SME's show capitalism thrives in Russia

Its 34 years in February that the Soviet Union collapsed and brought about the end of communist rule in Russia,at the that time all companies ,shops and enterprises were owned and controlled by the state and there were few individual businesses.
Since then everything has changed,it took time for the people to adapt particularly the 1990's under Yeltsin were tough but certainly the last 24 years we have seen dramatic changes since I encountered in March 1991 a young man selling individual banana's on the street in Moscow in the same way you see people in the West selling roses. That was when I realised that Russia was on its way to being a capitalist country again.
A recent report has stated that small and medium-sized businesses (SMEs) account for a fifth of Russia's GDP and now employ over 40% of the country's private sector workforce. A review of the results for 2024 revealed that Expert analysed data on the number of small and medium-sized enterprises in the country and found that it continued the steady growth of recent years. At the same time, individual entrepreneurship remains the most popular form of doing business.
Minor PriorityAccording to the latest estimate by the Ministry of Economic Development, published in November 2024, at the end of 2023, 31.45 million people, or 41.4% of the Russian workforce (76 million people, according to Rosstat), were employed in small and medium-sized enterprises.

The total income of SMEs in 2023 was RUB 140.5 trillion (a 74.8% increase compared to 2019), and the amount of taxes and insurance premiums paid by them was RUB 9.15 trillion (+74.5% compared to 2019). Both indicators are growing at a rate 10 times faster than the number of SMEs (this indicator increased by 7.3% from 2019 to 2023).
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Support for SMEs is a key priority for the state. In 2025, the national project "Efficient and Competitive Economy" will commence, encompassing the federal project "Small and Medium-Sized Entrepreneurship and Support for Individual Entrepreneurial Initiatives".
"Within the framework of this federal project, the SME Corporation will continue activities to provide financial support to SME entities in priority sectors, expand SME access to the procurement markets of state and private companies, as well as production cooperation, and develop and create new digital services on the SME.RF platform," Alexander Isaevich, General Director of the Federal Corporation for the Development of Small and Medium-Sized Entrepreneurship (SME Corporation), explained to Expert.

According to his forecast, by 2030, small and medium-sized businesses will attract investments in the amount of about 5.3 trillion rubles. The volume of purchases from SMEs by large customers under Federal Law 223 (which obliges organisations with 50% state participation to purchase a certain share of goods and services from SMEs) is set to grow rapidly, reaching over 62 trillion rubles. However, it should be noted that only 1.2 trillion rubles of this amount will be allocated to purchases from small technology companies. For comparison, in 2023, the volume of purchases by companies with state participation under Federal Law 223 from small and medium-sized businesses amounted to 7.97 trillion rubles, and in 2024 it is expected to reach 8 trillion rubles. Finally, the MSP.RF platform is set to be utilised by over 3 million users to access federal and regional support measures and services.

According to data from the register maintained by the Federal Tax Service (FTS), as of December 10, 2024, there were more than 6.5 million SMEs in Russia.
Overall, for 2024, the growth was 4.1% (since December 10, 2023), and the positive dynamics continued for the fourth consecutive year. At present, approximately every sixth SME is considered to be newly created, i.e. it has existed for less than a year.

Alexander Isaevich comments that the past two years have been significant for Russian small and medium-sized companies, with a number of key events influencing the sector's growth. He highlights the impact of the low base in 2022, which was associated with a temporary slowdown in the rate of new business registration during the final period of the pandemic.

However, since the last months of 2022, business registration has expanded to new regions of the country, which entered into a period of active development in 2023 and continues at present.According to Alexander Isaevich, the number of small and medium-sized enterprises in these four new subjects of the Russian Federation reached 115 thousand units in 2024.

Currently, the number of individual entrepreneurs (IE) exceeds that of legal entities by almost 2 million, reaching 4.32 million compared to 2.25 million. Since December 2016, the number of IEs has increased by 41.8% (3.05 million), while the number of SMEs-legal entities has decreased by 19.6% (from 2.8 million).
"The trend towards an increase in the number of individual entrepreneurs is primarily associated with simpler rules and requirements for doing business," says Alexander Isaevich. "In today's economic climate, entrepreneurs are seeking cost-effective business opportunities. In this regard, individual entrepreneurship stands out as the most optimal choice. Furthermore, there has been a shift in public attitudes towards entrepreneurship in recent years. Various support measures have been introduced to encourage young people to enter the entrepreneurial sphere.

