How Effective Has the Government’s Support for Small Businesses Been? Not very effective at all, according to data collected by FOM

Following the introduction of sanctions against Russia and the resulting spike in the value of the ruble in March 2022, the government introduced a comprehensive package of support measures aimed at helping businesses navigate the crisis. Several initiatives were implemented: small and medium-sized businesses were given the opportunity to defer payments on loans taken out before March 1, 2022; interest rates on loans were reduced from 8% to 3% for medium-sized businesses and to 4.5% for small enterprises; companies importing priority goods that had signed contracts valued at more than 3 million rubles or more after March 1 were offered subsidised loans; in response to recommendations from Russia’s central bank, certain banks ceased charging late payment penalties on loans until the end of the year. In February 2023, Deputy Prime Minister Andrei Belousov claimed that small and medium-sized businesses had taken out 812.5 billion rubles worth of subsidised loans in 2022, taking advantage of both the security and guarantees provided to participants of the national guarantee system. He also noted that over 44,000 entrepreneurs had been granted government aid under the nationwide project to develop small and medium-sized businesses.

Data from the FOM Small Business longitudinal survey demonstrates that, in reality, the government’s assistance to small businesses was nothing more than a drop in the ocean. The authors of the study interviewed business owners in the second and fourth quarters of 2022 to assess how aware they were of business support measures, their opinions of these schemes, and their ability to access such support. In the second quarter of 2022, 60% of entrepreneurs had heard about the governmental aid in question, but by the fourth quarter, that number had dropped to 48%. This may come as no surprise given the fact that only 30% of those aware of the measures considered them to be of any use (this figure stood at 19% of all those surveyed in the second quarter survey). It is highly likely that this determined the decline in interest from businesses in the fourth quarter, while the percentage of respondents who considered these measures to be helpful in the second survey had fallen to just 14% of all participants. 

In the second quarter, 9% of entrepreneurs said that they intended to apply for government support (that is 15% of all participants who were aware of the measures) and 4% responded that they had already applied. In the fourth quarter, the percentage of respondents who had already applied for this support had increased to just 6% of all those surveyed, while the number of entrepreneurs who were planning to apply had fallen to 6%. The most common measures that business owners requested included deferring tax payments to a later date (38% of all support applications), receiving compensation for various forms of commission that they had paid (25%), taking out loans at reduced rates (19%) and being granted credit holidays (12%).

However, of the businesses that applied for support, a third of entrepreneurs (or 2% of all respondents) were satisfied with the results of their application; another 17% were partially satisfied (1% of all respondents) and half (3% of all respondents) were not satisfied with the results, suggesting that they had failed to receive any support. According to the FOM survey, a mere 3% of small businesses had received government support, and only a third of these had received partial support that fell short of their expectations. 

Among those who had reported in the second survey (in the fourth quarter of 2022) that they did not intend to apply for aid, a third of entrepreneurs claimed that their businesses simply did not require any help (an answer given by 12% of all those surveyed). Some companies (in fields such as consulting, advertising, law etc) did not qualify for government support (7% of all respondents), while another quarter said that they were unwilling to take on the bureaucratic burden of such applications, alongside a lack of trust in the programme and government itself (8% of all respondents).

The fact that such a small proportion of companies sought support indicates that the issue is not a lack of awareness about the scheme (if this were the case, the number of applicants would have likely increased by the second survey). Therefore, two possible explanations remain: either the FOM survey is biased, or the support measures were poorly designed from the outset. The fact that businesses have demonstrated only a tepid and short-lived interest in these measures suggests that the second explanation is likely the more realistic of the two.

Government support measures for small businesses, 2022, % of respondents

Source: ‘Public Opinion Foundation’