Although individually, small and medium-sized enterprises (SMEs) are an important element of the Croatian corporate sector and the overall economy, they collectively shape Croatia’s economic structure, not just through their numbers, but by their significant contributions across employment and economic activity.
Over the past 20 years, Croatia has experienced two phases of corporate financing. A period of financial deepening, that is, the growth in bank financing, until the global financial crisis, followed by a decline in bank financing after 2013. The decline in bank financing for SMEs was even more pronounced than for large companies; however, a modest rebound was recorded in 2024. More precisely, credit growth to enterprises in 2024 and the beginning of 2025 was largely driven by lending to SMEs, which recorded an annual increase of 9.6% in 2024 and 11.8% in the first quarter of 2025. The strongest growth was recorded in investment loans to companies in real estate activities, accommodation, food services, and construction, as well as working capital loans to companies in the trade and manufacturing sectors.
To finance their operations, enterprises most commonly rely on deferred payments to suppliers and leasing, while bank loans declined in importance in 2024, with only 28% of SMEs using this source of financing, around 10 percentage points less than in 2016 and 2020. However, in 2024, full approval of the requested loan amounts was more common than in earlier rounds. The main reasons cited for not using bank loans are the sufficiency of own funds and the availability of alternative external financing sources.
The easing of the restrictive European Central Bank (ECB) monetary policy in the second half of 2024 was reflected in more favorable financing conditions for corporates. Average interest rates on newly approved loans to SMEs continued the downward trend that began in early 2024, reaching 4.2% in March 2025. This represents a decrease of 54 basis points compared to the end of last year and 149 basis points compared to the beginning of 2024, when rates peaked during the most recent cycle of ECB key interest rate hikes.
Over the past few years, the COVID-19 pandemic and Russia's large-scale aggression against Ukraine have led SMEs to face higher energy costs, supply chain disruptions, geopolitical tensions, and monetary policy adjustments. Therefore, SMEs are forced to optimise their operations and costs, and access to finance is even more important for them, especially start-ups and scale-ups.
Croatia has continued to strategically use European Union funds to develop financial instruments to enhance the competitiveness of SMEs. This initiative builds on the successful implementation of similar programs in the previous programming period and aligns with the overarching objective of fostering sustainable growth and employment.
One of the primary challenges facing Croatian SMEs is limited access to financing. Insufficient investment and constrained access to financial resources compel small entrepreneurs to rely on costly short-term borrowing, such as overdrafts and credit cards. Additionally, microfinancing is generally overlooked by traditional financial institutions due to high administrative costs and perceived risks associated with smaller or start-up enterprises.
To address these challenges, the Ministry of Regional Development and EU Funds issued a decision on 4 September 2023, that assigns the implementation of financial instruments, including 'Small Loans,' 'Portfolio Guarantees,' and 'Individual Guarantees,' to HAMAG-BICRO. This strategic framework is expected to enhance the financial stability and growth potential of Croatian SMEs in the context of the broader EU funding landscape. In addition to HAMAG-BICRO activities, significant financial support for MSMEs can also be obtained through the products and services of the HBOR.