SMEs are particularly exposed to rising economic and environmental pressures, including climate risks, shifting trade dynamics, and the wider transition to a green economy. This cluster evaluates policies that strengthen SME resilience and competitiveness in this context. It examines five broader areas, assessing frameworks for SME greening, disaster resilience mechanisms, access to financial support, non-financial support and the role of business networks, as well as innovation ecosystems in supporting the transition.
SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Bosnia and Herzegovina
Abstract
Although Bosnia and Herzegovina’s economy recovered swiftly after the COVID-19 pandemic, its most vulnerable firms, primarily small and medium-sized enterprises (SMEs), have faced persistent pressures. Since the 2022 OECD assessment of SME policies in the economy, volatile energy prices, slowing economic growth in 2024-2025 (European Commission, 2025[1]), and declining foreign direct investment (FDI) (World Bank, 2025[2]) have further constrained their ability to invest in the green transition.
Beyond the urgent need for decarbonisation, other global shifts are rapidly reshaping competitive conditions. Evolving trade rules, increasingly fragmented value chains, shifting consumer preferences, and the growing importance of digital technologies are transforming how firms operate and compete (OECD, 2023[3]). While the green transition presents important opportunities for modernising infrastructure, business processes, and production models, SMEs will only be able to capture these benefits with targeted and well-coordinated government support.
In light of the deep trade linkages with the European Union, especially under the EU Green Deal, this section analyses government actions to strengthen SME adaptability and competitiveness as a prerequisite for sustaining growth and ensuring long-term resilience in Bosnia and Herzegovina.
3.1.1. Smoothing SME pathways to a green economy
SMEs are central to advancing Bosnia and Herzegovina’s green economy and delivering on Green Agenda commitments, as they remain the economy’s main employers (70% in 2023) and creators of value added (67% in 2023) (European Commission, 2025[1]). Their role is particularly critical given the economy’s high fossil fuel dependence, with 53% of electricity still generated from fossil sources in 2023 (Eurostat, 2025[4]). Additionally, energy prices have risen over recent years, increasing by 18% between 2019 and 2024 (Eurostat, 2025[5]). Under these conditions, decarbonisation is no longer only an environmental imperative but a competitiveness requirement as it helps SMEs reduce operating costs, optimise resource use, and improve resilience through energy efficiency and cleaner production practices.
While these structural challenges remain significant, there are signals of progress. For instance, investments for environmental protection have risen by roughly 17%, from approximately BAM 54.94 million (Bosnia and Herzegovina convertible marks) (approximately EUR 28 million) in 2023 to BAM 64.4 million (~EUR 32.9 million) in 2024. While the data are not disaggregated by firm size, they show that across both entities, air and climate protection, wastewater treatment and waste management continue to account for the largest share of industry investments in recent years (Figure 3.1).
BAM thousands
Note: Investment is, by its purpose, classified into two categories: investment aimed at the reduction or elimination of already generated pollution (end-of-pipe investment) and investment in the reduction or prevention of the generation of pollution during the production process (investment in integrated technologies).
These priorities also broadly align with the strategies and policies guiding SME greening in the economy. At the state level, the key policy framework is the Bosnia and Herzegovina-wide Environmental Strategy (yet to be adopted), which is operationalised through the Environmental Protection Strategies in both entities (see Table 3.1) and the Brčko District. These documents steer efforts toward reducing environmental impacts and addressing climate change by strengthening institutional and regulatory frameworks in line with the EU acquis and improving services to the private sector. However, measures are generally economy-wide and not specifically tailored to SMEs.
Notes: Indirectly refers to the private sector being considered in the policy document, but no concrete SME-targeted measures are included.
1. Draft still to be adopted.
2. This strategy is based on a modular principle and consists of both entities’ (Federation of Bosnia and Herzegovina and Republika Srpska) energy and climate plans.
Source: Information provided by the Government of Bosnia and Herzegovina and entity-level governments during the assessment period in 2025.
Critically, Bosnia and Herzegovina has not yet adopted its National Energy and Climate Plan (NECP), which is essential for steering climate- and energy-related measures and guiding budget allocations across the economy. In this context, more targeted greening measures included in the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS) SME strategies, particularly those supporting renewable energy uptake and energy efficiency in SMEs, will depend on the timely adoption of this state-level planning framework to scale effectively. Positively, SMEs are also addressed through sector-specific strategies in areas such as energy development, waste management and agricultural production. However, transparency in the use of public funds across all strategies remains limited, making it difficult to assess the overall level of support offered to SMEs across governance levels. Just transition strategies are still under development in both entities,1 and climate change adaptation remains a major gap, as the National Adaptation Plan (NAP) has not yet been operationalised through entity-level policies. Lastly, Bosnia and Herzegovina’s Reform Agenda constitutes a complementary policy document aligned with these strategies and is particularly important for securing investments that can bring the economy closer to integration with the EU Single Market and sustainability standards.
While both entities report frequent consultation with private-sector stakeholders during policy and incentive design, irregular monitoring of greening policies risks weakening accountability and limiting inclusive, evidence-based planning. In the Federation of Bosnia and Herzegovina, for instance, implementation of SME-related greening measures in the SME Strategy is not fully reported, although some activities by the Environmental Protection Fund, such as training and funding for waste management projects since 2022, are documented. Monitoring is more consistent in Republika Srpska, where regular implementation reports for the SME Strategy have been produced since 2022.
In Republika Srpska, budget execution of greening measures under the SME Strategy was highly uneven in 2022-2023, with only about 34% of the allocated funds realised. In 2024, spending more than doubled the planned amount, driven by additional resources from the Single Market Programme and the Enterprise Europe Network. Across the three years, Republika Srpska supported 160 SMEs with environmental protection projects (e.g. waste disposal), over 60 energy-efficiency projects, and carried out 5 SME energy audits. For the Federation of Bosnia and Herzegovina, no comparable data are published. This reflects a broader systemic issue: the European Commission (2025[1]) notes that funding and capacity for monitoring and evaluating enterprise and industrial policy remain limited, and statistical data continue to be insufficient.
Overall, green market development in Bosnia and Herzegovina remains limited, with little data available on the uptake of green products and services. According to a recent Regional Cooperation Council (RCC) study (2024[8]), only about half of SMEs see opportunities to reduce costs through green business solutions, while the remainder perceive no clear benefits to adopting more sustainable practices. Promotion mechanisms for companies already offering green products or services are also weak, with no data on the use of ecolabels. Some progress was made in 2023 with the adoption of a Green Certification Guide by the Foreign Trade Chamber of Bosnia and Herzegovina, which helps SMEs understand certification requirements and application processes in the metal and wood sectors.
The regulatory environment also remains a significant barrier for SMEs seeking to green their operations. Despite growing pressure to align with EU environmental and product standards, Bosnia and Herzegovina still lacks a well-coordinated framework to incentivise investments in process modernisation, renewable energy and compliance with environmental requirements across the economy. In Republika Srpska, for example, waste management has become an important component of SME greening efforts, with initiatives focussed on strengthening extended producer responsibility schemes and increasing capacities for improved waste management. These measures contribute to greater regulatory predictability and help create more favourable conditions for SMEs to engage in circular-economy practices. While both entities have adopted sector-specific regulatory frameworks that provide incentives for environmental investments, further co-ordination at the state level would support harmonisation in simplifying or streamlining regulatory procedures specifically for SMEs undergoing the green transition. However, chambers of commerce are increasingly stepping in to fill part of this gap, for example, by adjusting environmental management system guidelines for SMEs, providing practical materials to support compliance with EU Green Deal legislation, and delivering workshops on key greening topics.
When it comes to raising awareness of green business practices and resilience measures, chambers of commerce, together with the FBiH Environmental Protection Fund and the Fund for Environmental Protection and Energy Efficiency in Republika Srpska, play a central role. Across both entities, these institutions have delivered numerous trainings, seminars and workshops and have co-financed targeted activities aligned with the greening priorities of the SME strategies. Their efforts remain the primary drivers of outreach and capacity building for SMEs in the sustainable economy.
3.1.2. Boosting SME competitiveness in sustainable value chains
Businesses in Bosnia and Herzegovina remain divided on the benefits of the green transition, and this uncertainty continues to slow broader engagement. Business survey data show that less than half of firms (40%) view the green transition as an opportunity, whether through cost reductions, greater competitiveness or access to sustainable EU value chains, while a significant share (60%) remains unsure or sceptical (RCC, 2024[8]). This signals that the private sector’s interest and potential readiness exist, but clearer policy signals and better communication from the government, e.g. awareness-raising activities, training and funding support, are needed to translate this into concrete action.
At the state level, the connection between SME greening and deeper integration into sustainable value chains, both domestically and abroad, is increasingly recognised. Since the last OECD assessment, the Bosnia and Herzegovina Export Promotion Agency (BHEPA) has aligned its internationalisation efforts with circular-economy principles, emphasising support for green innovation and supply-chain integration. Its dedicated green economy portal2 now provides information on projects, services and training. Importantly, the share of BHEPA initiatives linked to the green economy rose from 12% in 2023 to 14% in 2024 (Government of Bosnia and Herzegovina, 2025[9]), reflecting growing recognition of the strategic relevance of sustainability in trade.3
Both entity-level SME strategies include objectives and measures to support export-oriented companies and enhance their integration into global value chains. However, these goals are not yet aligned with greening-focussed objectives, despite the growing influence of EU environmental directives, such as the Carbon Border Adjustment Mechanism (CBAM)4 and the Corporate Sustainability Reporting Directive (CSRD),5 on BiH’s exporters’ competitiveness in EU markets. The European Union remains the primary destination for SME products from Bosnia and Herzegovina, accounting for 73% of exports (European Commission, 2025[1]). In fact, 76% of business owners surveyed by the Foreign Trade Chamber of Bosnia and Herzegovina (2024[10]), in 2023,6 indicated their willingness to invest additional effort and resources to adapt to CBAM requirements, but knowledge of where to start and which supports to access was unclear (see more under Section 3.4).
Both entities’ strategies prioritise support for SMEs to move toward higher value added production. Between 2022 and 2024 in Republika Srpska, over 1 300 SMEs received support through initiatives such as the Enterprise Europe Network, government incentives for technological upgrades, and assistance with trade fair participation and first-time exporting. In Republika Srpska, between 2022 and 2024, 170 SMEs benefitted through grants of BAM 2.8 million (~EUR 1.43 million) and in 2025, 254 SMEs received BAM 3.2 million (~EUR 1.64 million).7 However, there are no available data on how many of these projects specifically target greening or the transition to more resilient and sustainable value chains.
Since 2025, Republika Srpska has also introduced grants for the technological upgrading of SMEs, with the Ministry of Economy and Entrepreneurship reporting that BAM 58 million (~EUR 29.7 million) in support has been allocated to 812 enterprises. This programme includes support for circular-economy initiatives. However, there are currently no data indicating exactly how many of these projects were green/circular SME projects.
Comparable data from the Federation of Bosnia and Herzegovina on the implementation of SME strategy goals related to export and global value chain integration are not available. However, the project, Strengthening the Competitiveness of SMEs,8 implemented by the Federal Ministry of Development, Entrepreneurship and Crafts under the 2025 grant package, achieved strong results. The initiative supports the growth of innovative and export-oriented SMEs through business process modernisation, adoption of quality standards, circular-economy practices and energy efficiency. In 2025, 158 SMEs received funding under the project, while another 224 signed co-financing agreements to upgrade equipment, modernise operations, improve product quality and expand trade activities (Federal Ministry of Development, Entrepreneurship and Crafts, 2025[11]; 2025[12]). Details on the specific share of greening-focussed interventions, however, are not provided.
