Electronic Journal of Polish Agricultural Universities (EJPAU) founded by all Polish Agriculture Universities presents original papers and review articles relevant to all aspects of agricultural sciences. It is target for persons working both in science and industry,regulatory agencies or teaching in agricultural sector. Covered by IFIS Publishing (Food Science and Technology Abstracts), ELSEVIER Science - Food Science and Technology Program, CAS USA (Chemical Abstracts), CABI Publishing UK and ALPSP (Association of Learned and Professional Society Publisher - full membership). Presented in the Master List of Thomson ISI.
Volume 9
Issue 4
Available Online: http://www.ejpau.media.pl/volume9/issue4/art-21.html


Marcin Idzik
Faculty of Economic Sciences, Warsaw University of Life Sciences – SGGW, Poland



This paper contains a discussion of the development of the main financing sources of enterprise activity in Poland, with emphasis on bank credit and its availability. Bankers and entrepreneurs opinions about the role of banks in improving enterprise competitiveness were compared. Their perceptions of bank credit availability are strongly different. Moreover, it is a common opinion that banks are hampering economic development in Poland because enterprises cannot rely on banks as business partners. Banks do not pay enough attention to constructing a long-term strategy of positioning enterprises on the market according to survey results.

Key words: competitiveness, banking, enterprise, financing, credits..


Enterprise development is impacted by free access to capital. Barriers encountered while searching for capital have been one of the most important factors limiting Polish enterprise development. Eight out of ten entrepreneurs have been financing current activity with their own capital, whereas one out of ten has been using other sources. The remaining financing source is money borrowed from family or friends [1].

An enterprise can be financed from several sources. The choice of a particular financing source depends on an enterprise’s form, its level of development or desired structure, and costs of capital. Bank credit or loans could be the most common financing source for firms. However, enterprises usually meet great difficulties associated with obtaining financing from external sources, especially when acquiring bank credit <footnote 1> [3, 10]. Commercial banks, which were to be a driving force for entrepreneurship, are afraid of micro-enterprises and a majority of services addressed to the firms concern credit line administration only. As a result, many micro-firms cover both current and investment activity costs with their own capital.

Entrepreneurs do not have a very good opinion of banks and they assess the banks role in micro-firm development support negatively. A key expectation of entrepreneurs is that banks should offer favourable credit conditions to them. There are some questions that arise: to what extent banks are partners in economic activity – both as advisors and potential capital sources? What are entrepreneurs’ expectations and how do banks meet their wants? What are entrepreneurs’ opinions about banks in Poland? How do entrepreneurs assess an enterprise-bank relationship? How many enterprise demands for credit products are unfulfilled? Which barriers connected with the use of bank credit have been caused by banks and which have been caused by enterprises? Finally, how can competitiveness of Polish enterprises be improved through more intensive cooperation with banks?

This paper presents some answers to the questions stated above. Opinions of banks and entrepreneurs are compared. Empirical data came from research done with the Pentor Research International S.A. The research was based on the CATI method – telephone interview supported by computers, in a half-year cycle. The first measurement took place in February-March 2005; the second one lasted from September to December. The total research sample consisted of 3,000 micro-entrepreneurs. According to the European Commission Recommendation, a micro-enterprise is defined as an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed two million EUR. Each research time period included a representative random sample of 1500 persons managing micro-enterprises.


Polish business is based on micro-enterprises. There were 3,402,160 micro-enterprises registered in the REGON register in June 2004, including 1,698,061 active enterprises. What is more, in 2004 230,000 new firms were registered, while 194,000 businesses closed. About 39.2% of enterprises set up in 2001 and 44.5% of firms set up in 2002 are still in business. After the first year of activity, 64.4% of micro-enterprises survived. Micro-enterprises amount to about 93% of the total number of firms in Poland [10]. One of the key factors that has an impact on enterprise competitiveness and ability to survive on the market is fast development of activity through the use of capital investment. Due to limited access to capital, difficult market conditions (i.e. insufficient demand for products offered by the firm), force managers to implement survival policies. They are not able to engage in a reasonable policy of financial management known as current capital management. It results in moderate development and a light growth capital management orientation opposed to a dynamic expansion policy with rapid expansion of potential activity [8]. Furthermore, economic reality in a competitive market involves a survival battle with a strategy to minimize loses to protect the firm from being wound down. There is no time to decide which kind of policy to implement – either an aggressive or passive one, with greater or smaller risk. Due to this, entrepreneurs do not have the capital to actively impact (increase) their assets. Capital is required to create a structure of building assets that brings benefits and results in long-term development of an enterprise.


