Business and SME support

Small and medium sized enterprises (SMEs) are the backbone of the economy in the Western Balkans. These businesses are engines for growth, innovation and social integration. And perhaps most importantly, job creation.

The EU has long been helping SMEs overcome challenges they face, such as access to finance, and in creating a more favourable financing environment. In the wake of the COVID-19 pandemic, this support is more important than ever.

What are the challenges?

Small and medium sized enterprises (SMEs) account for 99% of all enterprises in the Western Balkans and employ between 50% and 80% of the active population. Yet, despite huge potential, SMEs continue to face many obstacles. This limits their ability to become more competitive, particularly at an international level.

One major challenge for small businesses is accessing the finance they need to develop and grow. Many banks are reluctant to lend to SMEs, perceiving many to be risky.
Regulatory and administrative burdens are also a big issue. This creates barriers to starting and growing a business.
Companies lack capacity to sustain business, grow, adapt and develop.
As elsewhere, many small businesses across the Western Balkans took a severe hit from the COVID-19 pandemic.

Small businesses need continued support to recover from the economic downturn and help them to grow to the best of their potential.

How is the EU responding?

Creating a thriving environment for SMEs is at the forefront for EU investment and policy support in the region. The EU promotes reforms and dialogue to build a more business-friendly environment.

The EU is also behind a number of initiatives that aim to make it easier for SMEs to access finance in all phases of their lifecycle, notably through the Western Balkans Investment Framework (WBIF) and its support to the private sector – the Western Balkans Enterprise Development and Innovation Framework (WB EDIF).

The EU’s programme for Competitiveness of Enterprises and Small and Medium-sized Enterprises – COSME – is also open to Western Balkan partners. Between 2014 and 2020, COSME supported 67 SME projects in the region. And SMEs have received a significant €385 million in EU support to help cope with some of the immediate difficulties caused by the pandemic.

SMEs and entrepreneurs also need non-financial support. That’s why funding is complemented by services such as mentoring and training, in areas like financial and digital literacy, business planning, management skills and commercialisation.

Almost 6,000 SMEs and 135,000 jobs supported under WB EDIF 2013-20

€840 million made available to SMEs through WB EDIF 2013-20

Ongoing support

Despite some positive strides, there is still much to do to unlock the full potential of SMEs in the region. The EU’s Economic and Investment Plan for the Western Balkans (EIP) plans a substantial increase in grants for private sector support, with a focus on innovation and green growth. It sets priorities for private sector and SME development in the years to come, with support to focus on:

Access to finance – Unlocking adequate finance for SMEs to create and grow business. A combination of guarantees, loans and venture capital should reinforce an innovative and business-friendly ecosystem in the region.
Growth potential – Supporting start-ups and SMEs in strategic sectors with growth potential – as identified by the countries for improving the business ecosystem.
Entrepreneurship support and education – Supporting financial and digital upskilling, digitising of companies, incubators and business advisory support. Grant actions support specific groups who may find it difficult to reach their full potential, notably young people and small companies.