Across both entities, guidance and support for SME internationalisation with links to the green economy remain in their early stages, and data on SME interest and capacity to join sustainable value chains are very limited (see Section 3.4). Green public procurement (GPP) also represents a largely untapped potential to stimulate demand for green services and build SME technical capacity for greening practices. Currently, no strategy or policy addresses GPP at the state or entity level. However, entity-level environmental and procurement policies provide legal grounds for integrating environmental criteria in procurement procedures. The new Public Procurement Strategy 2024-2028 also includes objectives to establish a GPP framework and develop guidelines, as well as planned amendments to the Public Procurement Law. However, concrete activities to educate SMEs and ensure their participation in GPP are yet to be formulated.
Export-oriented SMEs in Bosnia and Herzegovina are also feeling growing pressure to adopt environmental, social and governance (ESG) standards and comply with the EU CBAM. Estimates suggest that the economy could face financial losses of EUR 369 million to EUR 1.62 billion from the start of CBAM until 2030 (Spasić, 2025[13]), representing 1-6% of the 2024 gross domestic product (GDP) (World Bank, 2025[14]). This highlights the potential scale of losses for businesses that are unprepared or unable to meet EU environmental requirements.
Currently, expert analyses focus on specific sectors such as steel, cement and electricity, but many activities lack sufficient government co-ordination, and the impact on SMEs remains poorly understood. Most preparation and familiarisation efforts for SMEs on CBAM and reporting obligations are delivered by the Chamber of Economy in the Federation of Bosnia and Herzegovina and the Chamber of Commerce in Republika Srpska,9 while local non-governmental organisations (NGOs) have also achieved tangible results through donor-funded projects. These initiatives provide important lessons on how government support could effectively help SMEs navigate decarbonisation and comply with EU standards (see Box 3.1).
Policy context
Strategic documents on decarbonisation (including the upcoming NECP and entity-level energy and climate plans) prioritise large, energy-intensive industries (cement, steel, chemicals), while manufacturing SMEs are addressed largely through voluntary measures. Yet, pressures such as CBAM and growing market demands for sustainable production make improved energy efficiency essential for Bosnia and Herzegovina’s SME sector. In this context, the Sustainable Energy Transition Center (RESET) and EDA, with Swedish support, launched the Energy Transition Network in Industry project (2022-2024) (METI) to strengthen the implementation of energy transition measures among export-oriented SMEs and improve the uptake of energy efficiency, renewables and energy management practices.
Operational aspects
The project focusses on strengthening government-aligned approaches to SME decarbonisation by: 1) testing and evaluating a systemic support model for SMEs in selected industrial sectors, tailored to conditions in Bosnia and Herzegovina; and 2) establishing an SME network to facilitate information exchange and peer learning on energy transition measures.
Under the project, 30 companies received full energy audits, and 9 SMEs participated in a one-year METI pilot network, demonstrating how structured support can drive decarbonisation at the firm level in four key areas: improving energy efficiency, expanding the use of renewable energy, introducing energy management systems, and strengthening energy monitoring practices.
Policy impact
The METI project demonstrates that targeted, hands-on support can meaningfully accelerate SME decarbonisation and offer concrete lessons for government policy. More than half of participating SMEs installed solar power plants for self-consumption, and many replaced fossil fuel heating systems, adopting practical measures to improve energy efficiency and management. A key action was the successful pilot of an external, shared energy manager, addressing the fact that SMEs rarely have dedicated in-house expertise, thereby demonstrating a scalable model for supporting smaller firms. The project also consolidated actionable policy proposals to integrate SME needs into the NECP and broader government strategies, helping to ensure that future decarbonisation frameworks better reflect the realities of SME capabilities, constraints and opportunities.
Sources: Sustainable Energy Transition Center (2022[15]); Spasić (2024[16]).
The way forward
Strengthen budget execution and improve the implementation of SME greening policies. Across both entities, allocated budgets for SME greening measures are underutilised, due to weak planning, insufficient outreach, or overly complex application procedures that discourage SME participation. Entity governments are encouraged to ensure that all greening programmes are supported by proactive awareness raising, simplified administrative processes, and targeted capacity building for SMEs. Closer co-ordination with chambers of commerce and other business support organisations can help increase engagement and ensure that measures respond to the actual needs of SMEs. At the same time, maintaining consistent budget allocations and a stable pipeline of greening instruments will be essential to achieve scale and sustain long-term impact. To this end, Bosnia and Herzegovina is encouraged to look beyond green budget tagging alone and consider approaches that more explicitly link budget allocations to expected and measured results, helping to ensure stronger alignment between private-sector development policies and commitments to achieving net zero (see Box 3.2).
Establish a systemic review of applicable environmental regulations and create robust monitoring and evaluation systems to identify and tackle gaps, as well as overlaps and inconsistencies that cause uncertainty and complexity for SMEs. By streamlining the legal and policy framework based on hard evidence (including, for example, systematic SME feedback through surveys), the government could better account for real market needs and boost SME investment in the green economy. This is especially urgent in the Federation of Bosnia and Herzegovina, where monitoring and reporting on the implementation of the SME Strategy have been inconsistent since the 2022 OECD assessment. Across both entities, governments could improve data collection on SME greening efforts (such as SME greenhouse gas emissions in the business sector, SME emissions intensity, energy price burden, etc. (OECD, 2023[17]), enabling regular evaluations of strategies and policies and ensuring that public interventions demonstrate measurable economic and environmental impact. Bosnia and Herzegovina could, for example, consider introducing energy audits and developing energy rationalisation plans like in Portugal (OECD, 2025[18]), allowing the government to measure progress in the business sector against energy savings targets, or other instruments such as the Policy and Action Standard developed by the Greenhouse Gas Protocol (2014[19]) to assess the emissions of specific policy measures and improve their effectiveness.
Mainstream SME greening and resilience concerns more prominently in export and investment promotion programmes. While certain export and value chain integration initiatives, particularly those led by the BiH Foreign Trade Chamber, are increasingly linking competitiveness with green requirements in the EU Single Market, this connection is still absent from targeted measures under entity SME strategies (though more concrete measures are planned in the new SME strategy of Republika Srpska from 2027 on). Developing explicit synergies between greening objectives and trade facilitation in these strategies would help position SMEs more competitively in international markets and strengthen their resilience to evolving decarbonisation standards in trade. Bosnia and Herzegovina could consider instruments such as export credit insurance for green exports, like the Dutch Green Label scheme, which could offer useful insights for developing similar mechanisms (Atradius Dutch State Business, 2020[20]). It could also further leverage the Enterprise Europe Network to help SMEs prepare for EU Green Deal legislation, such as CBAM and the Ecodesign for Sustainable Products Regulation (ESPR), and attract investments.
Identify the needs of most CBAM-affected sectors and SME segments. Bosnia and Herzegovina still lacks a clear understanding of which SME groups (by size, activity, etc.) operate in the most CBAM-affected industries. Just Transition (in development) and related green enterprise policies should align with targeted, evidence-based actions to strengthen SMEs' preparedness for carbon pricing, disclosure requirements, and shifting value chain expectations. This could include stronger guidance for CBAM compliance for impacted SMEs. Stronger co‑ordination among the BiH Foreign Trade Chamber, entity-level chambers, and ministries responsible for export support is essential to ensure that measures address real risks and opportunities. In the Federation of Bosnia and Herzegovina, the planned Green Transition Programme, which foresees targeted assistance to SMEs in light of CBAM, should enter implementation without delay to generate impact ahead of CBAM’s full application.
Experience from OECD Member countries shows a range of approaches, from developing tools to assess the greenhouse gas (GHG) impacts of policies, to modelling the macroeconomic effects of carbon taxes, and estimating the costs of meeting climate targets.
Korea provides a concrete example. In 2023, it introduced a GHG Reduction Cognitive Budgeting System that requires each budget proposal to include expected GHG impacts and to undergo a dedicated review process. This helps clarify how public budgets support climate-neutrality strategies. Proposals are classified into three types, including projects with quantifiable emission reductions and more qualitative or research-oriented initiatives. GHG reduction is defined as the difference between GHG emission levels ex ante and ex post.
In 2024, around 1.5% of the total budget was allocated to GHG reduction projects, about half of which were research and development (R&D) activities (out of 294 projects).
For Bosnia and Herzegovina, a similar approach could help align SME support policies with climate objectives by systematically identifying, prioritising and tracking budget measures that promote energy efficiency, low-carbon technologies and innovation among SMEs.
Sources: OECD (2024[21]); Korea Environment Corporation.
The COVID-19 pandemic highlighted how much more vulnerable SMEs are to shocks compared to larger firms. In Bosnia and Herzegovina, as around the world, SMEs usually bear the heaviest and longest-lasting consequences of disaster events (UNDRR, 2022[22]). Limited financial resources, coupled with gaps in skills and knowledge for adaptive innovation (Marjanović, 2024[23]), leave these firms exposed to both economic and environmental disruptions.
In Bosnia and Herzegovina, climate change is expected to intensify these risks, with rising threats from destructive floods, heatwaves and wildfires. The severe floods of 2024 were the most damaging since 2014 (WHO, 2024[24]), underscoring the urgent need for targeted SME measures that enhance proactive disaster risk management, build resilience and ensure rapid, effective recovery.
This section examines how mechanisms supporting SMEs are designed to strengthen their resilience to economic shocks, natural hazards and rising climate-related risks. It considers both support for preparing for and preventing disruptions, as well as measures to help SMEs recover from crises.
3.2.1. Enhancing crisis-resilient strategies to prevent SME bankruptcies
The COVID-19 crisis demonstrated how external shocks disproportionately strain SMEs, which often lack the financial and technical capacities as well as access to regulatory support needed to manage disruptions. While there are no economy-wide centralised data on SME bankruptcies that would help monitor SME vulnerabilities and design targeted crisis-response policies, there are frequently updated data from the RS Agency for Intermediary, Information and Financial Services. Recent data from Republika Srpska show mixed trends: in the first three quarters of 2025, 231 companies were deregistered, over 40% more than in the same period last year, while business openings remained relatively stable (688 in 2025 vs. 674 in 2024) (Media Portal, 2025[25]).
While the available data do not allow firm conclusions on broader business dynamics, they point to growing pressures on SMEs in Bosnia and Herzegovina in recent years. Against this backdrop, it is encouraging that both entity-level SME strategies emphasise bankruptcy-prevention measures (see Dimension 2). Both include actions to support SMEs in financial distress and to develop an early warning system (EWS) to detect emerging signs of business vulnerability. However, implementation remains weak: no progress data are available for the Federation of Bosnia and Herzegovina, and in the Republika Srpska, activities have been repeatedly delayed since 2022 due to insufficient financing. This raises concerns about strategic prioritisation in the Federation of Bosnia and Herzegovina and the sufficiency of budgeting in Republika Srpska, ultimately limiting the system’s ability to protect SMEs from avoidable failure.
Modest progress has been made in promoting preventive and alternative approaches to business distress, particularly through efforts to raise awareness and encourage restructuring over liquidation. In Republika Srpska, the Chamber of Commerce established the Institute of Consensual Out-of-Court Financial Restructuring in 2023 and trained 15 mediators to facilitate voluntary procedures. In the same year, information campaigns were launched to familiarise SMEs with this option. Although no settlement agreements have yet been concluded, the mechanism marks meaningful progress in expanding access to lower-cost, faster, survival-oriented restructuring outside the courts.
Overall, however, gaps in implementation and resourcing continue to limit the impact of prevention-focussed SME policies aimed at strengthening resilience and avoiding avoidable business failure. Additionally, in both entities, preventive measures remain weak in scope and are not informed by up-to-date assessments of SME needs. As a result, it is difficult to gauge whether government actions effectively address business vulnerabilities arising from economic or environmental shocks.