Micro-enterprises have been financing both current and investment activities from their own resources (95% and 81% of respondents, respectively). Concerning current activity, the most popular financing source was own capital and to a much lesser extent short-term credit from a bank which was used by 13% of the entrepreneurs (graph 1). To a much smaller extent the entrepreneurs used PLN credits, both commercial (7%) and preferential (7%). Leasing, which has been relatively more available than financing as a source of credit, was used as often as PLN credits. Such a great percentage of the use of own resources in investment financing has not been caused by the abundance of own capital, but it has been an effect of barriers to loan capital access.

Graph. 1. Financing sources of current and investment activities of microfirms

Source: [1], N=3000

It should be indicated that enterprise cash resources were usually strongly limited and in 49% of the enterprises spent on current needs. Thirty percent of the firms saved resources for investments. Nevertheless, only one out of five enterprises was able to save some money regularly [1].

Other sources, not coming from banks, were seldom used in current activity financing. They included: loans from other financial institutions (2%), budget sources – i.e. subventions (2%), and loans from other enterprises (1%). The investment activity of financing from other than the enterprises own resources was dominated by current credit (9%). Entrepreneurs use PLN preferential or commercial credits even more rarely (7% in case of each credit type). Furthermore, leasing is used by one in twenty entrepreneurs (5%).

Graph. 2. Entrepreneurs’ major problems in relationships with banks

Source: [1], N=3000

A major reason for the use of own resources in micro-enterprise financing was caused by important limits on loan capital access, especially regarding bank credit. One of ten entrepreneurs has experienced some problems in relationships with banks, in particular concerning the denial of credit (graph 2). Problems with banks, as indicated by entrepreneurs, were just the opposite of what they had expected in bank service.

Micro-enterprises have a low level of debt and most of them do not use credit. Data of the National Bank of Poland (NBP) indicate that the level of credit used by firms has been moderate and the number of loans has been regularly decreasing [11]. About 16% of the smallest enterprises cannot borrow any money (graph 2). Credit products offered by banks are used by one out of three firms. In 2005, one out of four enterprises had PLN current credit (graph 3). PLN investment credits were used much more rarely (14%) as well as car credits (13%), leasing (9%), preferential credits (7%), current credits taken in foreign currency (3%), or factoring (2%).

Graph. 3. Entrepreneurs’ use of selected credit products in 2005

Source: [1], N=3000

However, the most popular has been credit in a current account. In comparison to a wide variety of products offered by banks to entrepreneurs, it was used by about every second enterprise (47%) (graph 3). The index of credit penetration in current accounts was double the penetration for any other credit product which indicates a significant demand for external financing sources for running the enterprises current activities.


According to the entrepreneur respondents, one of the most effective investment and current activity financing sources can be bank credit, although its availability is highly complicated and limited. However, the problem has a multidimensional character. Reasons of unsatisfied demand for financial sources come not only from banks, but also from entrepreneurs. Research on needs indicate the following [2]:

Therefore, participation in a “credit relationship” with a banking institution is determined by the entrepreneurs awareness of a need, knowledge of a bank’s offer, and belief that the offer could satisfy the need. However, to let the mechanism work, some barriers need to be overcome, especially those connected with the level of income and economic potential of an enterprise and the awareness, knowledge and tendency to use bank offers by enterprise managers. On the other hand, banks should make their offer available, attractive, and not discriminatory (graph 4).

Graph. 4. Factors conditioning changes in entrepreneurial attitude towards banks and SOHO enterprise banking development in Poland

Source: [9].

In the bankers opinion, lack of or weak security for credit are the most common problems encountered by banks credit committees when analysing credit applications of enterprises (graph 5). Moreover, customers usually have no credit history or even credit capacity. Most applications submitted by micro-entrepreneurs are assessed negatively, as their quality is definitely worse than applications submitted by small, medium or large firms.

Graph. 5. Barriers met by banks’ credit committees while analysing enterprise credit applications

Source: [7], N=200.

Banks officially present a reserved approach to micro-enterprise sector financing. Difficulties connected with loan capital access of micro-enterprises are usually caused by several factors: high probability of going bankrupt, incomplete information on small and medium enterprises, high guarantee requirements, and relatively small scale activity.

In the opinion of bankers, these firms do not manage their own money and therefore, they are not keen to take on risk. Micro-enterprises are usually young, underinvested, and risky firms. In many cases, they lack division of an enterprise’s capital from its owner’s assets and this causes a problem in the enterprise’s credit capacity evaluation. In the opinion of bankers, a thin and almost undetectable border between an enterprise’s capital and its owner’s assets is one of the main reasons that cause banks to be very reluctant to make offers to that group of customers. In addition, there is a high percentage of enterprises that quit their activity for economic reasons (that is caused by the lack of “a buffer” in the form of share capital of appropriate value). In addition, most potential debtors do not run accountancy in a reliable way and this is a criteria for credit capacity evaluation done by banks. On the other hand, there are no legal regulations that require micro-enterprises to run accountancy similarly to large enterprises. However, the micro-enterprises do have to keep enough records to allow them to make tax settlements correctly. From a banks point of view, ability to generate appropriate cash flow in the future is the basis for making a positive credit decision. Banks demand security which often cannot be supplied by micro-enterprises. As a result, the enterprises do not obtain the ability to repay or even incur liabilities.

