|                                                                                                                                                             |  | BANKING  ON  SMALL  BUSINESS: TUSRIF  IN  VLADIVOSTOK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | September 1997by David Ciagne & Jo Anne SeelSince opening to foreign visitors in 1992, Vladivostok has attracted increased international trade
as companies from the United States, East Asia, and elsewhere have positioned themselves to do
business in the Russian Far East (RFE).  Yet prosperity continues to elude the city--the largest in
the region, which faces the collapse of its core industries, a crumbling infrastructure, unreliable
telecommunications, and until recently, a crippling energy crisis.  Despite this adversity, small
business is a bright spot in the local economy as budding entrepreneurs launch new businesses and
begin to succeed.Filling the vacuum left by the disintegration of the region's Soviet-era economy, small business
now provides local employment opportunities and necessary products and services in
Vladivostok.  Through its Bank Partner Program, the U.S. Russia Investment Fund (TUSRIF)
is working with Dalrybbank  and Dalnevostochny Bank in Vladivostok, as well as with other
banks elsewhere in the RFE, to play a pioneering role in this transformation.  Together they
provide small businesses affordable, long-term capital which would otherwise be unavailable
through commercial banks.Growing Portfolio
Since their first loan to an auto painting company in July 1995, TUSRIF and Dalrybbank have
grown their small business portfolio to more than $1.5 million in loans to 20 enterprises.  These
loans have created an estimated 275 new jobs in Vladivostok.  TUSRIF provides the capital and
the Russian banks share equally in the loan decision, credit risk, and interest earnings.  The Bank
Partner Program, which also operates in Kamchatka and other RFE cities, serves to build a
permanent local lending capacity through formal credit training programs and a close working
relationship with the local TUSRIF lender.The loan portfolio includes businesses in light manufacturing (28 percent), medical/health services
(23 percent), and consumer services (49 percent).  TUSRIF and its bank partners have
increasingly found prospects among Vladivostok companies seeking to establish local assembly of
products previously imported.  Loans for the purchase of equipment and raw materials, often
from U.S. suppliers, reduce the final cost of products sold to local customers.Some Examples
Bonaz Company Limited, which was established in 1989 as a one-man operation providing
small-scale home repairs, now employs 80 people and offers a variety of building services.  Its
first business loan came from TUSRIF to fund the local assembly of thermal windows from
imported materials.  This product has been especially attractive given the frigid Vladivostok
winters and the energy deficiencies which have plagued the region.Loans to medical and health-related service providers include businesses engaged in optometry
and retail eyeglasses, purified water sales, and dental services.  Kolot, a family-owned and
operated dental clinic, is the only provider of orthodontic services in the krai.  The clinic obtained
an equipment loan to upgrade its dental equipment and to provide modern orthodontic services. 
Kolot's practice has grown substantially as local residents now have access to modern orthodontia
care that had previously been unavailable.
With enterprises and universities shedding the consumer services they often provided before
privatization, there has been a shortage of affordable local food services.  TUSRIF recently
provided a loan to Cherry Garden, a start-up woman-owned catering business.  In the first phase
of the project, the company will provide hot lunches to students at Vladivostok's two largest
universities.  Plans call for Cherry Garden subsequently to establish five small cafes open to the
general public.The Essentials
Small business lending in the RFE is fundamentally the same as lending elsewhere in Russia--or
even the United States; good management and a viable business plan are necessary elements in
any sound loan.  TUSRIF and Dalrybbank have removed one of the obstacles to starting a
business in Vladivostok--access to affordable term financing.  U.S. companies doing business in
the RFE and elsewhere in Russia should monitor TUSRIF's lending operations, since TUSRIF's
borrowers and investment partners often are in the market for U.S. goods and services and may
also be attractive partners for additional investment.  For more information on TUSRIF, contact
the Fund's U.S. office at 212-818-0444.David Ciagne and Jo Anne Seel work for TUSRIF in New York and Vladivostok, respectively.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)