necessary guarantees and we think that our first clients will be our shareholders who will have accounts with a limit of 50% of the value of their stock," Alambritis said.
He also explained that the new bank will have branches in all towns and will not be registered on the Cyprus Stock Exchange.
Once established, the bank will seek to draw capital from the European Development Bank and European Central Bank.
The announcement comes only weeks after the presentation of a report by the Association of Chartered Certified Accountants (ACCA) on how to fund SMEs in Cyprus, which proposes the creation of a development bank to manage structural funds for investment purposes.
Speaking to The Cyprus Weekly during his stay on the island, past president of the association and chair of the ACCA's Global Forum for SMEs Mark Gold said that SMEs are the biggest market in Cyprus, covering 81% of output and over 90% of employment.
"Because they can't get funding, it's spiralling downwards so the essence of this report is how to address that position in easy ways, it's a bottom-up and top-down approach."
According to the report prepared for the ACCA by Cyprus-based development organisation TALOS, other suggestions include the creation of a leasing arm within the development bank that will start using unallocated ELA funds for short-term leasing of 12 to 24 months.
The bank will also create a funding mechanism for working capital for all export-oriented activities of SMEs in Cyprus and a start-up fund within the development bank that will use unallocated structural funds to finance start-ups created by young people.
Source: InCyprus
