3. Russia’s financing landscape As with most other transition economies, financial markets in Russia have seen rapid growth, both in terms of credit to the private sector and in terms of the size of equity markets. Stock market capitalisation relative to gross domestic product (GDP) has increased very rapidly from a low base around 2000. Chart 8.1 shows that by 2010, the market capitalisation of listed companies in Russia had fallen back from its 2007 peak to stand at nearly 70 per cent of GDP – comparable to much of Europe, albeit somewhat lower than the United Kingdom and the two main Asian comparators. Having stood at around 10 per cent of GDP in 2000, credit to the private sector currently stands at more than 40 per cent of GDP (see Chart 8.2). The dominant state-owned bank – Sberbank – accounts for around half of the deposit base, although a number of other banks now have a country-wide 7 Hellman and Puri (2000). 8 Lerner (2009); Hellman and Puri (2002). 9 Da Rin et al. (2011). 10 A point made by Lerner (2009). 11 An argument also made by the World Bank (2011). 12 EBRD (2007).
82 2002 2008 % of gross regional product Source: Central Bank of Russia, Rosstat and authors’ calculations. Note: Based on location of bank branches. Chart 8.3 Corporate credit in 2002 and 2008, broken down by region 0 10 20 30 40 50 60 70 80 0 10 20 30 40 50 60 70 80 90 chapter 08 / Financing innovation branch network and there are a large number of small regional banks in the market. Credit to companies has actually trebled in the past decade, most of which (more than 80 per cent) has been denominated in the local currency. However, most of that credit is extended to larger companies, with around one-quarter of domestic private credit being extended to SMEs. Furthermore, while the rate of growth has been rapid, the total volume of credit remains relatively small compared with countries belonging to the Organisation for Economic Co-operation and Development (OECD). Unfortunately, there is no breakdown by type of lending, so there is no information available regarding the percentage of lending targeting R&D and other indicators of innovation. Aggregate data may hide significant variation within a country, particularly in a country as large and diverse as Russia. Indeed, many regions remain chronically under-banked. Chart 8.3 provides two snapshots (for 2002 and 2008, respectively) of corporate credit as a percentage of GDP at regional level. Aside from indicating the almost universal growth in credit across Russia’s regions (as almost all points are above the 45-degree line), the very significant variation across regions stands out: Moscow has a credit ratio of more than 80 per cent of gross regional product (GRP), while some other regions have ratios of less than 4 per cent. 13 Data on the maturity structure made available by the Central Bank of Russia suggest that medium- and long-term loans account for a significant percentage of bank lending to the corporate sector: more than 60 per cent of rouble-denominated lending has a maturity of more than one year, and more than one- third has a maturity of more than three years. This has also been the case with foreign currency-denominated lending.
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