Support measure to be created for attraction of financing for the SMEs in capital markets 11/12/2018
On Tuesday, December 4, the Cabinet of Ministers (the Cabinet) reviewed the informative note prepared by the Ministry of Finance about the creation of the European Union (EU) funds support mechanism for attraction of financing for small and medium-sized enterprises (SMEs) in capital markets. To develop the capital market ecosystem in Latvia and facilitate the possibilities of attracting financing for the rapidly growing SMEs in public market via stock exchange, the financial mechanism has been developed, which would prevent the barriers for the enterprises to be listed in the stock exchange. Within the scope of the support measure, it is planned to provide support to at least five to ten enterprises each year, in order to carry out the stock listing or bond issue.
To implement the development of the necessary support measure and adopt international experience, in February of 2018, the Ministry of Finance and the Ministry of Economics launched the cooperation project with the Structural Reform Support Service of the European Commission and the European Bank for Reconstruction and Development. Similar support measures are currently implemented and successfully operate also in other EU Member States, for example, Austria, Hungary and Poland. During the project implementation, the consultations took place with the representatives of the financial sector and public organisations, inter alia, AS Nasdaq Riga stock exchange and financial market participants.
Latvia is not sufficiently making the full use of stock exchange potential and possibilities of attracting alternative financing in capital markets for financing the enterprises. In the opinion of the consultants, there is a market flaw existing with respect to the listing of the enterprises in the stock exchange. International benchmark surveys and surveys of Latvian enterprises demonstrate the need for capital financing in the enterprises and the interest of the enterprises, however, in practice, only separate enterprises have made their stock listed. Having analysed the issue, the existing barriers for listing have been identified, inter alia, high costs of preparation for listing, low market liquidity and insufficient knowledge among entrepreneurs.
The government set the task, by 15 December 2019, to draft the EU structural funds support measure documents, inter alia, regulations on implementation of the specific support objective, and to develop the proposals for ensuring the financing of the support measure.
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