A barrier to bank credit use is partly caused by entrepreneurs whose knowledge level of basic credit products is unsatisfactory. The best situation concerns the most popular products and bank services. Entrepreneurs are not very aware of advising services offered by banks, i.e. financial and tax advising. Their lowest knowledge level concerns credit products – most entrepreneurs claim that they do not know anything about them (graph 6).

Graph. 6. Self-evaluation of entrepreneurs’ knowledge and their tendency to use selected bank products

Source: [1], N=1500.

It would be hard to expect that entrepreneurs that have incomplete knowledge about bank offers concerning the firms financing activity would be able to choose an optimal product for their enterprise development that is completely aligned with their current needs and financial abilities. In the opinion of entrepreneurs, banks ought to polish up their advising & consulting tools while searching for credit customers.

The banking sector representatives appreciate the role and potential of SMEs. They see a great opportunity of strategic business line development (graph 7). In the bankers opinion, the segment of micro, small, and medium enterprises is the most attractive and create the greatest development opportunities for banks in Poland [4, 5, 6].

Graph. 7. The greatest development opportunities of banks in Poland (according to bankers)

Source: [4, 5, 6], N=200.

However, in the opinion of bankers, compared to other enterprises, the SOHO and SMEs possess the lowest ability to utilize credit (graph 8). These firms are not reliable customers for banks, and it is difficult to evaluate their credit capacity honestly. Micro-enterprises present considerably higher risk of continuing activity and exhibit a tendency for going bankrupt, when compared to small and medium enterprises. Furthermore, their smaller scale of activity leads to a lower ability to incur and repay liabilities.

Graph. 8. Evaluation of credit absorption of different customer groups (according to bankers)

Source: [7], N=200.

Furthermore, according to the bankers, the banking market has been becoming narrower. The segment of large enterprises has already been divided. Banks are looking for development opportunities in the market niches and services offered for private customers and small enterprises. The segment of micro-enterprises as well as small and medium firms seems to be attractive and interesting for almost all banks. However, the market is not well-known and there are basic problems with estimation of market potential, segmentation, and activity risk evaluation. Moreover, a fundamental problem exists when the banks perceived offers are standardized and not adjusted to each enterprises’ needs.


Entrepreneurs do not have a very good opinion of bank services. The opinions in the micro-enterprise sector are symmetrically polarised – 3% are very positive assessments, 45% – positive, 37% rather positive and 11% very negative (graph 9). So, half of the entrepreneurs evaluate banks positively (48%). On-the-other-hand, according to the bankers, entrepreneurs opinions of the banks are much more positive (graph 8). Obviously, there are strong divergences in opinion between bankers and entrepreneurs concerning the quality of bank services provided to entrepreneurs. Moreover, the bankers do not recognize the entrepreneurs’ needs concerning bank services.

Graph. 9. General opinion about banks in Poland (according to bankers and entrepreneurs)

Source: [1], N=3000; [7], N=200.

Entrepreneurs usually see Polish banks as institutions which hinder (56%) rather than support (38%) enterprise development. However, the opinions are varied and depend on an enterprise’s size as measured by its income (graph 10). In general, the larger a firms annual income is, the more positive opinions its representatives generate about banks and their role in enterprise development in Poland. The most negative opinions were presented by entrepreneurs working for the construction industry, trade and repairs, production, services for real property and firms, health care, hotels and restaurants, financial intermediaries, agriculture, transport, and communication.

Graph. 10. Entrepreneurs’ opinions abort banks’ role in enterprises’ development in Poland (according to entrepreneurs’ annual incomes’ groups)

Source: [1], N=3000.

Regarding banking functions, entrepreneurs expect convenient credit requirements and conditions, serious and individualized account service, and reasonable bank service charges (graph 11).

Graph. 11. Entrepreneurs’ expectations of banks, percent rating a characteristic as very important

Source: [1], N=3000.

Entrepreneurs exhibit a pragmatic character in their expectations of banks. About 59% of them carefully compare different bank offers when selecting a bank. One out of five entrepreneurs chooses a bank which is located near his/her enterprise location. Three out of four expect banks to satisfy their needs. One out of ten entrepreneurs claims that he/she does not have very high expectations of his/her bank. By way of contrast, one in two entrepreneurs declare that his/her bank is almost ideal [1].

