Belgazprombank: A bank for Belarus’ budding private sector

Graham Stack for business new europe
Interview with Sergei Shaban, deputy chairman of Belgazprombank

Q: How did it come about that Belgazprombank – whose two main shareholders are Russian state-owned giants Gazprombank (48.1%) and Gazprom (48.1%) – has its main focus on private small and midsize enterprises?

A: The Bank was founded in 1990 under another name and bought by Gazprom in 1997. But in those seven years, we had decided on this strategy of targeting small and medium enterprises. When Gazprom acquired us, it set Belgazprombank the task of handling gas payments beween Belarus and Russia. But we made sure we retained the SME business line. In two years, we had unraveled the gas payments, and settled the indebtedness of the Belarusian structures to Gazprom, and were finished with the main task. Then we focused again on our work with SMEs”

Q: So what does your loan book look like?

A: 99% of our credits go to private business. We have a 10-25% market share of SMEs in Belarus, and two thirds of the market for microcredits from $1000-10,000, where we have a partnership with the European Bank for Reconstruction and Development (EBRD). And in retail, 30% of the car loan market, which is 52% of our retail loans.

We credit businesses across all sectors. Import operations for retail, however, are declining in significance. Our client basis has outgrown that stage, which makes us very happy. Only 23% of our loan portfolio goes to trade now, with 18% going to construction and real estate, and 14% to manufacturing. 42% goes to private individuals. We are proud to have credited construction of the first modern logistic centres in Belarus, and the Vitebsk Condensed Gas Plant.

Q: Is the SME segment not very restricted in Belarus, where government policy has traditionally focused on state-owned large industry?

It is true that small and medium business is still only a niche in Belarus, but, thanks to the new investment climate created by the government, we expect it to grow very rapidly.

We’re very happy about government reforms, especially the state programme for support of small and medium sized towns with less than 50,000. They have created a whole series of special conditions ranging from tax rebates to lifting price controls. Food producers have a big future here.

But we’re also proud to have financed larger projects such as Belarus’ first state of the art logistics centre and the Vitebsk Plant for Condensed Gas.

Q: How does it help to have such powerful backers as Gazprombank and Gazprom?

A: It of course makes a fundamental difference, especially in times of financial crisis. Gazprombank and Gazprom took the decision in April this year to increase shareholders’ equity from $45m to $195m over two years. After disbursal of the first tranche, shareholders’ equity has risen to $120m, making Belgazprombank third largest in the country in terms of shareholder equity. As a result of this expansion, Belgazprombank can now issue credits of up to $30m.

Q: Is there demand for such credits?

A: No, there’s no demand for $30m credits. Not yet anyway. The previous maximum credit we could give was $10m, so our customer base is oriented towards that size of crediting – around $5-7m. Now we have three times the potential, we still have to create a new client base to match the new possibilities.

Of course, such clients will not be from import operations, but from construction and production – such as financing the Vitebsk Plant for Condensed Gas. And there are a lot of large real estate projects.

Q: How will privatization affect your client base?

A: The largest Belarus companies are going to stay under state control for the foreseeable future. But midsize companies will more and more shift to private hands. And this creates chances for us.

By the way, the start of the privatization drive was marked by Gazprom’s purchase of Belarusian pipeline operator Belgaztrans, another of our shareholders. When this deal was completed, and nothing terrible happened, the state realized it had nothing to fear from privatization”

Q: Does Russia use the gas price issue to persuade Belarus to open its economy to investors?

A: Yes of course, it is definitely a lever of influence. I believe Russia has understood that it is more effective to use economic levers than political ones. If Russia raises prices gradually, giving Belarus the chance to adapt economically while becoming more open to Russian investment, then it is profitable for both sides.