With climate change expected to intensify pressures on firms, strengthening prevention is becoming urgent. Past events, such as the 2014 floods, which affected large parts of the population and caused damage equivalent to 15% of GDP, demonstrate the scale of potential losses (World Bank, 2024[26]). Without stronger risk-mitigation measures and targeted support for businesses to adapt, Bosnia and Herzegovina’s GDP could decline by up to 14% by 2050 under certain climate change scenarios (World Bank, 2024[26]).
Survey data corroborate these concerns from a business perspective (Figure 3.2). Climate change and natural hazards rank among the most significant risks for firms in Bosnia and Herzegovina, with extreme weather cited by around 44% of respondents, followed by extreme temperatures (36%), environmental disasters (29%) and floods (27%). These perceptions highlight the growing operational vulnerability of SMEs and the urgency for targeted government action on climate adaptation and risk reduction.
Percentage of surveyed SMEs
Notes: Multiple selection was possible.
Data obtained from a qualitative and quantitative survey of around 200 SMEs in Bosnia and Herzegovina, representing 0.38% of the total SME population in 2023.
The survey was undertaken after the outbreak of the COVID-19 pandemic in 2021.
Source: UNDRR (2022[22]).
Disaster risk management responsibilities are distributed across governance levels, with operational competencies largely exercised at the entity level in accordance with constitutional arrangements. Yet, the system remains predominantly reactive, and weak co-ordination with civil protection authorities in the Federation of Bosnia and Herzegovina and Republika Srpska continues to limit progress on climate adaptation and disaster risk reduction (DRR). Although work began in 2023, led by the Ministry of Security with support from the Organization for Security and Co-operation in Europe (OSCE), to develop the BiH DRR Strategy 2023-2027, it has yet to be finalised (OSCE, 2023[27]). Combined with Bosnia and Herzegovina’s multi-tier governance structure, this delay has slowed the upgrading of multi-hazard EWS and the creation of a unified framework for strengthening prevention and preparedness across government and the private sector (UNDRR, 2025[28]). Positively, in January 2026, the Ministry of Security of Bosnia and Herzegovina initiated the drafting of a new DRR Strategy for 2026-2030. The strategy is expected to be developed in close co-operation with relevant institutions at all levels of government and to promote a more comprehensive and co-ordinated approach to risk management.10
At the same time, Bosnia and Herzegovina’s NAP offers no concrete incentives for businesses to invest in long-term climate resilience or disaster risk prevention, and neither entity’s SME nor environmental strategies address this gap. According to a United Nations Office for Disaster Risk Reduction (UNDRR) survey, only 17% of responding SMEs report access to resilience-related incentives, mostly limited to insurance discounts rather than institutional support (UNDRR, 2022[22]). As a result, SMEs remain largely uninformed and unsupported in assessing climate risks and integrating resilience into business continuity planning.
In fact, over 25% of surveyed SMEs stated not considering disaster protection measures a priority, clearly showing a lack of information and awareness on the importance of prevention in the face of climate change induced extremes. Key barriers to investing in disaster protection are a lack of resources and capacity, the absence of incentives and low awareness of risks and potential business impacts. On a positive note, following the adoption of the regulation on incentives for improving SME competitiveness in Republika Srpska, SMEs can seek financial support for certification to international standards such as ISO 22301, which promote risk management, including resilience to climate-related disruptions. Additionally, in February 2026, the Chamber of Commerce and Industry of Republika Srpska held a seminar on crisis and risk management skills, which attracted more than 100 participants and offered guidelines and solutions for efficient risk and human resource management during crises.
However, addressing the gaps in SME awareness and government support will require co-ordinated action with key partners, including engagement with civil protection authorities to provide guidance on disaster preparedness, greater use of publicly available risk data in business planning, and stronger involvement of banks and insurers in offering practical, accessible financial and advisory mechanisms that help SMEs manage growing climate and disaster risks.
3.2.2. Increasing SME recovery capacity and second-chance opportunities
Both SME strategies in the Federation of Bosnia and Herzegovina and in Republika Srpska acknowledge that business resilience requires more than preventing business failure; it also depends on the rapid exit of nonviable businesses and the successful facilitation of rapid recovery or business re-entry for viable ones, while supporting entrepreneurial activity during and after crises. Strong second-chance mechanisms are therefore essential for preserving jobs, sustaining value creation, and supporting long-term economic continuity.
Available evidence suggests that progress in this area across Bosnia and Herzegovina remains limited. According to the Government of the Federation of Bosnia and Herzegovina, the backlog of SME bankruptcy cases did not meaningfully decrease in 2023-2024 compared to the post-COVID period of 2021-2022. Any improvements in the entity have been marginal and uneven, reflecting slow procedures and the absence of substantial reforms. Such gaps could undermine SMEs' ability to rebound quickly or reallocate public resources to productive uses, thereby weakening broader economic resilience.
State-level data suggest that reorganisation procedures in Bosnia and Herzegovina remain slow and costly compared to liquidation, reducing their appeal for both debtors and creditors. Reorganisation takes an estimated 18 months, longer than liquidation at 12 months, and costs around 7% of the company’s market value, compared to 5% for liquidation (World Bank, 2024[29]). This dynamic risks pushing even viable firms toward permanent exit rather than restructuring and continuity.
In this respect, second-chance programmes that address regulatory and access-to-finance hurdles to improving bouncing-back options for honest entrepreneurs while safeguarding creditor protection are critical (see Dimension 2). While the SME strategies in both the Federation of Bosnia and Herzegovina and Republika Srpska reference measures to promote second-chance programmes, no implementation activities have been reported since 2022. While in Republika Srpska, SMEs can still access support through the Development Agency (RARS) and the Danube Chance 2.0 project, which ran between 2018 and 2021 and was co-financed by the European Union through the Interreg Danube Transnational Programme and co-ordinated by RARS, the entity still cites budget constraints. The Federation of Bosnia and Herzegovina provides no updates. Moreover, awareness raising and information campaigns targeting SMEs are lacking, leaving many businesses unaware of existing support through government channels or chambers of commerce.
Addressing this gap is also critical in light of climate-related risks, which are expected to drive higher demand for second-chance options. Neither entity has institutionalised relief funding for climate-vulnerable SMEs or financially viable firms whose survival would protect long-term employment, with support currently provided only on an ad hoc basis, as seen during the 2014 floods.
In 2014, the EU Flood Recovery Programme provided a substantial contribution of EUR 42.2 million to address Bosnia and Herzegovina’s recovery needs (European Commission, 2024[30]). The programme combined housing, infrastructure, business, and livelihoods support, delivering strong results in the SME sector, particularly in the agricultural sector. The 2017 evaluation report concluded that the support was effective in enabling SMEs to return to full production and, in some cases, to retain or increase employment levels and productivity. However, the evaluation also found that the impact could have been enhanced if tailored business consultancy services had been systematically provided to weaker SMEs, as was the case for agricultural producers.
In 2024, the European Union also financed immediate flood recovery support in eight local communities in Bosnia and Herzegovina through the Instrument for Pre-Accession Assistance III (IPA III) with a budget of EUR 20 million (European Commission, 2024[30]). A key output of this intervention (the EU Support to Floods Recovery in Bosnia and Herzegovina project) is the re-establishment and improvement of the competitiveness of selected SMEs, with a target to support up to 100 enterprises in restoring and creating jobs. The intervention also aims to restore and increase economic activity in agricultural and local business communities by approximately 20%, as measured by employment and GDP contribution. These actions are based on a rapid needs assessment, intended to ensure informed decision making by the end of 2024, though updates are not publicly available. In addition, the FBiH budget approved BAM 1 million (~EUR 500 000) in response to the 2024 floods to support small business entities in repairing damage caused by the natural disaster.
Still, a continuous challenge is the lack of tailored financial and insurance products for SMEs. Over half of businesses surveyed in 2022 remain uninsured against disasters (Figure 3.3), highlighting both a gap in product availability and low awareness of insurance as a recovery tool.
Bosnia and Herzegovina still lacks a comprehensive catastrophe insurance mechanism, as the market remains underdeveloped. While the broader insurance market has grown, catastrophe policies remain voluntary and sparse (UNDP, 2024[31]). During the catastrophic 2014 floods, for example, only about 15% of total losses were insured, with flood coverage limited to six citizens in total (Ghetu, 2020[32]).The distribution of responsibilities across levels of government can further create coordination challenges for risk pooling, limiting the capacity to protect critical infrastructure and assets essential to SME development and economic resilience.
Finally, long-term climate adaptation measures for SMEs remain very limited. Although the NAP acknowledges the importance of tracking business losses from extreme weather and promoting insurance uptake, no concrete budgets or measures are in place to advance these actions. As a result, the most vulnerable sectors lack the support needed to strengthen SME resilience and recovery capacity.
Percentage of surveyed SMEs
Note: Data obtained from a qualitative and quantitative survey of around 200 SMEs in Bosnia and Herzegovina, representing 0.38% of the total SME population in 2023.
Source: UNDRR (2022[22]).
The way forward
Improve the accessibility and practical use of out-of-court settlement mechanisms for SMEs. Republika Srpska’s restructuring option for financial debt offers a positive example that the Federation of Bosnia and Herzegovina could also adopt and build upon. Currently, court-based reorganisation proceedings remain longer and more costly than liquidation. While longer timelines are expected, costs should at least be comparable to create real incentives for both creditors and debtors to pursue reorganisation rather than liquidation. Therefore, for commercial debt, introducing a debt threshold for fast-tracked reorganisation, calibrated to the average size of SMEs filing for bankruptcy, would significantly reduce administrative burdens and costs for firms in financial distress. Using legal tools to increase efficiency would not only support viable SMEs but also reduce pressure on courts and accelerate the reintegration of distressed businesses into the economy while preserving jobs. Existing OECD analysis highlights the link between efficient bankruptcy and judicial systems and stronger business dynamism (Calvino, Criscuolo and Verlhac, 2020[33]), offering useful insights that Bosnia and Herzegovina could draw on.
Increase funding and implementation for both preventive measures and second-chance policies for SMEs. Although both entities recognise the importance of insolvency prevention, progress has been limited due to insufficient funding and weak implementation. The development of a data-driven EWS should be given renewed strategic priority, building in particular on the existing indicators and tools already created in Republika Srpska through the Danube 2.0 self-assessment system. Second-chance policies face similar financial and operational constraints. As a first step, targeted outreach to SMEs could be expanded to assess demand and inform the design of tailored support measures for inclusion in future SME strategy action plans.
Reinforce monitoring and evaluation capacities for insolvency procedures and policies. Because local courts are not required to systematically collect, manage or publish statistics on insolvency proceedings, Bosnia and Herzegovina lacks reliable data on the effectiveness and efficiency of bankruptcy and restructuring processes across both entities and the Brčko District. State-level and entity governments are encouraged to work together to strengthen courts' capacity for comprehensive data collection and analysis. Improving the evidence base would enable authorities to understand patterns of financial distress among SMEs better and to design targeted measures that support economic resilience by facilitating smoother business exit and re-entry pathways.
Develop SME-focussed climate change adaptation measures and promote greater insurance uptake. Both entities should operationalise adaptation measures in line with the NAP, which also foresees the development of risk insurance solutions. Strengthening the governance framework for risk pooling between the public and private sectors is essential to ensure that relevant policies and regulations are updated to encourage uptake among businesses. Any new insurance schemes designed for SMEs in the most affected sectors (e.g. agriculture, industry, tourism, etc.) should be accompanied by clear communication of benefits and affordability through instruments such as subsidised premiums, tax incentives, shared-risk facilities and targeted technical assistance (GIZ, 2022[34]). Expanding SME participation in insurance markets will help firms make sustainable risk management decisions, avoid distress asset sales, and enhance their long-term financial resilience.
