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Monday 19.03.2018 | Name days: Jāzeps

Economic Diary of Latvia. How to lend money to another and still profit from it

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«According to results of a recent survey by SKDS, 69.6% of Latvian residents do not support amendments to increase micro-enterprise tax from 9% to 11%,» – says Chairman of Latvian Chamber for Commerce and Industry Janis Endzins.

The representative of the entrepreneurial organizations nonetheless positively views the decision of the National Economy Committee to support amendments aimed to maintain the tax rate at 9% for the first three years of economic activity.

«This may help us fix the mistake made by the last parliament to increase micro-enterprise tax from 9% to 11%,» – comments Janis Endzins.

First arrivals

From January 15th and onward, Citadele bank received more than 800 applications regarding requests to receive mortgage loan with state guarantee, which is provided at beneficial terms and reduced first instalment.

The biggest degree of interest has been noted for housing worth EUR 7,000 to EUR 23,000. Approximately 70% of applications have been received from residents of Riga and Riga region. 30% of applications have been received from residents of other regions, as reported by Citadele Private Crediting Department Baiba Tetina.

As previously reported, Citadele bank is currently the first and only participant of the state support programme aimed to assist Latvian families with children to acquire housing. As part of the state support programme, residents can expect to be provided with funding from banks worth up to 95% of market price of the desired property.

Under circumstances of real estate property becoming more expensive in Latvia, the launch of the programme may prove quite useful. According to Eurostat, Latvia is among leaders in terms of real estate price growth in 2014. Ireland is on the first place (+15%), Estonia is on the second (+13.2%). Latvia, UK and Sweden are on the third (+10.3%).

Lend to someone else and still profit from it

A new project for mutual crediting for private persons – Mintos – has been launched in Latvia. Representatives of the company position themselves as ‘competitive alternative to bank crediting’.

67 loans worth a total of EUR 550,000 have been issued and 150 investors have been attracted, as reported by co-founder of the company Martins Sulte.

This platform has been created in order for private persons to use their funds to invest in loans for other private persons. This is a new thing for Latvia, but USA, China and Europe have been working with such programmes for a long time.

The structure of the platform is simple: the lender has to fill in a form. His solvency is then inspected, as is information from Credit Register. After the in-depth inspection, the company issues a loan from its own funds. Only after all this the company offers residents to perform investments in specific loans. Investors also have the right to re-sell their investments. The minimal investment rate is EUR 10.

If the lender is unable to pay back the money in time or completely halts the payment of interest or the main amount, the company has the right to buy out problematic investments.

The offered rates make the project attractive for investors and lenders. The company is also paid a portion of the money as well.

Latvian enterprises steer clear of innovations

Only 30.4% of Latvian enterprises had performed the introduction of investments over the course of 2010-2012, which is the fourth lowest index in Europe, according to data from Eurostat.

For example: the average index across Europe is 48.9%, in Lithuania – 32.9%, in Estonia – 47.6%.

The leading countries in regard to the proportion of innovative companies are Germany (66.9%), Luxembourg (66.1%) and Ireland (58.7%).

It is worth noting that the proportion of innovative enterprises in the EU has declined from 52.8% to 48.9% in 2008-2010. In Latvia, on the other hand, this proportion has increased from 29.9% to 30.4%.

Information from Eurostat was compiled based on innovative products and processes, as well as marketing and management.

According to a survey by SEB Bank in Baltic States, the number of companies that plan to introduce innovations continues to decline in Latvia and continues to rise in neighbouring republics.

Last year, 48% of enterprises in Latvia had planned to invest in innovations. In reality, only 39% ended up actually investing. Estonia’s indexes were 60% and 73% respectively and those of Lithuania – 42% and 69%.

The majority of companies that plan to introduce innovations work in IT and communications (69%), entertainment (57%), industry and energy (56%) sectors.


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