MASARYK UNIVERSITY, BRNO
Faculty of Economics and Administration
Essay:
Financing of the SMEs in Serbia and
special challenges facing women-owned and managed SMEs
Course: Finance (Basics)
Student: Milica Bogdanov, 448396
Brno, 2015. Lecturer: Ing. Ludek Benada
Overview
Small and medium enterprises are businesses whose personnel numbers fall below certain limits.
The European definition of SME follows: "The category of micro, small and medium-sized enterprises
(SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual
turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43
million euro.
Company category Staff headcount Turnover or Balance sheet total
Medium-sized < 250 ≤ € 50 m ≤ € 43 m
Small < 50 ≤ € 10 m ≤ € 10 m
Micro < 10 ≤ € 2 m ≤ € 2 m
SMEs in Serbia
The Serbian Accounting Law (2013) defines an SME as an enterprise which fulfils at least two out of
three conditions: employees up to 250, operating income up to EUR 35 million and total assets up to
EUR 17.5 million.
Based on the latest research, ratio of the self- and external funding sources in SMEs is 3:1, this being
one of the major obstacles for further economic growth of SMEs. SMEs' share in total number of
enterprises in Serbia, as well as their role in economic growth and development, is growing year after
year. According to the latest available official data, in 2009 SMEs on average accounted for 99.8% of
the total number of economic entities, 42.3% of employment, 33% of GDP.
Debt financing is the most widely used source of external finance by the Serbian SMEs, but is still
unreachable for many, especially for innovative enterprises, because of high interest rates, high
banking costs and high collateral requirements.
In Serbia, unlike the EU, until recently there were no initiatives to support SMEs with high growth
rate even though they were known to contribute significantly to dynamism and innovativeness of the
economy. Financing difficulties are even more emphasized in transition economies because of
undeveloped financial markets, unfavourable terms of debt financing and insufficient volume and
scope of government support programmes.
According to the SME Development Strategy for 2015 to 2020, which was adopted by the Serbian
government, Serbia will have 350,000 small and medium-sized enterprises employing 950,000 people
in 2020. In order to achieve many of the Strategy goals the Government has adopted 6 pillars improve
the business environment, easy access to the sources of finance, development of human
resources, strengthening the sustainability and competitiveness of SMEs, improve access to new
markets, develop and promote the entrepreneurial spirit, encouraging women's, youth and social
entrepreneurship.
Special Challenges Facing Women-Owned and Managed SMEs
There is increasing awareness of the important contribution that women entrepreneurs can make to
build and strengthen the SME sector.
In some countries women have been known to create enterprises at rates faster than men, making
substantial contributions to job growth along the way, but they also face unique difficulties in getting
finance (for example, Ireland, Spain and the Unites States are countries where the number of
women-owned SMEs has increased more than men-owned SMEs.)
The typical profile of a female entrepreneur in Serbia is a middle-aged woman from an urban area
with high-school education who is married, lives in a medium-sized family and household and has
children. Women in Serbia mainly run microenterprises, operating in the service sector and in the
local market.
The things that make the situation even more difficult for them are gender bias, socio-economic
constraints, and lack of access to business networks. For example, women can have trouble posting
adequate collateral because of the way in which their marital property (collateral) is often registered.
They can face negative prejudice from lenders about their capacity and commitment to succeed in
the “tough” world of business. They can sometimes have difficulty in building reputational collateral
or demonstrating a consistent track record running their business as a result of family obligations,
such as having a baby that may cause them to take time off. They also lack access to business
networks that are often male-dominated, loosely formed, and conduct as much business in the café
as the conference room.
While the participation rate in taking formal finance is very low for all SMEs, it is even lower for
women-owned than men-owned SMEs by a divide of nearly 25 percent. Women-owned SMEs rely on
friends and family for finance more than they do banks, whereas the opposite is true for men-owned
SMEs. When they do borrow, the also borrow less. Women-owned SMEs are also less likely to seek
formal enforcement of a credit contract – over 75 percent indicated they have no interest in
attempting enforcement.
Gender-related constraints need to be part of the reform agenda for improving SME access to
finance.
References
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=CFE/SME%282012%2912/FINAL&do
cLanguage=En
http://www.policycafe.rs/documents/loop/FINANCING%20THE%20GROWTH%20OF%20SME%20-
%20Critical%20Issues%20and%20Recommendations.pdf
http://www.revecon.ro/articles/2011-2/2011-2-3.pdf
http://www.ekapija.com/website/en/page/1109144/Serbia-aims-to-get-35-000-new-SMEs-and-200-000-new-
jobs-in-5-years-What-will-SME-Development-Strategy-bring?