February 18th, 2020. Interview with Nadia who owns and runs a hat manufacturing business.

She came to a bank branch where I was responsible for development of small business lending and represented the EBRD Russia Small Business Fund, in June 1998.  The company was founded by two graduates of the Textile Institute and made women’s hats for autumn and winter.

Together with business partner, Elena, they have run the business for 25 years

Nadia and I first met in 1998

She came to a bank branch where I was responsible for development of small business lending and represented the EBRD Russia Small Business Fund, in June 1998.  The company was founded by two graduates of the Textile Institute and made women’s hats for autumn and winter. Elena designed models, Nadia was responsible for production and sales. They employed from five to ten people, depending on the season.  That summer, sales were down, and еру business needed money to buy materials and get ready for autumn. They would normally use private loans as there was no other sources of credit available. Nadia and Elena’s business had borrowed from private individuals: 3000 USD from one person, at 36% per annum, and 2000 USD, at 66%. The interest rate sounds high today, but at that time inflation was also high in Russia. It was difficult to define inflation accurately as the government supported the national currency, the ruble. The new banking system was still being built on the basis of the old one, inherited from the Soviet centralised economy.  International small business lending standards were a novelty, but there were many bank managers welcoming them. Common sense was evident in the approach and methodology that the EBRD Russia Small Business Fund helped Russian banks to implement.

Being lucky

Nadia’s business, company “Siringa” (“syrenx”), received the EBRD loan: 30000 rubles, equivalent to 5 thousand dollars at the time, for 2 years, 36% per annum.  The interest was the same as one of their private loans, but the new one was an official agreement with the largest state-owned Russian bank!  Repayment schedule was much more accommodating: instead of paying interest every month and saving for months to repay the body of the loan on day X, the EBRD methodology suggested even monthly payments. Nadia recalls that they bought raw materials, fabrics, and additional equipment – a professional iron, and felt lucky.  In fact, after a while it became clear that Nadia and Elena were even more lucky as they had spent their loan before August 17th, 1998. On that day, the Russian government announced its default, goods began to disappear and the ruble fell against dollar.  For all imported things, like fabrics and threads and even buttons, mostly from Italy – manufacturers of clothes had to pay two or three, and by January 1999 – four times more.

2020

Today the company has two production sites, several dozens of employees, several thousand models of headwear for different seasons including summer as well as having added clothes to their range.  New models are regularly launched.  Internet sales are expanding.

Crisis as an opportunity 

Nina: And how have you survived at other moments of crisis? There were several more after 1998.

Nadia:  A crisis in an economy can give an opportunity to see familiar things in a new way.  In early 2014, because of the events around the Crimea and Ukraine, the ruble fell again, we had to buy everything for dollars and euros and it started to cost two times more.  Our buyers seemed frozen, no one ordered anything, no one called us.

But there was time for everything.  Our designers improved existing models making tiny changes.  We launched new, more sophisticated models – one can find clients for exclusive models at all times.

EBRD Russia Small Business Fund

Nina: What were your impressions about us, consultants, and the approach adopted by the Russian bank to disburse the EBRD sub-loans? We have always been critisized for posing too many questions to potential borrowers.

Nadia: I was under the impression that international organisations want to understand what was going on in Russia, what was the scale of shadow economy and whether businesses were willing to operate more openly, more formally, for example. I had a feeling when I was working with the EBRD consultants, that they wanted as much information as possible, and that for my information I would get my loan. The interest rate and repayment schedule conditions were attractive, and I did not see any risks in sharing.  The dialogue with the bank was a valuable experience.  We were creative professionals, we knew all about textile and technology but did not understand profitability and the importance of careful cash flow management.  The EBRD program and your questions helped me to better understand my own business.

Competition

Nina: They say all manufacturers have one big competitor – China. Is that so?

Nadia: In my opinion, Chinese hats do not have a soul, as we say in Russian. Our products are of very high quality, with handmade elements. Fifteen – twenty units of one model versus those millions. No comparison. Regretfully, our hats and caps are often copied – in Belarus, in Ukraine, in China. But when they follow “take it – cut it to see how it’s made – make your own” pattern, the quality is not the same. I try not to think about the piracy. What can we do? We should just make new things.

The Chinese, you know, they give new customers a higher price, that is, they are constantly looking for customers who will pay more. This is perhaps a reasonable approach. My point is, China isn’t necessarily always cheaper. And as for looking for components for our products in China, you can find better prices in Russia.

Nina: You have so many models! Several hundred?

Nadia: Several thousand. We have been in business for so many years. If a model has not been produced for ten years, you can safely launch it again today – it will feel like a novelty!

Nina: How you find people to work for you?

Nadia: There are no hatwear specialists in Russia these days.  We train people for skills, it takes years.  So we value people who work for us, very much.  And we do not employ those who come to Moscow from other cities or countries, they are too dependent on circumstances.

Nina: Can you say your business is  a “woman’s business”?

Nadia: In production, mostly women work. But men work for us, too: in logistics, in sales.

Nina: Do you think it is more difficult for a woman, than for a man, to do business in Russia?

Nadia: When there is a problem to be solved, I do not pretend that I am a strong man. During repair works in a semi-basement room where we have a sewing shop now, there was a local policeman checking on us, expecting that we pay something informally so that he leaves us in peace, but I chose to pretend I did not understand. He came to the Uzbek builders doing the repairs, some of them probably worked illegally, I was not interested in details and only talked to their manager. They paid the policeman. It was 2003.  It was cheaper for any construction company to give a bribe than to get documents for all the workers. So we were expected to pay, too. I went to the district police chief’s office, started talking and burst into tears.  He made a phone call to the local officer, and there were no further visits. Only when the district boss was fired, our local policeman came again. We eventually became friends, but that is a different story.

Success

Nina: What does success mean to you?

Nadia: I enjoy it so much when I hear that our customers wear our hats and clothes with pleasure.  I love it when we get so many orders that the office starts to get worried whether or not we have enough stock.

I often print out messages I get from clients, with feedback, and pin them on the walls in the office,  for everyone to see.  Today, I see new opportunities for new success stories thanks to Internet sales. The world is so big!  More people can wear what we produce.

Messages from customers (left photo):

“A massive Thank You to the manufacturer, for my high quality and stylish jumper and tunics! Bought almost all the colours of the tunics, super! Am your fan now, looking forward to see your new products. Thank you!!”

“Very nice model, feels so comfortable.  Your brand, Syrinx, this is special, something that stands out.  Wonderful!  This is not a promotion, I just want to express my immense satisfaction with the things this company produces”.

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