According to the manager of Holm Bank Rauno Klettenberg, providing services primarily to private clients and small enterprises, the crisis has been less damaging to many people than originally anticipated, e.g. a survey conducted by Holm Bank indicates that only one in five small enterprises needed state aid. However, Klettenberg points out that the pandemic still caused a lot of investment plans to be put on hold.
“Micro-enterprises postponed any investment decisions they may have had last year. This was done as a precaution, to see what effect and for how long the pandemic really had on the economy,” says Klettenberg. On the other hand, Klettenberg already sees signs of entrepreneurs regaining confidence. According to Holm Bank’s survey conducted last year, as much as 60% of entrepreneurs paused their investment plans, whereas almost a tenth (8%) of the same entrepreneurs have now moved forward with their investments.
“I you don’t know the prospect, you postpone investment decisions. Some companies might even try to take advantage of the current situation and change their business model to come out on the winning side,” says Klettenberg commenting on current developments.
Klettenberg feels this change is possible primarily because, unlike last spring, entrepreneurs now have a fairly good idea of the nature of this crisis and know exactly how the pandemic impacts the economy and which sectors are hit the hardest. “I believe companies focused on domestic consumption have a far more optimistic outlook on the second half of the year and are already making investment decisions.”
A large number of companies who are in the process of altering their business model are increasingly turning to e-commerce because traditional retail in brick-and-mortar stores is simply not possible in the given circumstances. “Shopping is still very much possible through online channels. What changed is that the coronavirus proved to be a boost for e-commerce and it will be even more prominent in the future.”
Many companies were not affected at all
Klettenberg also says that their survey revealed a surprising fact: the crisis had no impact on the turnover of 41% of micro-enterprises. A quarter of all those participating in the survey saw their turnover fall by about 20% and there were only a few sectors that were hit very hard in the crisis. “The tertiary sector, retail, catering and tourism suffered the immediate impact of the crisis.”
Of all the catering companies, only those that have been able to adapt to the new circumstances have been successful” highlights Klettenberg, adding “The restaurants that can cater for the take-out sector have managed to survive.”
The manager of Holm Bank also explained that Estonia benefited from not focusing on any single sector in its export activities, meaning that the crisis did not have as harsh of an impact on Estonia as it did in some other countries. He also feels it is clear that Estonia has learned from past crises. “The country is considerably more prepared for economic fallbacks. For this reason, for example, the financial sector has been far less impacted by this crisis than the previous crisis.”
State aid granted to one in five
The survey conducted by Holm Bank reveals that only about a fifth of the entrepreneurs who took part in the survey received some form of state aid. So, were the conditions for qualifying for state aid too restrictive or did companies actually fare better than media coverage seemed to suggest?
“I don’t dare speak for the entire business environment because every company is different. But by drawing some general conclusions, it could be said that the crisis impacted a smaller part of the business environment than anticipated. Companies that managed to keep their turnover on reasonable levels before the second wave of the pandemic were able to accumulate reserves for the second wave” says Klettenberg.
Somewhat surprisingly, the survey also showed that Russian-speaking entrepreneurs have been almost twice as likely to cut their workforce or salaries than Estonian-speaking company owners. Klettenberg attributes this to regional rather than linguistic or nationality issues. “Russian-speaking entrepreneurs are mainly based in northern Estonia and Ida-Viru county where coronavirus restrictions were established ahead of the rest of Estonia. This had a larger role than nationality.”
Holm Bank entered new markets amidst crisis
Previously, Holm Bank mainly provided hire purchase but in 2019 they were granted a banking licence and can now offer depositing services. “Today, deposits have essentially grown to the level of a loan portfolio,” says Klettenberg.
The bank also recently entered new markets by purchasing a subsidiary company in Latvia. The transaction was actually finalised a few months before the crisis, but the pandemic still had its impact. According to Klettenberg, the business operations of Holm Bank are largely dependent on the sense of security people have and the overall economic outlook. “It is clear that Latvia’s economy has also taken a hit due to the virus. Latvia also established coronavirus restrictions before Estonia.” According to Klettenberg, the business operations of Holm Bank are largely dependent on the sense of security people have and the overall economic outlook.
At the same time, Klettenberg’s view of the situation is not particularly bleak. “We acquired the subsidiary in Latvia in the end of 2019 and last year we saw growth numbers. Naturally, the restrictions that came with the pandemic had an impact on the market, but Latvia proved to be a positive surprise towards the end of the year. Small loans in particular have taken a turn up again,” says Klettenberg.
Holm Bank also offers a virtual credit card in Sweden, but this service is based on an authorisation for cross-border activities granted by Eesti Pank, i.e. the company does not have a subsidiary in Sweden.