The challenges of financing small and medium enterprises in Kosovo

Abstract

Access of SME to external finances shows as one of main barriers which are faced SME in the region.  
Increasingly is growing role of access to external finance to SMEs for investment and development. The study of 
factors affecting the supply side and demand side of financial instruments can provide a better picture of how 
SMEs can facilitate access to external sources of funding. Financing SMEs largely depend on financial market 
development and its instruments in country. In Kosovo, this market is limited to within the banking sector and 
credit is the main instrument for funding. There is a clear evident that small businesses are limited to accessing 
external finance than large businesses. Access to external finance also depends on the level of business 
turnover, age, collateral etc. Viewing from the financial offer side, credit conditions are point out - in Kosovo 
especially the interest rate appears as a limiting factor in the utilization of external finance.  
This paper is based on enterprise-level data from the survey of 500 SMEs led by BSC Kosovo in order to analyze 
the determinants of obtaining finance from banks when applying. Also we used the data provided by the Central 
Bank of Kosovo on Kosovo's financial sector.  
This paper aims to address the above issues and draw conclusions and recommendations on SME financing 
from external sources.