As Bosnia and Herzegovina strives to make progress toward climate neutrality, it must actively support SMEs with adequate funding and investment in key areas to enable them to transform their operations and business models and create a positive environmental impact. While sustainable finance has gained momentum globally and many economies have introduced national frameworks and taxonomies to drive market change, Bosnia and Herzegovina is only beginning this process.
Persistent barriers such as knowledge gaps, complex ESG reporting requirements, and the lack of an economy-wide taxonomy, alongside the economy's unique and complex governance structure, continue to limit SMEs' access to appropriate financing. This section, therefore, assesses institutional co-ordination, targeted policy measures, capacity-building initiatives, and regulatory support to ensure alignment with EU financing standards and equitable support for SMEs not only through bank loans but also through a diversified pool of alternative forms of financing.
3.3.1. Supporting SMEs in an evolving sustainable finance framework
Progress toward establishing a sustainable finance framework in Bosnia and Herzegovina has been modest since the 2022 OECD assessment. Efforts remain nascent, with weak co-ordination between the BiH Ministry of Finance and Treasury and the entity-level institutions responsible for developing sustainable finance instruments. Nonetheless, several positive steps have been taken. In 2023, the BiH Sustainable Development Goal (SDG) Financing Working Group11 adopted the SDG Financing Framework, which outlines agreed-upon policy measures and financial instruments to accelerate progress toward Agenda 2030. The framework includes SME-focussed approaches, with long-term instruments to be piloted during 2024-2026 and full implementation envisaged from 2027 onward.
Bosnia and Herzegovina has formally recognised the need to align its financial system with EU sustainable finance standards, but progress remains slow, particularly in areas most relevant for unlocking green financing for SMEs. The Central Bank of Bosnia and Herzegovina (CBBH) has incorporated sustainability objectives, including the development of ESG-aligned practices and green financial instruments, into its Strategic Plan 2025-2027. However, concrete steps toward establishing an economy-wide taxonomy are still limited.
According to the CBBH’s plan, the gradual transposition of the EU Green Taxonomy will take place at the entity level and in the Brčko District between 2024 and 2026, leaving a key precondition for scaling up SME green finance still under development. On a positive note, in alignment with EU recommendations, the CBBH is developing a Climate Change Challenge Management Policy and has joined major international networks, strengthening the foundations for future reforms and signalling a growing commitment to advancing sustainable finance tools that could benefit businesses.
In the entity context, the Banking Agency of the Federation of Bosnia and Herzegovina has taken initial steps to align the financial sector with sustainable finance principles. As part of its 2023-2025 strategic priorities, it introduced a requirement for banks to integrate ESG criteria into their lending decisions, including the development of green financial products targeting areas such as energy efficiency and renewable energy, both of which are highly relevant to SME decarbonisation. The Banking Agency of Republika Srpska issued Guidelines for Managing Climate and Environmental Risks in 2023 (Banking Agency of Republika Srpska, 2023[35]) and banks were required to conduct self-assessments and prepare compliance action plans, marking an important step toward embedding climate risk into financial supervision, though standardisation is lacking.
Yet, integrating ESG considerations into lending decisions can also act as a barrier to SME access to green financing if they are unable to meet ESG data or reporting requirements. This highlights the importance of simplified sustainability reporting frameworks proportional to SME capacities, such as the EU Voluntary Standards for SMEs, as well as additional practical tools, advisory services and training to ensure that SMEs can meet ESG data requests and are not unintentionally excluded from green finance (OECD, 2025[36]). As banks are expected to develop their own taxonomies, this may lead to fragmentation in approaches.
In practice, however, financial institutions in Bosnia and Herzegovina remain at a very early stage of aligning with EU sustainable finance principles. Many banks still rely on internally developed guidelines to classify green activities, and smaller local institutions often struggle to meet emerging standards due to limited capacity and technical expertise. Clearer guidance is needed for commercial banks on sustainable finance requirements, alongside practical support for SMEs on how to meet these criteria. Strengthened co-ordination with key actors, particularly the FBiH and RS development banks, should also include more proactive outreach to help local banks better guide SMEs and improve access to green finance through available credit-line programmes.
The European Commission’s (2025[1]) latest progress report corroborates the finding that financial support for green innovation remains insufficient, especially for SMEs and start-ups. There is, however, some progress as Table 3.2 shows. In Republika Srpska, funding for green SME projects increased considerably through the EU-supported Environmental Protection and Energy Efficiency Fund. Both the total grant volume and the number of supported SMEs grew from 2024 to 2025. This trend is not mirrored in the Federation of Bosnia and Herzegovina. Beyond a similar one-off call in 2023, the Fund’s allocation remains largely oriented toward a general nature and water protection in municipalities, around 75% of its 2024 budget (OECD, 2025[37]), leaving limited funding for measures that directly support SMEs in greening their operations or transforming their business models.
Finally, overall demand for sustainable finance products in Bosnia and Herzegovina remains unclear. Evidence from peer economies in the Western Balkans indicates that SME awareness and understanding of financing options, particularly for green investments, tend to be low (RCC, 2024[38]), and similar challenges are likely present in Bosnia and Herzegovina. Neither entity has a financial literacy framework aligned with EU/OECD-International Network on Financial Education standards (see Cluster 1). In Republika Srpska, the Chamber of Commerce has introduced a new financial literacy training programme that expands on its earlier Financial Incubator initiative, but it still does not include modules on sustainable finance. In the Federation of Bosnia and Herzegovina, no progress has been noted, leaving SMEs without structured support to build the knowledge needed to access or benefit from sustainable finance instruments. More broadly, limited awareness of sustainability and weak capacity to develop bankable projects constrain demand from the business sector and hinder the development of a robust project pipeline for banks. This underscores the need for targeted SME awareness raising, as well as training and advisory support on sustainable finance instruments and investment proposal preparation.
Source: Information submitted to the OECD during the assessment period 2025-2026.
3.3.2. Increasing SME access to sustainable (bank and alternative) financing
Given the diversity of SMEs in terms of size, sector, technological maturity and location, firms require different financial solutions depending on their business models and stage of development. Broadly, three groups can be distinguished by their role in the green transition: early-stage green start-ups (“innovators”) developing new technologies or business models; more mature green firms (“enablers”) scaling up innovative solutions; and established SMEs seeking to adopt greener processes, products or technologies (“adopters”) (OECD, 2025[39]).
Sustainable finance is particularly important for green SMEs because it integrates environmental performance into project appraisal, allowing a better assessment of long-term value creation while accommodating higher upfront costs relative to short-term returns. When provided on concessional terms, such as lower interest rates or longer repayment periods, it can help address key barriers to SME access to finance and incentivise greener operations, especially given the higher uncertainty associated with many green investments. However, stronger government action is needed to establish the institutional conditions required for its broader uptake among SMEs. This includes incentivising investment in green SMEs and strengthening capacities through training and guidance for institutions and SMEs alike.
Banks remain a key source of financing for SMEs in Bosnia and Herzegovina, with the sector holding more than 90% of total financial sector assets, and banks’ lending as a share of GDP rising from 46.2% in 2023 to 48% in 2024 (European Commission, 2025[1]). Yet access constraints persist, especially for microenterprises, where a recent survey suggests that about 30% of loan requests12 are rejected due to insufficient collateral (ILO, 2024[40]). As a result, many SMEs must rely on a combination of retained earnings and commercial loans to finance green measures. While eight commercial banks in Bosnia and Herzegovina offer green loans (ILO, 2024[40]), these products are largely tailored to households rather than firms, limiting their usefulness for SMEs, particularly medium-sized enterprises seeking to scale larger green projects.
Green business loans are mainly enabled by international investors such as the European Bank for Reconstruction and Development (EBRD), whose SME Go Green programme, launched in 2023, channels financing to Bosnia and Herzegovina’s SMEs through Raiffeisen Bank Bosnia and Herzegovina, UniCredit and Intesa Sanpaolo Banka (EBRD, 2023[41]). SMEs that successfully complete their projects can receive an investment grant of 10-15% of the loan value. The programme also includes EU-funded support to train bankers on green financial products and to help SMEs with project implementation.
Currently, government-backed institutional support through development banks remains limited. The Development Bank of the Federation of Bosnia and Herzegovina offers an SME-targeted credit line for long-term energy-efficiency upgrades and renewable energy investments. Between 2023 and 2025, approximately BAM 13.3 million (~EUR 6.8 million) was invested to support projects, though the number of projects supported has not been reported. In Republika Srpska, existing credit lines do not prioritise sustainability, and no public reporting has been issued since 2018.13
Despite these developments, the expansion of green finance remains slow, with such products accounting for less than 2% of total financial offerings in 2021 (RCC, 2024[38]). This underlines the importance of risk-sharing mechanisms that reduce financial risks for financial institutions lending to SMEs. Green projects are often perceived as higher risk by lenders, resulting in higher interest rates, strict collateral requirements, and ultimately greater barriers for SMEs seeking finance (OECD, 2025[39]). In this context, credit guarantee schemes are an important lever for scaling up sustainable finance by mitigating risk perceptions and strengthening investor confidence in green investments by covering part of potential losses in the event of borrower default. The RS Guarantee Fund explicitly prioritises environmental protection as a strategic pillar for SME support. It issues portfolio guarantees for renewable energy under special terms and has recently applied for accreditation with the Green Climate Fund, which could enable new green financing programmes. In contrast, this focus on greening is not reflected in the FBiH Credit Guarantee Programme.
Beyond bank credit, other debt instruments are not sufficiently developed to increase green finance. Green leasing products, for example, are not available for SME adopters seeking to acquire resource-efficient equipment, and there are no data on leasing tailored to green investments. Green leases enable SMEs to access environmentally friendly assets, such as energy-efficient equipment (usually on favourable terms), thereby reducing high upfront costs and spreading payments over a longer period. Although widely used by firms, the overall leasing market has contracted in recent years, and both banks and specialised leasing companies continue to highlight double taxation as a major barrier to further development (ILO, 2024[40]). This underscores the relevance of alternative finance sources that can complement or substitute traditional debt financing, particularly for green innovation and higher-risk projects where bank capital is often inadequate.
Market-based financing still plays a limited role, although it could help some more established SMEs fund environmentally friendly solutions and processes. This could take place directly, for example, through mini bonds,14 or indirectly via green bonds issued by financial institutions or governments, with proceeds earmarked for financing green SME projects. Capital markets remain largely underutilised as a source of financing for SMEs, and no efforts have been reported to create SME-specific listing segments (US Department of State, 2025[42]) (see Cluster 1). Data on how capital market instruments could support sustainable or resilience projects is not collected, leaving policymakers without a basis to design targeted interventions. Still, some positive developments are emerging. For example, Naša Banka issued two green bonds on the Banja Luka Stock Exchange in 2023 and 2024, using the proceeds to finance loans for private individuals and companies supporting sustainable development, with a particular focus on projects that reduce carbon dioxide emissions (Balkan Green Energy News, 2023[43]; Petrushevska, 2024[44]).
Regarding equity finance that could be particularly relevant for SME innovators, a positive development is the 2022 amendment of the RS Law on Investment Funds, which expanded the regulatory environment for venture capital, private equity and other alternative financing vehicles, laying groundwork for more diversified SME financing in the future. In the Federation of Bosnia and Herzegovina, no comparable progress has been reported, although the SME Strategy does envisage promoting risk capital funds. The first venture capital fund (Cloud Health EuroVentures) was launched in Sarajevo in late 2025,15 but the overall market remains nascent, with no evidence of initiatives targeting early-stage green firms. Significant data gaps also persist regarding SME demand for risk capital and investor interest, limiting the ability to scale these instruments strategically.