Graph. 12. Evaluations of selected bank attributes by entrepreneurs

Source: [1].

Among positively valued attributes expected by entrepreneurs from banking institutions in Poland, emotional areas dominate (graph 12). However, entrepreneurs give low scores to banks for the costs of services offered, the level of interest charged for credit, and interest paid on deposits. Individualized attention to an enterprise is very important to entrepreneurs, while it is still extraordinary for most banks to do so. Entrepreneurs do not treat banks as business partners, and therefore, in the opinion of entrepreneurs, banks do not understand their firms’ needs. Unfortunately, bank offers are standardized and are not adjusted to an enterprise’s specific or unique needs. These low ratings of valuable bank services do not present the Polish banking sector in a good light.


Present business models of enterprise banking (90% of the market), apart from some exceptions (BRE Bank, Bank BPH), treat small enterprises similar to private customers using standardized banking practices. Such an approach crates a contradiction between banks offers and the entrepreneurs’ basic needs. However, the approach seems to be economically justified and sufficient for most banks, as they do not consider specifics or needs of micro-enterprises. On the other hand, the firms demand special, individualized offers, flexibility, and high quality service.

Entrepreneurs expect advising services from banks that understand their needs. Nevertheless, only a few banks have tried to meet their needs. Most banks do not care about building long-lasting relationships with micro-enterprises. The market has been classified as immature and unstable. Therefore, banks do not pay enough attention to constructing long-lasting positioning strategies for the micro-enterprise market.

Although numerous barriers come from entrepreneurs, the banks’ behaviour and approach are not completely justified. Fundamental barriers are the entrepreneurs knowledge concerning a banks’ offer and alternative financing sources available. It could be beneficial for banks to educate entrepreneurs to make upselling and crosselling more successful. Thus, it is necessary for banks and others to concentrate on education in order to help create needs for financial institutions services.

Small firms, when applying for credit, often are not able to meet bank requirements. At first, they have problems with filling out a complicated credit application form, and then it occurs that they have to prepare a balance sheet, a profit and loss report, and financial forecasts. If they managed to complete all of these forms, they would still have to overcome another barrier--required collateral is twice as large as the amount of credit. This is especially true in the case of young micro-firms.

Amelioration of credit access barriers has been supported by the development of the National Service System for Small and Medium Enterprises. Free consultancies for entrepreneurs as well as entrepreneurship incubators and regional entrepreneurship centres have been developed. Their actions have contributed to a positive change in the banking knowledge of entrepreneurs. Regarding the problem of credit security, there are special funds for credit guaranties which could be supportive. However, overcoming capital access barriers would still be rather difficult.

<footnote 1>

Nowadays, it is easier for a small or young firm to get resources by leasing, even though leasing costs are usually higher than the cost of credit. Moreover, micro-loans offered by loan funds could be an alternative form of financing. As it is seen in practice, use of such financing forms has remained at a very low level. Entrepreneurs continuously declare that their demand for bank credit is not satisfied.


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  2. Kłopocka A. 2004: Psychospołeczne uwarunkowania rozwoju bankowosci detalicznej w Polsce [Psychosocial conditions of retail banking development in Poland]. Bank i Kredyt 05.2004 Warsaw [in Polish].

  3. Kulawczuk P. 2004: Ocena dochodowosci segmentu MSP dla banków w perspektywie do roku 2009 [Evaluation of SME segment’s profitability for banks –until 2009]. Instytut Badań nad Gospodarką Rynkowa, Gdańsk [in Polish]

  4. Monitor Bankowy 01.2006 [Banking monitor 01.2006]. Pentor Research International 2006 [in Polish].

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  9. Smiłowski E. 2004: Polacy wobec polskiego sektora bankowego [Poles towards Polish banking sector]. Maszynopis wystapienia. Zwiazek Banków Polskich 29.06.2004 [in Polish].

  10. Warunki powstawania i działalnosci oraz perspektywy rozwojowe polskich przedsiębiorstw 2005 [Conditions of setting up and running Polish enterprises as well as their development perspectives 2005]. GUS, Warsaw 2005 [in Polish].

  11. http://www.nbp.pl


Accepted for print: 9.11.2006

Marcin Idzik
Faculty of Economic Sciences, Warsaw University of Life Sciences – SGGW, Poland
161 Nowoursynowska Str.
02-787 Warsaw
email: marcin_idzik@sggw.pl

Responses to this article, comments are invited and should be submitted within three months of the publication of the article. If accepted for publication, they will be published in the chapter headed 'Discussions' and hyperlinked to the article.