Power
and strength of the countries mostly depend on the development of their small
and medium business environment. The growth of small and medium-sized
businesses is the guarantee of state’s financial stability. The biggest role
of small and medium-sized business in the economy is the protection of
competition. It is possible to strengthen the competitive environment in the
country by developing this sector. Another important contribution to this
sector of the economy is the creation of new jobs. They can produce more
production and product diversity with less investment. Also, it is possible
to create job opportunities with fewer investment costs. They can adapt to
the changes and variations in demand more easily. This sector is also one of
the main anti-crisis methods of the states. Because the bankruptcy of the
large enterprises during the crisis deepens the crisis in the country’s
economy. However, such risks are even lower in the SME. Most of these
businesses form a balance in the economy of the country. But still, in
Azerbaijan development of this area is quite slow. Country citizens are faced
many different problems when they want to form a business. While the share of
SME in developed countries is higher than 50 percent of GDP, in Azerbaijan it
is relatively low. This issue has a lot of reasons but the main one is
related that Azerbaijan is an oil country. Therefore, the share of oil in GDP
is quite high. Given the fact that more large oil companies operate in the
oil sector, the share of large-scale enterprises in GDP is higher. On August
27, 2002, “Azerbaijan Republic National Fund for Entrepreneurship
Support” was approved and it has developed great opportunities for SMEs.
The main objective of this is providing financial support to business
activity of population. But current situation government’s support is not
enough for the development of the small and medium-sized entrepreneurs. They
lack financial support when they create and renew their own business,
although, The National Fund for Entrepreneurship Support (NFES) was set up to
develop small and medium-sized businesses. Most of the commercial banks are
not interested in granting loans to entrepreneurs. This is due to the fact
that a number of business loans are large and they are transferred to the
long-term. This is even more risky for banks than consumer loans. The
percentage of the business loans issued by the banks is also quite high. That
is why entrepreneurship subjects suffer from lack of funds and cannot establish
a business. Owners, who receive cash, have a higher interest rate and are
reluctant to repay the loan. The lender receives high-interest rate loan from
the moment it receives a loan. These are the absurd condition for normal
business and in particular for new businesses. Newly emerging companies who
have used these loans are condemned to failure. For solving this problem, the
financial opportunities of entrepreneurs should be expanded. In other words,
entrepreneurs working in this sector should have access to financial
resources not only from the state but also from private institutions. In
Europe, even in neighboring Russia and Turkey, there are Business Angels,
Investment funds and “Venture” funds which are alternative to
business people. Also, entrepreneurs should be able to benefit from
preferential loans at the expense of commercial banks. Banks that support
SMEs should be encouraged by the government. That is, certain discounts can
be made to banks that give more money to the real sector. In addition, Public
credit guarantee schemes are a common form of government intervention to in
credit markets to improve access to finance for SMEs. A CGS provides
third-party credit risk mitigation to lenders by absorbing a portion of
losses on the loans made to SMEs in case of default, in return for a fee.
More than half of the countries in the world have a CGS for SMEs and this
number is growing. When dealing with major problems in entrepreneurial
activity, their relationships with the state are weak, as well as weak
relations with each other, the lack of good knowledge of production trends,
market relations, ie systematic non-implementation of issues such as
production, service delivery, factors can be noted.Other problems for SME is
lack of information about the market. Understanding your industry is the key
to staying strong and competitive. Entrepreneurs have to know about the
latest regulatory, some statistics and business news to ensure that it is
profitable or not. For preventing this problem, there must be some agencies
and online resources which they can give entrepreneurs advice. As one of the
ways to solve the problem, it is possible to leverage knowledge and
experience in any sector and stimulate development through the use of
Business Incubators. Also, the government should require knowledge about
their business field from entrepreneurs and it should be mandatory. If this
happens, default of the small business would decrease. On the other hand, it
was possible to explore the current situation and to address the issue by
examining the world experience. For example, in the UK there are UKTI
international trade advisers services which help the exporters in many ways.
In order to find more sources of investment in the development of SME, the
government should in line with international standards to attract foreign
financial institutions. Because of the weak relationships with foreign
partners also create serious problems in the development of small and medium
enterprises. For this reason, we must take some actions. For example, if some
investor wants to invest, he should go through a lot of processes and it
takes a lot of time and cost. But in Singapore, it takes 5 minutes and cost
$100. That’s what we need to make the process easy. We need to create an
excitement in opportunities that are available and then make it inexpensive
to invest. As well as government tax system also affects the investor’s
decision. Tax exemptions must apply in our country. In world practice, newly
established businesses and startups are exempt from taxation for up to 2
years. Free trade zone also can stimulate the SMEs in Azerbaijan. Because
Azerbaijan locates between the two continents – Europe and Asia. If we take
Dubai as an example we can see that it becomes an increasingly great place to
invest in the small and medium enterprise. Generally, recent years innovation
entrepreneurship, especially in this sector, has become the important area
for sustainable development. Because it increases efficiency and growth in
many businesses. But in our country, more attention is given to agriculture,
tourism and communication technologies. It would be good to use Venture
capital in the development of innovative entrepreneurship. Venture capital is
the investment of funds intended to finance new and small companies and
startups. In our country, there are some institutions which give Venture
capital but they are not enough. One of the main problems in an area of
legislation in Azerbaijan is not the lack of legal normative act, but the
inefficient functioning of existing laws. In order to address these problems,
economic and legal reforms should be deepened in the country, efficiency and
transparency of government agencies’ activity and coordination should be
strengthened. In addition, the efforts to ensure the rule of law should be
enhanced and efforts to form an independent judiciary should be intensified.
We must adopt “Competition Code” for the development of free
entrepreneurship. That is, effective measures should be taken to eliminate
the prejudices against free entrepreneurship, strengthen anti-monopoly, fight
against corruption, reduce the tax burden, mitigate the terms of loans for
entrepreneurs, and ensure the fairness of interest rate. In conclusion, as we
see from all examples without government intervention Small medium
entrepreneurs can’t grow and develop effectively in conditions of our
country. By eliminating problems, the government creates healthy competition
in this area.