Lastly, microfinance continues to play a critical role for microenterprises excluded from traditional banking. In Bosnia and Herzegovina, only five micro-credit organisations offer green products, and most are still geared toward households rather than businesses. A few, such as Partner and Mi-Bospo, provide loans for energy efficiency (EE) upgrades in commercial buildings or business processes, but overall coverage remains modest. Partner’s microloans are offered on concessional terms, including no processing fees and a partial refund of up to 10% of the loan amount. Interest rates range from 7.99% to 9.99%, depending on the repayment period, which can extend up to 54 months for a loan of BAM 30 000 (approximately EUR 15 000) (Partner Microcredit Society, 2026[45]).
The way forward
Create a sustainable finance platform to strengthen co‑ordination between state-level and entity-level institutions to drive the development of aligned sustainable finance frameworks and facilitate engagement with the private sector, particularly industry, banking, academia and civil society. This platform should, among other priorities, work towards supporting the alignment of entity-level taxonomies with the EU Taxonomy and ensuring coherence across all governance levels, continuing the standardisation of sustainable finance offerings and requirements, and advising the government (both at state and entity levels) on policies for strengthening SME access to sustainable finance, both through banks and alternative external financing mechanisms.
In parallel with advancing a Green Taxonomy, develop SME-specific support for its implementation. Entity-level governments and the self-governing Brčko District are encouraged to ensure that upcoming taxonomy requirements for sustainable economic activities are fully aligned with the EU Taxonomy and integrated into SME policies. Support measures should focus on reducing compliance burdens by providing clear guidance, practical tools and advisory services that help SMEs navigate complex reporting obligations and eligibility criteria. This will enable smaller firms to access sustainable finance products more easily and meet the expectations of investors, banks and trade partners as green disclosure standards tighten. For this purpose, Bosnia and Herzegovina could make use of the OECD Guidance Note on Fostering Convergence in SME Sustainability Reporting, which presents practical instruments to help financial institutions develop reporting frameworks tailored to SME reporting capacities and aligned with key international standards such as the European Union’s voluntary standard for SME sustainability reporting (Koreen, Kuzmanovic and Honegger, 2025[46]).
Mobilise finance for sustainable SME projects through credit guarantees and dedicated credit lines. Both entities can build on existing good practices to expand green financing for SMEs. In Republika Srpska, the Guarantee Fund, already applying guarantees for SME energy-related investments, offers a useful model that the FBiH Credit Guarantee Programme could replicate to scale these instruments. Development banks also play a critical role: Republika Srpska should consider adopting an approach similar to that of the Development Bank of the Federation of Bosnia and Herzegovina, which already operates a credit line for EE and renewable energy projects. Across both entities, monitoring and reporting on green blended finance instruments must be strengthened, including in government-run grant schemes, to ensure transparency, assess effectiveness, and support future expansion of sustainable financing mechanisms. Bosnia and Herzegovina could benefit greatly from the OECD Development Assistance Committee (DAC) Blended Finance Guidance 2025, which outlines practical steps and documents good practice across economies for the effective implementation of blended finance solutions (OECD, 2025[47]).
Scale up non-bank financing to support SME sustainable transformation. Bosnia and Herzegovina is encouraged to assess the full landscape of alternative finance instruments, considering SME needs and sector-specific priorities, and address existing regulatory barriers. Key actions could include reforming leasing regulations to eliminate double taxation, which could benefit SME adopters and enablers. But also simplifying administrative requirements, such as application procedures, due diligence, reporting, documentation, and compliance checks, on both the supply side (investment funds and venture capital providers) and the demand side (SMEs receiving venture capital), which are usually more capital-intensive SME innovators. Expanding access to direct equity and quasi-equity through government support could also be considered, but such measures should be guided by a clear assessment of market demand and financing gaps. Evidence from OECD (2025[48]) Member countries points to an increasing role for development banks in venture capital, particularly in addressing early market gaps. A similar approach could be explored in Bosnia and Herzegovina, with development banks first scoping market demand and then gradually supporting growth-stage investments as the ecosystem and financing needs evolve. By doing this, the economy could attract more private capital, providing SMEs with more accessible, flexible and impactful financing options for sustainable growth.
SMEs in Bosnia and Herzegovina continue to face a range of administrative, knowledge-related and technical barriers to their green transition and to building more resilient business models. Survey evidence shows that 28% of SMEs struggle to comply with green regulations and standards, while 30% identify the need for better education and awareness (RCC, 2024[8]). These findings highlight that SMEs require more than financial support alone; they also need easier access to targeted advisory services, capacity building, and support ecosystems at all stages of the business life cycle to promote business sustainability.
Limited resources and restricted market access can be addressed through stronger connections within the economy to other businesses and market participants, for example, through industry partnerships or business networks that either complement or even replace government support.
In this context, this section examines government support systems and initiatives aimed at removing barriers to SMEs collaborating and networking with other firms. It explores how such measures can enable SMEs to contribute to a more sustainable economy while enhancing their integration into value chains within Bosnia and Herzegovina and internationally.
3.4.1. Scaling up public non-financial support for SMEs in a green and resilient economy
Both entities’ SME strategies acknowledge the importance of strengthening SMEs' capacity to adopt green practices and improve resilience. However, the concrete measures and indicators included remain narrowly focussed, primarily on financial incentives and activities related to energy efficiency and renewable energy. Broader guidance to help SMEs navigate the full spectrum of green transition requirements is largely lacking, and environmental strategies address climate action at a general level without accounting for SME-specific needs.
At the state level, the Foreign Trade Chamber of Bosnia and Herzegovina has become an important actor in advancing SME greening and resilience. Since 2023, it has delivered more than 65 trainings, offering short-term technical assistance and certification support (OECD, 2025[37]). Building on this role, and with backing from the European Union and the Government of Germany, the chamber launched the Responsible Business Hub in July 2025, further expanding tailored services that can help SMEs integrate sustainability into their operations (see Box 3.3).
Policy context
More than 80% of managers in Bosnia and Herzegovina are estimated to lack sufficient awareness of how the green transition affects their businesses, while nearly half lack the capacity to develop sustainable products and services (Support4Partnership, 2025[49]).
To address this gap, the European Union and the Government of Germany, in co-ordination with the Regional Trade Chamber of Bosnia and Herzegovina and the Sarajevo School of Science and Technology (SSST), launched the Responsible Business Hub (RBH) in 2025.
The RBH supports companies in adopting responsible, sustainable and green business practices aligned with EU standards. It serves as a catalyst for SME transformation, linking the private sector with innovation actors and policy institutions to accelerate the green transition across Bosnia and Herzegovina’s economy.
Operational aspects
The RBH provides free advisory services and expert guidance to help SMEs prepare for EU market requirements, particularly in environmental protection and sustainability compliance. SMEs gain access to:
clear information on EU regulations and compliance requirements, helping reduce transition risks and costs
local and international expert networks, workshops and training programmes
practical tools for developing internal procedures and sustainability reporting.
In addition, five pilot companies will receive targeted technical support from the SSST to develop green products or services, translating knowledge into concrete market outcomes.
Policy impact
Although the RBH is still in its early stages, it represents a tangible and scalable model for delivering technical greening support to SMEs (see Box 3.4). By combining advisory services, skills development, and innovation support, the Hub lays the groundwork for higher-quality green products, sustainable production processes and improved SME readiness for EU market integration.
Source: DigiGreen.BA (2025[50]).
Such an overview of available support services is also accessible in Republika Srpska through the Entrepreneurial Portal, which acts as a centralised platform for entrepreneurs. It consolidates information on financial incentives, training opportunities, public calls, legislation and other support measures offered by institutions such as the Ministry of Economy and Entrepreneurship and RARS. The portal also includes programmes relevant to SME greening,16 particularly those focussed on knowledge sharing and capacity building for the green transition. In the Federation of Bosnia and Herzegovina, however, businesses must navigate multiple institutional websites, as no comparable centralised access point exists.
Chambers of commerce in both entities remain the primary providers of SME support services. From November to December 2025, the Chamber of Commerce and Industry of Republika Srpska held an ESG Academy, offering 4 days of free training on relevant regulatory frameworks to 72 participants, of whom 35 were microenterprises and SMEs. It also announced a more structured programme under the DiGreenSMEs project to take place as of 2026, providing concrete consulting support for implementing digital solutions in the green transition process, with priority given to participants of the Academy (DigiGreen.BA, 2025[51]).17 In total, the chamber reports having organised over 20 training sessions on the green economy, with more than 660 participants18 and ten SMEs benefitting from direct incentives for greening since 2022.
In the Federation of Bosnia and Herzegovina, however, the Federal Ministry of Development, Entrepreneurship and Crafts reports limited capacity, while efforts to establish an SME Development Agency stalled, posing a barrier to designing and delivering more effective, greening-responsive support for SMEs.
Overall, analysis of SME needs related to greening remains underdeveloped. While RARS collaborates with chambers and SME associations to align programmes with market needs and conducts regular evaluations, these findings are not publicly available. And while a Center for Digital Transformation was established in Republika Srpska following evaluation of programmes, no dedicated greening support centre has emerged, potentially due to low demand from businesses. In the Federation of Bosnia and Herzegovina, the SME Strategy notes slow progress in assessing training needs, and the absence of quality assurance or accreditation mechanisms for private business support service (BSS) providers further limits the development of robust, resilience- and greening-oriented services.
Some insights into SME demand for BSSs focussed on the green transition come from the Sweden-funded Challenge to Change (C2C) project (2022-2025), which supported innovative SME projects linked to the twin transition through competitive grant calls. Of 914 applications evaluated between 2023 and 2024, only 72 (7.9%) related to green transformation services, highlighting that SMEs currently prioritise digital transformation over greening (PEM Consulting, 2024[52]). Among green-related requests, more than half involved installing solar power systems for self-consumption in processing companies, while a smaller share sought environmental consulting. This suggests technical BSSs are mainly sought when regulatory compliance is required or anticipated, a trend likely to grow as environmental legislation tightens.
In terms of support provision, reports on the SME strategy in Republika Srpska show no greening-related actions beyond financial support, while the Federation of Bosnia and Herzegovina similarly emphasises grant schemes over technical or knowledge-based services. Positively, Environmental Protection Funds in both entities offer targeted training. In November 2025, in the Federation of Bosnia and Herzegovina, the Fund launched a call to train entities reporting under the new Waste Management Information System, while in Republika Srpska, the Fund provides regular training on energy management for buildings and business processes, demonstrating progress in equipping SMEs for sustainable operations.
A key barrier to developing greening-focussed BSSs is the lack of regular, effective monitoring by institutions responsible for providing environmental guidance to SMEs. In Republika Srpska, the Swiss Import Promotion Programme project (2017-2024) supported the textile and wood industries while also strengthening the Chamber of Commerce’s internal capacities, aligning the organisation’s practices with ESG standards, developing a Sustainable Development Strategy and training its staff. This experience is particularly relevant for helping SMEs meet EU Single Market expectations, including ESG-related requirements. Building on this, the chamber organised 12 workshops in 2024 to prepare companies for CBAM implementation, including reporting obligations (OECD, 2025[37]).
In the Federation of Bosnia and Herzegovina, the five-year Green Transition Programme (2024-2028) supported by the United Nations Development Programme (UNDP) aims to provide tailored technical support to at least 100 companies in preparation for CBAM. To date, implementation has primarily focussed on awareness-raising activities, including outreach to firms across 12 locations in the Federation of Bosnia and Herzegovina, while more concrete support measures have yet to be fully rolled out. This suggests that further efforts may be needed to ensure timely and effective support to firms amid the CBAM’s implementation (OECD, 2025[37]).