The vast majority of SMEs (96.2%) are microenterprises with an annual income of up to 120 million rubles and a staff size of no more than 15 people.

A further 3.5% (227.4 thousand) were small businesses with an annual income of up to 800 million rubles and a workforce of up to 100 people.

The remaining 0.3% (21 thousand) were medium-sized enterprises with an annual income of up to 2 billion rubles and a number of employees of no more than 250 people (for certain types of activities - up to 1-1.5 thousand).

However, a turning point has emerged in the observed trend of reducing the share of small and medium-sized SMEs if we look at the results of 2024.

"In 2024 (over 11 months), there was a change in the structure of the SME sector, with an increase in the number of medium and small enterprises: their share increased from 0.295 to 0.320% and from 3.38 to 3.46%, respectively," says Alexander Isaevich.
These results are the initial outcomes of the work undertaken in accordance with the May decree signed by Russian President Vladimir Putin in 2024.

"The development of the SME sector has become a priority, with the aim of achieving qualitative growth in such companies and enhancing income per employee, as outlined in the new May decree of the President of the Russian Federation. The head of the SME Corporation has specified that the growth of small and medium-sized enterprises should also be facilitated by the measures of the new national project.According to data from the Federal Tax Service register, the most popular types of activity among SMEs are online retail trade (21%), trucking services (15%), construction (13%), rental and property management (11%), and retail trade in food, beverages and tobacco products in non-specialized stores (9%).

For individual entrepreneurs, the top five areas of activity align closely with the overall SME landscape, while for legal entities, construction ranks first (26%) and wholesale trade second (15%).Since 2019, the concept of social entrepreneurship has been formally recognized at the legislative level in Russia. Social SMEs encompass entities that pursue socially beneficial goals and address the needs of citizens and society. From December 2020 to December 2024, the number of social SMEs increased fourfold, from 2.9 to 12.1 thousand, representing a 0.2% share of all SMEs.Among social SMEs, the largest segment is engaged in additional education for children and adults (45%), day care for children (23%), and physical education, health and sports activities (16%).
According to calculations by experts based on data from the Federal Tax Service and Rosstat, the average number of SMEs in Russia is 45 per 1,000 residents.

"Russia has a fairly high density of entrepreneurs," agrees Alexander Isaevich, head of the SME Corporation. He notes that Russia outperforms several developed economies, including Germany (31 SMEs per 1,000 population) and Japan (29 SMEs per 1,000 population).

Over the past eight years, the Russian SME density indicator has increased by 18% - in December 2016 it was 38 entities per 1,000 residents.

In 17 regions, the SME density indicator is higher than the national average, while in 68 it is lower (new regions were not included in this calculation).

The subjects of the Russian Federation with the highest SME density are: Kalmykia (98), Moscow (69), St. Petersburg (67), Kaliningrad Oblast (57), Novosibirsk Oblast and Kamchatka Krai (54 each), Krasnodar Krai and Moscow Oblast (53 each), Sakhalin and Magadan Oblasts (51 each).

Regions with the lowest number of SMEs per 1,000 residents: Ingushetia (13), Chechnya (17), Dagestan (18), Tyumen Oblast (20) and Kabardino-Balkaria (25).

An expert analysis of the dynamics of the total number of SMEs in all subjects of the Russian Federation (from December 10, 2023 to December 10, 2024) revealed that there was no decrease in any of them.

31 regions demonstrated better indicators than the national average (4.06%), while 58 regions exhibited worse indicators.

Notably, all four new regions have entered the top 10 in terms of growth rates of the number of SMEs over the year.

The variation across regions can be attributed to a combination of factors, including population growth rates, demand dynamics for goods and services, competitive intensity, and unique local circumstances.