businesses are the essential part of an economy in most countries of the
world. Economic growth levels of countries and innovation are directly
related to small businesses. They play a critical role in achieving
sustainable domestic growth. It is known that 9 out of 10 jobs are small
enterprises. In Azerbaijan a number of small enterprises are about 100 000
and it contributes to reduction of unemployment rate to a great extent.
Enterprises mainly accumulated in retailing, construction, processing industry,
trade, agriculture areas. Since 2014 Azerbaijan has entered new post-oil
edge, to limit the dependence on oil sector. A recent slump in oil prices
forced government to diversify the economy in order to maintain sustainable
economic development. A primary way of getting additional money to the
country lies on the development of small businesses and the support of the
government on this matter. However, if government can not implement effective
programs in a timely manner, it will hurt small enterprises and will limit
their further operations. The government lacks a certain action plan or
strategy aimed at increasing entrepreneurship. Stimulation of the economy
depends on applying these determinants and it would be helpful to stimulate
economy. First of all, small enterprises should get more access to financial
sources. There is different kind of financial institutions in the country
such as banks, non-bank institutions, micro-lending firms that provide
additional liquidity to the entrepreneurs. However, certain type of
difficulties arises when they apply for getting additional money for their
businesses. The most widely used money borrowing system is banks. In the
first step percentage of credit is afraid of entrepreneur with minimum 24%
rate. Sometimes banks require the business owners to have a – collateral
before lending them such as house or a private car. Because of Lack of
complicated activities of banks, entrepreneur should collect needed documents
from state agencies which can take a month to get. Even if the banks get the
loans they are usually provided in small amounts or at higher rates. All of
them are the main obstacles that stand in front of small businesses.
Providing loans without any collateral or not requiring additional documents
would speed up the process. From the banks’ perspective, it is indeed risky
to lend to newcomers to the business since new small enterprises can be
driven into corner quickly. That is why while giving credit to them, their
projects should be analyzed carefully by creditors of banks and credit
institutions and decision should be made money is lent out or not. After this
credit rates must be minimized, which will attract borrower and number of
financial sources must be established and their capital should meet needed
amount of the entrepreneurs. Other credit institutions such as- non-banking
firms, local and foreign micro-lending firms also exist in the country;
however the aggregate capital of all these firms totaled to 454.1 million AZN
which is insufficient to finance most of the enterprises. Additional problem
comes from these institutions that they mainly concentrated around the
capital city. In rural regions people suffer from the lack of such credit
institutions, those are the reason why fundamental increasing of business
units and diminishing of unemployment did not notice in out of the Baku.
Additionally, the existence of National Business Promotion Foundation should
be pointed out which provides loans at a much lower interest rates – 6 %.
However, the overall amount of capital is small which is not sufficient to
cover the needs of SME’s. In addition, the Foundation usually provides loans
to real business projects rather than to new and small businesses. In current
situation overall financial sources is limited and shortage of money for
financing all SMEs is impossible. Thus, evaluations of SME would be
reasonable. Furthermore, the Ministry of Economic Development and other
related government agencies should help to get small businesses and their
customer to the market by promoting free market mechanism. Research in
various countries and regions would be high costly for small enterprises,
because their own budget is not enough to find additional clients. Hence,
support of government to enterprises is vital. For example, the exhibitions
in western countries in order to promote domestic products products and
services of national business entrepreneurs are a great opportunity to
enhance trade relationships with foreigners. Demand is the main factor on
this stage that will motivate businesses to increase production. Following
case is proof for that idea. An American woman who came to Azerbaijan to
teach English soon noticed that there is a good business opportunity and as a
result, started a business in textile industry. She helped Azerbaijan rural
women to earn money with weaving which is traditional handicraft in this
region. However, previously due to lack of demand and organized market, those
women always sewed for themselves just to meet their own needs. Currently,
Right now their handcraft socks are being sold in the US markets. Recently,
the government has taken important steps in order to motivate small
entrepreneurship activity in the country. For example, the registration
process of enterprises has been eased through the implementation of the
single window principle that helps to register the businesses very easily.