3.4.2. Exploiting the power of networks for the sustainable growth of SMEs
Experience from OECD Member countries shows that targeted policies can successfully integrate SMEs into business networks,19 enabling them to benefit from knowledge transfer, innovation, internationalisation and productivity gains (OECD, 2023[53]; 2019[54]; 2008[55]). In the context of the green economy, expanding and strengthening such networks is essential for SMEs to access key resources such as data, skills and technology, and to improve their adaptability (see Annex). Experience with EE networks in Germany, for example, has shown that they act as catalysts for energy savings, with total accumulated annual savings of 7 432 GWh of final energy recorded between 2017 and 2023, averaging 31.1 GWh per network per year (Adelphi, 2024[56]).
Both entities’ SME strategies focus on developing network platforms to support knowledge-based practices (see Section 3.5), boost innovation and productivity, and integrate SMEs into global value chains, particularly the EU Single Market. The trend is towards building thematic networks, such as those focussed on SME greening and energy efficiency.
Because the Federation of Bosnia and Herzegovina does not publicly report on the implementation of its SME Strategy, there are no updates on what has been achieved since the last OECD assessment, despite action plans that include measures to foster co-operation and networking across EU value chains. In Republika Srpska, implementation reports since 2022 have only mentioned the creation of a digital innovation hub, with no major progress on green networks. However, the agricultural sector presents some positive examples. The Government of Republika Srpska and the Chamber of Commerce and Industry of Republika Srpska support several agricultural cluster associations, including the GLS Agricultural Cluster, the Una-Sana Agricultural Cluster, which brings together more than 500 producers, and the Krajina Agricultural Cluster. These initiatives help connect producers through mechanisms such as virtual marketplaces while also promoting the sustainable production and marketing of local products. Beyond the agricultural sector, however, data on green networks remain limited, making it difficult to get the full picture of how SME networks are built in line with strategic goals, such as connecting SMEs with other market actors to increase the resources and knowledge needed for a successful green transition.
Clusters, as a key lever for promoting business collaboration and innovation across many EU countries, are not fully used in Bosnia and Herzegovina. They could play a crucial role in strengthening research- and practice-based sectors, particularly as knowledge-intensive activities gain traction in driving economic development (see Section 3.5). In Bosnia and Herzegovina, cluster initiatives have been mostly donor-driven, with no consolidated state- or entity-level policies to support their development.
Consequently, data on cluster support, existing instruments, and their impact are very limited. While some regional incentives provide financial or technical support (European Cluster Collaboration Platform, 2024[57]), there is little understanding of how SMEs are linked to other businesses and stakeholders in pre- and post-production stages of value chains within the green economy. Furthermore, no consolidated assessment exists on the benefits SMEs gain from participating in clusters, such as productivity improvements, cost savings or enhanced resilience.
Both entity-level SME strategies also highlight the importance of linking domestic SMEs to foreign investors’ supply chains and supporting their joint presence in international markets. While FDI has been driven by manufacturing and energy sectors, overall inflows decreased from 4.1% of GDP in 2023 to 3.5% in 2024 (World Bank, 2025[2]). Weaknesses in the business environment (see Cluster 1) risk limiting SMEs’ ability to leverage greenfield investments and develop resilient, green business models.
In response, the Green Recovery Component, implemented by Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) and the Foreign Trade Chamber of Bosnia and Herzegovina between 2022 and 2024, provided targeted support to enhance SME integration into green value chains (see Box 3.4).
Policy context
SMEs in Bosnia and Herzegovina, particularly exporters, face dual pressures: rising requirements to decarbonise operations and increasing electricity costs (Spasić, 2023[58]), which strengthens the business case for investing in energy efficiency. However, without targeted support and strategic partnerships to pool resources and knowledge, many SMEs struggle to plan and implement such investments.
In response, GIZ, in co-operation with the Foreign Trade Chamber of Bosnia and Herzegovina, launched the project, Support to SMEs in the Implementation of Energy Efficiency Measures through the Creation of Energy Efficiency Networks (EENs), in 2022, with financing under the Green Recovery Component. The project aims to help SMEs jointly address energy efficiency challenges through structured collaboration.
The project aims to establish an EEN comprising SMEs operating across various subsectors in Bosnia and Herzegovina and to enable them to realise financial savings and access technical support during the implementation of measures, as well as to exchange information with companies from Germany that have already implemented such projects.
Operational aspects
Implemented between January 2022 and August 2024, the project established an EEN bringing together SMEs from different subsectors. Activities included six network meetings hosted by participating companies, enabling peer learning and practical exchange on implemented measures. In addition, participating SMEs took part in a multi-day study visit to Germany, where they observed proven EE solutions and their operational and financial benefits in practice.
Policy impact
By the end of 2024, the EEN was operationalised, providing a replicable model for collective SME action on energy efficiency. The project built lasting institutional capacity within the Foreign Trade Chamber (FTC), which was leveraged to establish the RBH (see Box 3.3). Through the Hub, the FTC then launched the EENs, extending and institutionalising support to ten SMEs1 in Bosnia and Herzegovina. These will participate in a structured programme (until June 2026), including energy audits, carbon footprint measurement, five visits to production facilities, and three specialised workshops on carbon footprinting, ESG reporting and human rights due diligence in supply chains.
The initiative demonstrates how network-based approaches can lower implementation costs, accelerate the uptake of EE measures, and strengthen SME competitiveness and resilience amid rising energy and decarbonisation pressures.
1. These are: Airvent, Aras Production, Termoelektro, Mikroelektronika, Stolarkomerc, TEM Mandeks, Ćosićpromet, Medena-Commerce, KS Tueren, and Mladegs Pak.
Sources: Foreign Trade Chamber of Bosnia and Herzegovina (2025[59]; 2026[60]; n.d.[61]); DigiGreen.BA (2025[62]).
Overall, initiatives linking SME network building to greening and resilience remain very limited in Bosnia and Herzegovina. The absence of a Smart Specialisation Strategy (S3), which would guide the development of a place-based knowledge economy and support targeted network initiatives, is likely to delay progress. This is particularly relevant for strategic sectors such as energy, where network support could significantly enhance both decarbonisation and resilience outcomes for SMEs.
The way forward
Systematically assess and address SME training needs for greening and regulatory compliance. A major gap in current BSSs is the limited understanding, at both state and entity levels, of what SMEs truly need to advance their green transformation and remain competitive, both domestically and in key markets such as the European Union. While initiatives such as the C2C project offer useful initial insights, follow-up assessments and continuous needs analysis are essential. Early findings already suggest that SMEs benefit most from bundled support services that integrate digital and green solutions and focus on how these technologies interact. Building such tailored, demand-driven training programmes would significantly strengthen SME preparedness for emerging regulatory requirements and green market opportunities. A good example that Bosnia and Herzegovina could follow is presented in Box 3.5.
Increase institutional capacities to design and implement non-financial support services for SME greening. Especially in the Federation of Bosnia and Herzegovina, with a plan to establish an SME Development Agency, more funds and strategic priority should be allocated to boost institutional competencies and resources to develop and deliver greening-focussed services that align with state-level support already in place at this level. This should include advisory services on energy management, access to EE support schemes, and compliance with green regulations such as CBAM, as well as broader ESG requirements from buyers and lenders. Stronger co-ordination between the entities, with RARS already having some experience in the field in Republika Srpska and the BiH FTC, would improve co-ordination and scale. Further, it would be advisable to link technical assistance more systematically to existing and future financial programmes. Stronger collaboration with financial institutions would be key to channelling technical and advisory expertise, for example, through bank-developed tools for measuring carbon footprints, guidance on accessing green finance programmes, and support in meeting banks’ reporting and disclosure requirements. This would also help to strategically promote BSSs to SMEs.
Scale up and accelerate the delivery of tailored business network support in light of Carbon Border Adjustment Mechanism requirements. To help SMEs adapt to CBAM, Bosnia and Herzegovina is encouraged to significantly expand targeted support beyond the currently planned capacity-building activities within the chambers of commerce. This includes fostering stronger collaboration through clusters, industrial zones, and other business networks that can jointly address decarbonisation challenges. Shared approaches, such as collective EE upgrades, joint renewable energy generation and storage solutions, and industrial symbiosis models, can reduce compliance costs, accelerate preparedness for CBAM reporting, and strengthen competitiveness across entire value chains. By scaling and speeding up tailored BSS delivery, the entities can create a more enabling environment to help SMEs transition efficiently and equitably.
About the programme
KMU.DIGITAL, run by the Austrian Federal Ministry for Economy, Energy and Tourism in co-operation with the Austrian Economic Chamber, supports Austrian SMEs in planning, implementing and commercialising digitalisation projects to boost competitiveness and growth. In 2024, the programme entered its fourth round and now includes a GREEN strand that explicitly links digitalisation with ecological transformation. This provides advisory and financial support to SMEs to adopt digital technologies that reduce environmental impact, such as intelligent energy-saving systems, digital waste management solutions, and the integration of sustainability reporting into enterprise resource planning systems, thereby delivering benefits for both companies and the Austrian economy.
What is supported
Subsidised status and potential analyses and strategy consultations with certified advisors (up to EUR 3 000 per company).
Implementation of new green investments co-financed at 30% of eligible costs (up to EUR 6 000 per company).
All measures can be combined with the standard KMU.DIGITAL funding.
A similar bundled approach in Bosnia and Herzegovina, combining financial and technical support for both digitalisation and greening, could help SMEs modernise operations, adopt sustainable practices and enhance competitiveness. Integrating non-financial support with financial incentives would enable SMEs to implement innovations effectively, bridge knowledge gaps and access growth opportunities, fostering a more resilient and sustainable business ecosystem.
Source: KMU.DIGITAL (n.d.[63]).
Innovation is essential for SMEs to remain resilient and adapt to changing market conditions and the challenges posed by climate change, which is central to the concept of the green transition. Competitiveness depends on maintaining productivity and building strong linkages across value chains, which can be substantially enhanced through innovative products and processes. While Bosnia and Herzegovina’s SMEs perform strongly in introducing product innovations, reaching 167.2% of the EU average in 2025 (European Commission, 2025[64]), there are no data on the proportion of innovations contributing to the green economy.
As SMEs aim to remain competitive domestically and in export markets, leveraging networks and partnerships with other innovators is crucial to maximising resources and future-proofing their operations. Yet, collaboration between business innovators is not measured. Notably, business-academia collaboration, measured through public-private co-publications, remains just 29.8% of the EU average in 2025, highlighting the need for stronger mechanisms to support joint innovation efforts (European Commission, 2025[64]).
This section examines how government strategies are being translated into advanced innovation infrastructures, effective incentives and strengthened knowledge networks for SMEs that enable sustainable transformation.
3.5.1. Advancing strategic innovation for a green and resilient economy
Innovation policy in Bosnia and Herzegovina is largely driven at the entity level, as state-level frameworks such as the S3 and the BiH Science Strategy are still under development. In the Federation of Bosnia and Herzegovina, elements of science, technology and innovation (STI) are addressed within the SME Strategy, but no dedicated STI strategy exists. In Republika Srpska, innovation is supported through the SME Strategy, the Strategy for the Development of Science and Technology, Higher Education and Information Society 2023-2029, and the Action Plan for Innovation in SMEs 2024-2027. While these strategies acknowledge the role of green and circular innovation in enhancing SME competitiveness, links between innovation and greening are largely limited to participation in EU programmes.
In Republika Srpska, the reported results for 2024 focus on SME EE measures, with no evidence of support for innovative products or business-model changes. A 2023 pilot innovation voucher scheme benefitted ten SMEs, but its focus on greening is unclear. Overall, innovation support has predominantly targeted the digital sector, leaving green and circular innovation largely underdeveloped. Progress reporting is very limited in the Federation of Bosnia and Herzegovina.
In the absence of a state-level S3 framework to guide place-based knowledge development in greening sectors, it is positive that Republika Srpska has defined priority areas through its Entrepreneurial Discovery Process,20 covering information and communication technology (ICT), energy, food production and the creative economy. This provides substantial scope to develop green innovation measures in synergy with the SME Strategy.
