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Analysis of external factors affecting the development of SMEs in Kosovo

Author

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  • Govori, Arbiana

Abstract

Small and medium enterprises are becoming increasingly important for the creation and development of a modern, dynamic and knowledge-based economy. This is because of their capacity to promote entrepreneurship and entrepreneurial skills, and because of their ability to be flexible and adapt quickly to a changing market, and to generate new jobs. SME sector is the backbone of the economy in countries with higher income, while it is less developed in the countries with the low incomes. Organization for Economic Cooperation and Development (OECD) reports that more than 95% of enterprises in the OECD area are SMEs. These enterprises employ about 60% of private sector workers, make a major contribution in the field of innovation and support regional development and social cohesion. Also, SMEs in most low income countries give significant contribution to GDP growth and the creation of new jobs. In Kosovo SMEs represent more than 99% of the total number of enterprises and their share in GDP amounts to more than 50% (CBK, 2011). For this reason, the identification of external factors affecting the development of SMEs in Kosovo is very important, in order to take all the necessary steps to reduce or remove barriers and create new opportunities for these enterprises. This research focuses primarily on the impact of external factors, with special emphasis on access to finance for Small and Medium Enterprises (SMEs) in Kosovo. External factors such as access to finance, competition, corruption, and government policies have very important impact in the development of SMEs in Kosovo. Facilitating access to finance is essential to set up a favorable environment to develop SMEs. However, in general, SMEs in developing countries face numerous barriers to funding, although this problem is not unknown even in developed countries. Barriers that face SMEs usually relate to high administrative costs, high collateral requirements and the lack of willingness of banks to lend to SMEs. Raising the level of awareness of their role and availability of access to finance for SMEs can improve economic conditions in developing countries by promoting innovation, growth of GDP and reduce unemployment.

Suggested Citation

  • Govori, Arbiana, 2013. "Analysis of external factors affecting the development of SMEs in Kosovo," MPRA Paper 47230, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47230
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    File URL: https://mpra.ub.uni-muenchen.de/47230/1/MPRA_paper_47230.pdf
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    References listed on IDEAS

    as
    1. Per Davidsson & Frédéric Delmar & Johan Wiklund, 2006. "Entrepreneurship and the Growth of Firms," Books, Edward Elgar Publishing, number 3971, April.
    2. Nichter, Simeon & Goldmark, Lara, 2009. "Small Firm Growth in Developing Countries," World Development, Elsevier, vol. 37(9), pages 1453-1464, September.
    3. N/A, 2009. "On the Recession," Local Economy, London South Bank University, vol. 24(3), pages 253-253, May.
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    Citations

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    Cited by:

    1. Aneta Risteska & Dimitar Nikoloski & Miroslav Gveroski & Tatjana Spaseska & Fanka Risteska, 2014. "ANALYSIS OF SMEs FINANCING IN THE REPUBLIC OF MACEDONIA – CONDITIONS AND PERSPECTIVES," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 3, pages 9-16, June.
    2. Govori, Fadil, 2014. "The development of capital market and its impact on providing alternative sources of business financing: Empirical analysis," MPRA Paper 58189, University Library of Munich, Germany.

    More about this item

    Keywords

    Small and medium enterprises; the SME sector; SME financing; development factors; bank loans; GDP;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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