Since one window system applied, duration of registration procedure for new
enterprises decreased from 53 days to 3-7 days and a number of procedures
decreased from 13 to 5. In Azerbaijan potential for tourism is great and
government should pay particular attention to it by motivating businessmen to
invest in this sector of the economy. For example, in neighborhood- Georgia
people earn money with selling delicious food of Georgian cuisine, symbols of
country, souvenirs. Local people rent their homes to foreigners and this is
the main source of income of touristic zone population and local
municipalities. In turn, an inflow of tourist spending is a great support for
financing the national budget. Municipalities can finance some part of local
projects with the money generated by tourism. Thus, Georgian experience can
be learned and applied in our national entrepreneurship program. Another
potential for small entrepreneurship is an agricultural sector where
businesses can efficiently run. Giving credits with lower rates, subsidizing
their enterprises and increasing the amount of subsidy, supplying of seeds with
lease, supplying of various fertilizers, help on buying technical instruments
for plant are one of the significant points of agricultural enterprises
suffer from. After this steps government should develop strategy that will
support exporters with export credits, importers to reasonable rated import
credits, supplying exporters and importers with government guarantee while
taking credits from foreign financial institutions, ensuring exporters
covering economic and political risks should be analyzed and make a decision.
For example, ‘Chobani’ is national strained yogurt brand of the USA. The
company had been established by Turkish immigrant who left his village to
find life with high welfare. When he wanted to found small agricultural
business to produce yogurt he needed 800 000 $ for buying production
facilities in South Edmeston, New York. But, there was a huge question mark –
How to find 800 000 $. After doing some research he realized that firm does
not need all of the money to start. Since, there is government support to
small enterprises in US, half of the needed amount was covered by the US
Government and 320 000$ was provided by financial institutions. Founder-
Hamdi Ulukaya injected only 10 % of initial capital. Right now that small
enterprise turned to big company where more than 2000 employee works. In
2012, ‘Chobani’ opened one of the world’s largest yogurt plants in the state
of Idaho where he always points out that the state officials showed maximum
support to open that plant there. State expects total economic impact of
‘Chobani’ business only in Idaho to be 1.3 billion $. In 2017 the company is
listed by Fortune magazine among the ’50 companies that are changing the
world’. This case is an excellent example how the government support should
help the SMEs to become a world renowned company. Insurance in agriculture
stay as dead end yet. Some decrees issued about insurance early 2000’s, but
they were only covering some piece of agriculture such as corn, sugar beet,
vegetables, wheat, barley. According to decision, half of these crops were
insured by government. Insurance package was only covering natural accidents
such as fire, storm, flooding and freezing which is not enough and the
biggest disadvantage of this package. A list of agricultural products
financed by insurance includes only a certain part of crop products. Besides,
small amount of funds are used to stimulate agricultural insurance. Records
show that although 400 000 AZN and 550 000 AZN were allocated in recent years,
only 7800 AZN of these funds were paid as insurance coverage. Another issue
is the absence of close cooperation and ties between the government and
business subjects. Consultations among them and talking about barriers to
enter business, suggestions to solve obstacles would be beneficial for both
sides. But interview results show there is no any meeting. Not consulting and
meeting results with financial literacy of people. Lack of financial literacy
is one of the biggest problems in small enterprises. In some conditions, it
seems businessman takes too much loans which may put pressure on business
subjects since. They should pay back these liabilities when they mature.
Higher interest rate boosts that pressure and in most cases this kind of debt
accumulation results with bankrupt of small enterprises. Within volatile
environment, these enterprises are shutting down easily and that is why
literacy about finance is useful for each entrepreneur. Business incubators
are the way to train people on this issue with giving recommendations and
offers. Volatile environment require businesses to stand on your own legs,
being long –lived and innovative and spread all over the country. When
roadmap for economy is prepared, abovementioned key points and alternative
ways to solve them would be added. Proper strategy for volatile condition
should be applied and in that case diversifying economy with the help of
small enterprises will be effective.


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