However, despite strategic directions that support SME innovation with a focus on greening and resilience, recent analyses highlight weak innovation activity among SMEs in Bosnia and Herzegovina. Constraints include limited capital, low collaboration between companies and knowledge institutions, and a lack of consistent innovation infrastructure (Chamber of Economy of the Federation of Bosnia and Herzegovina, 2023[65]). Across both entities, there are no data on how innovation measures affect SME productivity or contribute to decarbonisation, and the competent authorities are yet to establish mechanisms to enhance business continuity, climate resilience and absorptive capacity for innovation.
A notable gap in Bosnia and Herzegovina is the absence of targeted innovation incentives. As shown in Figure 3.4, satisfaction with existing innovation support is low: roughly half of businesses are indifferent, and over 25% report active dissatisfaction with critical innovation infrastructure and government support. To date, no tax incentives or other mechanisms have been deployed to stimulate innovation across the SME sector or in priority sectors identified through the S3 development process, limiting progress toward a sustainable economy.
SMEs in Bosnia and Herzegovina have access to various incubators and accelerators across both entities (see Cluster 1), but their relevance for the green economy or sustainable innovation remains limited. Notable exceptions include the Mozaik Foundation, which combines ecosystem building, policy reform, and catalytic finance to accelerate green and digital transitions in Sarajevo and Banja Luka. In Republika Srpska, the Innovation Centre Banja Luka, funded by the entity government, is the only incubator subsidised by the RS government, operating under sustainable development principles, thereby, supporting broader sustainability goals, though it does not explicitly target green or SME resilience.
At the state level, the Ministry of Civil Affairs runs grant schemes such as Support for Technical Culture and Innovation in Bosnia and Herzegovina and Horizon Europe preparatory programmes for EUREKA projects. However, there is no reporting on their scale, effectiveness, or contribution to greening objectives for SMEs. In the Federation of Bosnia and Herzegovina, the Strengthening the Competitiveness of SMEs programme supports the integration of innovation but does not prioritise it. Ongoing legal reforms, including the planned Law on Innovation Activities in the Federation of Bosnia and Herzegovina,21 will be crucial to improve both financial and technical support for SME R&D across the entity.
Percentage of surveyed businesses
Notes: Sample n > 185 < 200, representing approximately 0.38% of the total SME population in 2023.
Total counts exclude responses of “Don’t know/refuse”.
The question was: Would you say that you are completely satisfied, neither satisfied nor dissatisfied or completely dissatisfied with the following … [5 options]?
Source: RCC (2024[8]).
In 2025, Republika Srpska adopted a regulation that sets out conditions, criteria and procedures for granting incentives to upgrade technological capacity and support the transition to a green and circular economy.22 This framework is intended to drive green innovation in line with SME strategy goals, though concrete results are not yet evident. Additionally, with the adoption of the Law on Innovation Activity in 2025, the Government of Republika Srpska has created the legal basis for establishing an Innovation Fund to further support innovation, including in the green economy.
Finally, regarding intellectual property (IP), progress remains limited and enforcement generally weak (see Cluster 1). The potential of IP to support SMEs in the green and resilient economy is largely untapped, and key strategies are outdated (European Commission, 2025[1]). The Institute for Intellectual Property of Bosnia and Herzegovina provides free helpdesk and advisory services, including educational seminars for SMEs, while the Enterprise Europe Network delivers workshops and guidance across both entities. However, procedural simplifications, such as streamlined trademark dispute resolution and priority examination for SME filings, are not in place, limiting the effectiveness of IP as a tool for sustainable and resilient innovation.
3.5.2. Capitalising on knowledge networks for driving SME innovation
To navigate the challenges posed by global megatrends outlined in Section 3.1, SMEs must actively engage with knowledge and innovation networks. Their integration into resilient networks is crucial for long-term value creation and growth. Access to knowledge and data through networks is critical for helping SMEs overcome capacity gaps (Pourmand Hilmersson and Hilmersson, 2021[66]).
Innovation voucher schemes are an effective means of stimulating collaboration between SMEs and R&D institutions. However, they have been used only to a limited extent so far. Republika Srpska reports that only ten SMEs benefitted from its pilot voucher scheme in 2023, with no plans to scale the scheme, and although the Federation of Bosnia and Herzegovina participates in an innovation voucher mechanism through the EU4DigitalSME BOOST project, neither entity has established a large-scale, government-led scheme that could systematically support SMEs or target green innovation.
A significant step toward strengthening the innovation ecosystem is the establishment of the first Science and Technology Park (STP) in Republika Srpska (see Cluster 1), intended to foster strategic knowledge and innovation partnerships between SMEs and research institutions. Yet, it remains unclear whether the STP will integrate sustainability objectives or support the development of green technologies and industrial solutions. The Federation of Bosnia and Herzegovina reports on technology transfer capacities at universities, such as the University of Zenica’s Centre for Innovation and Entrepreneurship (CIP UNZE), which facilitates SME development and science-industry collaboration, but green innovation is not a core focus of its services.
The Federation of Bosnia and Herzegovina also highlights its project, Improvement of Institutional Entrepreneurial Infrastructure, within the 2025 grant scheme, funded with BAM 350 000 (~EUR 179 000). The programme aims to strengthen technology-entrepreneurial centres as defined under the Law on Entrepreneurial Infrastructure of the Federation of Bosnia and Herzegovina, but does not explicitly provide innovation support for SME-research collaboration. Instead, it focusses on establishing support institutions that could offer technology transfer services, though links to green transition priorities are not specified.
Even so, strengthening technology transfer institutions is a step in the right direction, as these organisations are typically the main interface between the business sector and research institutions in the Federation of Bosnia and Herzegovina, providing mentoring, technical assistance, and access to laboratories for product testing. To maximise their impact, however, greening priorities must be more explicitly integrated into their strategic direction to drive innovation that enhances climate resilience and decarbonisation potential across Bosnia and Herzegovina’s industries. Relevant international experience can be found in OECD Member countries such as Portugal, where multi-stakeholder consortia for green innovation have been established under the Mobilising Agendas initiative, bringing together industry and academia across dedicated programmes focussed on the green transition (OECD, 2025[18]).
A relevant development in the Federation of Bosnia and Herzegovina is the 2024 grant awarded by the Ministry of Education and Science for co-financing scientific research and R&D projects, implemented in co-operation with the UNDP through the SDG2BiH initiative.23 While the scheme supports local R&D initiatives that advance SDG implementation, most funded projects have so far focussed on social priorities rather than on green or resilience-oriented innovation (UNDP, n.d.[67]).
In 2024, the RS Ministry of Science, Technological Development and Innovation also launched a public competition for the Best Technological Innovation. The scheme allows institutions to apply either independently or through consortia, thereby encouraging the development of knowledge networks. Yet, results have not been published, and neither its relevance to greening nor its accessibility for SMEs is evident. Earlier efforts, such as the 2019 Synergy pilot programme, which co-financed joint projects between businesses and the scientific community (with five projects supported by a budget of BAM 250 000), have not been institutionalised or scaled. These experiences have therefore not translated into sustained, systematic support for SME-focussed green innovation.
However, progress has been made in digitalisation, particularly through the establishment of the Digital Innovation Hub (DIH) in 2022, which supports SME digital upgrading (see Cluster 3). This infrastructure now also provides a useful entry point for greening efforts: a recent project funded by the European Union and Germany and implemented through the DIH focusses on enabling the twin transition by leveraging digital solutions and knowledge networks for the energy transition (see Box 3.6). This creates potential spillover benefits for SMEs seeking to strengthen resilience and accelerate their green transformation.
Policy context
The energy transition is a cornerstone of the green transformation for manufacturing SMEs in Bosnia and Herzegovina. Many firms have started exploring solutions to improve energy management, yet progress remains slow. At the same time, demand for less carbon-intensive products in export markets is rising, while support mechanisms that encourage the uptake of innovative and digital tools are largely absent.
This is despite the strong potential of digital technologies to directly enable greener production. For example, digital energy management systems can optimise energy use in real time, while resource-flow tracking can improve efficiency and support industrial symbiosis in manufacturing. In addition, digital platforms can enhance the measurement, monitoring and reporting of sustainability data, helping firms identify opportunities for savings and demonstrate compliance with environmental requirements. Attempts to adopt some of the best practices from the European Union, such as establishing Learning Energy Efficiency Networks, have yielded some results but have also revealed persistent challenges, including limited willingness among firms to co-operate and share experiences, as well as underdeveloped facilitation capacities to enhance knowledge-based advisory services.
In response, the NGO Enterprise Development Agency (EDA), in partnership with the Faculty of Electrical Engineering at the University of Banja Luka, the Chamber of Commerce of Republika Srpska, the Innovation Centre Banja Luka, and RARS, launched the project, Digitally Enabled Sustainable Energy Transition of Manufacturing SMEs (DESET). The project aims to stimulate the energy transition and digital transformation among export-oriented manufacturing SMEs, contributing to a more resilient, innovative, and sustainable industrial ecosystem.
Operational aspects
Running from May 2025 to November 2027, the project seeks, among other objectives, to establish a functional knowledge-exchange network linking SMEs with service providers.
As a first step, between 29 May and 13 June 2025, surveys were conducted with 85 manufacturing companies and 15 sector experts. The survey assessed the current state of energy management in SMEs, identified key challenges, and highlighted priority areas for intervention. Particular emphasis was placed on the role of digital tools and international standards, such as ISO 50001 and ISO 14001, in improving EE and management practices.
In October 2025, a training programme for energy management experts was held to build a pool of qualified professionals capable of providing high-quality support to SMEs throughout the energy transition. Currently, the project is supporting ten selected SMEs through activities that include conducting energy audits, implementing software and digital energy management solutions, and assisting with certification in accordance with ISO 50001 and ISO 14001 standards.
Policy impact
Although the project is still ongoing, the initial survey has already provided valuable insights into SMEs’ needs and readiness to engage in innovation networks. A significant 92% of surveyed companies indicated openness to participating in innovation practices focussed on digital and energy solutions. Experts further emphasised the importance of access to innovation laboratories and demonstration centres, enabling firms to test solutions before committing to investment. These early findings underline the relevance of network-based approaches that go beyond financial support alone, enabling SMEs to access knowledge, innovation equipment, facilitation services and strategic partnerships.
Sources: Enterprise Development Agency (2025[68]; 2025[69]); Innovation Centre Banja Luka (2025[70]).
The way forward
Establish a comprehensive incentive system for green research and development and innovation. Bosnia and Herzegovina still lacks a co-ordinated approach to innovation, particularly in the absence of an economy-wide S3. It is essential to identify barriers in the institutional set-up and innovation infrastructure, and to design a balanced policy mix that reflects SME resource constraints and sector priorities, such as in clean energy, air pollution, the circular economy and waste management. This would support innovation aligned with low-carbon and resilient economic development. In the Federation of Bosnia and Herzegovina, the swift adoption of the new Law on Innovation Activities is key to enabling this progress. Bosnia and Herzegovina could further consider establishing a comprehensive SME green innovation programme, such as the KMUi-Klima in Germany (see Box 3.7).
Consider introducing a green innovation voucher scheme. Although both entity-level SME strategies refer to innovation vouchers, and Republika Srpska conducted a small pilot, Bosnia and Herzegovina has yet to adopt such schemes and evaluate their potential impact. Introducing voucher programmes focussed on green transition priorities could stimulate innovation between SMEs, research institutions and support organisations, helping firms accelerate eco-innovation, enhance resilience and develop solutions aligned with emerging green market demands. Bosnia and Herzegovina could make use of the OECD International Database on Science, Technology and Innovation Policy to track experiences from initiatives (including over 140 policy instruments and 60 initiatives) in OECD Member countries and filter initiatives by company size/age and thematic focus to gain inspiration for designing successful green vouchers (EC-OECD, 2026[71]). One example is Austria’s Eco Voucher, providing up to EUR 12 000 that has been in place since 2020, incentivising SMEs to develop environmentally friendly innovations (Österreichische Forschungsförderungsgesellschaft, 2025[72]).
Once innovation support schemes are operational, introduce systematic impact evaluations. Programmes such as a green innovation voucher scheme should be regularly assessed to determine their effects on SME productivity, competitiveness and long-term resilience. Evidence from these assessments would help refine policy measures, improve targeting and ensure that support instruments effectively advance SMEs’ sustainable transformation and innovation capacity.
Policy context
To accelerate climate mitigation and adaptation in Germany, there is a need to translate innovative research into practical, market-ready solutions more quickly. In this context, the Federal Ministry of Research, Technology and Space (BMFTR) supports SMEs through the KMUi-Klima programme, strengthening their capacity to develop and commercialise cutting-edge climate innovations while enhancing the overall innovation ecosystem.
Since 2024, the BMFTR has established the Energy Efficiency, Climate Protection and Climate Adaptation field as a standalone priority within its KMU-innovativ programme. This elevates climate change as one of the central global challenges and places greater strategic emphasis on supporting SME-driven innovation in this area.
Operational aspects
The programme aims both to attract first-time SME applicants and to encourage already research-active companies to further expand their R&D activities and develop innovative solutions.
Funding is provided for R&D projects in priority areas that include:
technologies, processes and services that improve energy efficiency
greenhouse gas reduction technologies and solutions
cross-cutting climate-relevant technologies
climate protection products and services
products and services supporting climate change adaptation
sustainable services and land-use practices for rural areas.
Particular emphasis is placed on projects that contribute to the Climate Action Plan 2050 and Germany’s Adaptation Strategy to Climate Change. State aid for economic activities in the relevant areas may range from EUR 25 million to EUR 55 million per enterprise and project, depending on the type of research: up to EUR 25 million for experimental development, up to EUR 35 million for industrial research, and up to EUR 55 million for fundamental research.
Policy impact
The funding scheme has been very well received since its launch in 2007. The KMU-innovativ funding scheme now accounts for around one-quarter of the BMFTR’s SME funding. As of 2024, more than EUR 2 billion has been provided to risk-rich projects of innovative SMEs. Establishing such a flagship programme with regular annual calls would also provide continuity and predictability, helping to strengthen the economy’s innovation ecosystem over time.
Source: Federal Ministry of Research, Technology and Space (n.d.[73]).
Networks play a major role in increasing resilience as a certain degree of redundancy and diversification across nodes helps to reduce interdependence, promote risk management culture, reduce the cost of shock mitigation and allow for easier recovery and adaptation (Brende and Sternfels, 2022[74]; OECD, 2023[75]; OECD, 2004[76]). SME networks can take different forms, comprising various actors that exchange products, services, knowledge and other resources. They can be divided into four main types, as illustrated in Annex Figure 3.A.1.
Source: Based on OECD (2023[3]), drawing on EC/OECD (2023), Unleashing SME Potential to Scale Up, https://www.oecd.org/cfe/smes/sme-scale-up.htm, Phase II on Network expansion; EC/OECD (2023), Fostering FDI-SME Ecosystems to Boost Productivity and Innovation, https://www.oecd.org/industry/smes/fdi sme.htm, Phase II on FDI-SME linkages and ecosystems.
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← 1. The World Bank (2025[84]) announced a project to support a Just Transition in select coal mine regions of Bosnia and Herzegovina until 2030 that also foresees a grant scheme managed by the FBiH Ministry of Energy, Mining and Industry that would be offered to eligible local micro, small and medium-sized enterprises (MSMEs) in Banovici and surrounding areas.
← 2. The portal is at https://zelenaekonomija.komorabih.ba/en/.
← 3. Some activities on circular economy and the green transition conducted by the Foreign Trade Chamber of Bosnia and Herzegovina include:
Publications: Private Sector Recommendations for the Green Economy in Bosnia and Herzegovina, Green Transition in Bosnia and Herzegovina – with a Special Focus on Carbon Footprint Taxation.
Seminars, workshops, round tables, forums: The Business Community of Bosnia and Herzegovina in the Circular Economy and Energy Transition, Nearshoring and Decarbonization in the Western Balkans, Workshops on Green Business Models in the Metal and Wood Industries of Bosnia and Herzegovina, European EnergyManager (EUREM) Programme: Opportunity to Optimize Business through Efficient Energy Management.
Presentation of good practices in the implementation of green business models: Webinar “CBAM – Carbon Border Adjustment Mechanism”, Webinar “Reporting under the CBAM”, Workshop on the Implementation of the ETS.
← 4. While CBAM costs are legally and administratively borne by EU importers, who must purchase and surrender CBAM certificates, non-EU exporters may ultimately absorb part of the cost indirectly. In practice, exporting companies may lower their prices to remain competitive as suppliers in the EU market or invest in cleaner production to reduce embedded emissions and, consequently, the number of certificates required (UN Principles for Responsible Investment, 2026[80]).
← 5. SMEs may face increasing requests for sustainability information from financial and value chain partners who are obliged to comply with the CSRD, often in non-standardised formats (European Commission, 2025[79]).
← 6. The survey was conducted among 76 exporters, with 48.7% of them confirming that their products are covered under CBAM. Given the structure of Bosnia and Herzegovina’s export sector, it can be assumed that the majority of surveyed companies are SMEs active in iron and steel processing.
← 7. This funding to SMEs was dispersed under the Regulation on the Procedure for Granting Incentives for the Promotion of SMEs, through which SMEs are supported for participating in fairs abroad and the organisation of fairs and conferences, as well as under the Regulation on the Procedure for Granting Incentives for Improving the Competitiveness of SMEs, support is defined for digital transformation, procurement of equipment (including equipment for EE) and traditional crafts.
← 8. In 2022, nearly EUR 1.4 million was allocated to 96 enterprises, while by 2024, this amount had risen six-fold to almost EUR 8.4 million, benefitting 193 enterprises. Additional support is planned under the Economic Reform Programme 2024-2026, including dedicated loan programmes for ICT sector equipment and infrastructure, as well as for start-ups in the digital economy, but not on green business models (Government of the Federation of Bosnia and Herzegovina, 2025[87]).
← 9. In June 2023, the Chamber of Commerce of Republika Srpska (2023[86]), with the support of the Ministry of Economy and Entrepreneurship of Republika Srpska, organised the conference, “Green Economy - Driver of Sustainable Development of the RS Economy”, aiming to raise awareness about the importance of renewable energy sources, energy efficiency and the green economy. In 2025, it also held a seminar in Gradiška on the topic "Decarbonization of SMEs - Challenges and Opportunities", in co-operation with Business Friendly Certification South East Europe (BFC SEE) cities of Gradiška, Laktaši and Prnjavor, and the municipality of Srbac, to educate business representatives on CBAM and help them prepare for its implementation (Chamber of Commerce of Republika Srpska, 2025[78]).
← 10. The development process of Bosnia and Herzegovina’s Disaster Risk Reduction Strategy 2026-2030 is supported through the joint programme, "Disaster Risk Reduction for Sustainable Development in Bosnia and Herzegovina", which is financed by the Government of Switzerland, the United Nations and the authorities of Bosnia and Herzegovina, and implemented by the UNDP, the United Nations Children’s Fund (UNICEF), the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the Food and Agriculture Organization (FAO) in partnership with domestic institutions (Ministry of Security of Bosnia and Herzegovina, 2026[83]).
← 11. Members of the SDG Financing Working Group, which consists of representatives of the Council for Monitoring the Implementation of the Sustainable Development Goals in Bosnia and Herzegovina, appointed representatives of the ministries of finance and the relevant ministries at the level of Bosnia and Herzegovina, the Federation of Bosnia and Herzegovina, Republika Srpska; and representatives of the Finance Directorate of the Brčko District; and representatives of the cabinets of the Council of Ministers of Bosnia and Herzegovina, the Government of the Republika Srpska and the Government of the Federation of Bosnia and Herzegovina.
← 12. This is based on a sample of 21 MSMEs, so the external validity of the findings should be interpreted with caution.
← 13. The RS Investment and Development Bank’s nomination for accreditation with the Green Climate Fund has been recently accepted, and the bank has been in the process of accreditation since February 2026.
← 14. Mini bonds: Debt securities issued by SMEs that are pooled as part of a securitisation process to attract institutional and retail investors. Because mini bonds are subject to fewer regulatory requirements than traditional bonds, they are often backed by public financial institutions to strengthen their creditworthiness and reduce investment risk. This enables SMEs to access capital for green projects (OECD, 2025[39]).
← 15. Cloud Health EuroVentures is an early-stage venture capital fund investing in digital health, artificial intelligence and life sciences across southeast Europe. With a target size of USD 10 million, it aims to connect = innovators from Bosnia and Herzegovina with global investors, partners and mentors (Cloud Health Euroventures, 2025[90]).
← 16. These include the following projects: 1) the Interreg Europe Green, Digital, Female-driven SMEs (GRANDIS) project, which aims to unlock the potential of female entrepreneurs and women-led SMEs in the twin-transition sectors of green and digital technologies; 2) the DESET project with the goal to foster the energy transition and digital transformation of export-oriented manufacturing SMEs in Bosnia and Herzegovina by creating a more resilient, innovative and sustainable industrial ecosystem; 3) the SMEnergy project that builds service centres and transformation paths for a higher share of renewable energy use in SMEs; and 4) TEX-DAN: Moving Forward with Circularity in Textile and Fashion Value Chains, which aims to adopt technologies in SMEs to enhance circularity in textile and fashion value chains (Entrepreneurial Portal of Republika Srpska, 2025[85]).
← 17. The ESG Academy was implemented by the Chamber of Commerce of Republika Srpska, within the project "Digitally sustainable green transition of SMEs in Republika Srpska” (DiGreenSMEs), with the financial support of the European Union and the German government. The project is implemented through the EU initiative for the development of the private sector in Bosnia and Herzegovina, which is part of the broader GIZ programme, Sustainable Economic Development and Employment Promotion (SEDEP) in Bosnia and Herzegovina.
← 18. Beyond the ESG Academy other examples of educational activities undertaken by the Chamber of Commerce and Industry of Republika Srpska (2025[82]; 2026[81]) are a workshop on EU Cross-Border Carbon Adjustment Mechanism – CBAM: How to Fill in the Report on 28 October 2025 and a session on Energy Management, Energy Efficiency and Carbon Management, held on 5 February 2026.
← 19. Networks are systems of connected actors that enable the exchange of information, products, services, assets and/or resources. They may be supported by physical infrastructure, formal agreements, or remain informal relationships (OECD, 2023[3]).
← 20. In the second half of 2020, at the initiative of the RS Ministry of Scientific and Technological Development, Higher Education and Information Society, the Government of Republika Srpska decided to develop a Smart Specialisation Strategy of Republika Srpska for the period 2021-2027 and authorised this ministry to develop an interdepartmental working group to work on drafting the document (Government of Republika Srpska, 2021[77]).
← 21. In October 2023, the “Decision on the appointment of the Working Group for the preparation of the Draft Law on Innovation Activities in the Federation of Bosnia and Herzegovina” was adopted (Government of the Federation of Bosnia and Herzegovina, 2023[88]; 2023[89]).
← 22. Regulation on the Grant of Investment Incentives from 27 February 2025.
← 23. The project called “Translating the SDG Framework in Bosnia and Herzegovina into sustainable and inclusive growth” ran between 1 April 2022 and 31 March 2025.