Digital transformation is reshaping how SMEs compete, but requires more than access to technology. This cluster examines whether the right conditions are in place for SMEs to navigate this transition successfully. It looks at how policies are designed and implemented to support SME digitalisation and productivity, how they build the digital safety environment that underpins trust and resilience, and how they support SMEs in moving beyond basic digital tools toward more advanced and sustainable technologies; assessing in each case whether policy ambition is matched by effective delivery and measurable outcomes at firm level.
SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Bosnia and Herzegovina
Abstract
Digital transformation is an increasingly important driver of small and medium-sized enterprise (SME) productivity, innovation and competitiveness, yet its impact depends on whether firms operate within an enabling policy and institutional environment. While digital technologies can help SMEs improve operational efficiency, access new markets and adopt more data-driven business models (OECD, 2021[1]), these benefits only materialise when complementary conditions are in place, including adequate digital skills, access to advisory and financial support, interoperable systems, and effective governance frameworks (OECD, 2019[2]; Bianchini and Lasheras Sancho, 2025[3]). Public policy, therefore, plays a critical role in determining whether SME digitalisation remains confined to basic tool use or supports deeper upgrading and structural transformation (OECD, 2024[4]).
In Bosnia and Herzegovina (BiH), support for digital transformation has expanded in recent years, but policy efforts remain uneven across levels of government. While entity-level strategies, donor-funded programmes and innovation hubs increasingly recognise the importance of digitalisation and digital skills, these initiatives are not yet embedded in a coherent, SME-oriented policy framework. Implementation challenges persist, notably in terms of co-ordination, structured delivery mechanisms, and the availability of integrated financial and advisory support to accompany SMEs beyond basic adoption of digital tools. This section assesses whether the foundational conditions for SME digital upgrading are in place in Bosnia and Herzegovina by examining the coherence of policy and institutional frameworks, the structuring of financial and advisory support, and the availability of digital skills development opportunities.
4.1.1. Strengthening policy and financial support for SME digital transformation
SME digital transformation depends on co-ordinated progress across skills, infrastructure, innovation systems and access to finance, making the quality of the policy framework and delivery architecture a critical determinant of outcomes. Smaller firms typically face higher fixed costs of adoption, limited internal expertise and greater difficulty in sequencing investments, which makes them more dependent than large enterprises on coherent public support to derisk digital upgrading and guide investment decisions (OECD, 2021[1]). Digital transformation is thus best understood as a policy-intensive process: progress hinges not only on the availability of individual instruments, but on the extent to which governance arrangements align incentives, reduce fragmentation and provide predictable pathways from basic digital adoption to productivity-enhancing transformation (OECD, 2019[2]). Well co-ordinated policy frameworks and delivery mechanisms are thus essential for translating strategic intent into firm-level outcomes.
In Bosnia and Herzegovina, strategic references are made to SME digitalisation but remain dispersed across levels of government, reflecting the constitutional division of competences between state and entity levels. Digital transformation has been confirmed as a strategic priority in the Reform Agenda, recently endorsed by the European Commission under the Growth and Reform Facility, which outlines commitments to advance the green and digital transitions, strengthen private sector development, and improve competitiveness (European Commission, 2025[5]). It has also been identified as a guiding objective for future state-level policies expected to align with the EU Digital Compass and the Western Balkans Digital Agenda (Council of Ministers of Bosnia and Herzegovina, 2025[6]). However, these commitments have yet to be translated into a coherent, SME-focused policy architecture.
The smart specialisation process, initiated in line with the Multi-Annual Action Plan for the Regional Economic Area, is particularly relevant in this context, as a Smart Specialisation Strategy (S3) could identify priority sectors towards which to concentrate innovation and digitalisation efforts. While initial steps have been taken, such as mapping scientific, innovation and economic capacities and identifying preliminary priority domains, the process remains incomplete, with no S3 strategy adopted or draft publicly consulted to date (Council of Ministers of Bosnia and Herzegovina, 2025[7]). At the entity level, the Science Strategy of Republika Srpska foresees the introduction of smart specialisation as part of its fourth strategic goal, with the development of a Sustainable Smart Specialisation Strategy envisaged under Priority 4.1, signalling progress toward a more structured approach. Thus, the policy drive for SME digital transformation is primarily shaped by entity-level strategies, which vary in scope and depth (Table 4.1), though policy activity in this area is not exclusively dependent on the adoption of formal strategies. Across these frameworks, digitalisation is generally narrowly interpreted, focusing on connectivity, service uptake and ICT use rather than on the organisational change, data-driven management and innovation processes that characterise deeper digital transformation (Mitchell, 2021[8]).
Notes: The table considers all policy frameworks that are relevant for SME digitalisation or digital transformation.
1. A strategy sets the overall vision, strategic objectives and long-term priorities for a given policy area whereas an action plan operationalises these priorities by defining concrete measures, responsible institutions, timelines and (where available) indicative budgets. In other words, the strategy explains what the government intends to achieve while the action plan details how it will be implemented. Action plans, therefore, serve as the main reference point for assessing the extent to which strategic commitments translate into measurable, on-the-ground interventions.
2. An indirect SME targeting approach under the Status column refers to strategies that do not contain SME-specific measures, instruments or implementation mechanisms, but instead pursue economy-wide objectives from which SMEs may benefit. While such strategies may support areas relevant to SMEs (e.g. innovation, digital infrastructure or digital skills), they do not explicitly account for SME-specific constraints, capacities or policy needs.
Source: Information provided by state and entity levels of Bosnia and Herzegovina during the assessment period (2025).
In the Federation of Bosnia and Herzegovina (FBiH), the Development Strategy of the Federation of Bosnia and Herzegovina 2021-2027 explicitly recognises the digital economy as a strategic development pillar under the goal of increasing the digitalisation of the economy, and specifically calls to “accelerate the digital transformation of SMEs” under Measure 1.1.2. Complementing this, the Small Business Development Strategy of Federation of Bosnia and Herzegovina 2022-2027 translates these objectives into a more actionable policy framework under strategic direction on innovation and digital transformation of small businesses and a strategic goal on competitive small businesses based on innovation, digitalisation and the green economy. Within this framework, Priority 1.1: Digitalisation of small business entities includes measures to accelerate SME digital transformation, encourage the development of innovative digital solutions and companies in the software industry, and support entrepreneurship in the creative sectors. The strategy earmarks BAM 3 million (≈ EUR 1.5 million) in grant funding, of which BAM 270 000 (≈ EUR 138 000) is allocated specifically for SME digital transformation support, to be implemented through the Federal Ministry of Development, Entrepreneurship and Crafts (FMRPO). This represents a tangible, though modest, financial commitment to strengthening SMEs’ uptake and transformation of digital tools.
In Republika Srpska (RS), the SME Development Strategy 2021-2027 identifies digitalisation, innovation and technology upgrading as central drivers of competitiveness and links them explicitly to improved export performance and productivity growth. Under the strategic goal on strengthening the competitiveness and innovation of SMEs, Measure 1.1.2 specifically targets the promotion of innovation and digital transformation in SMEs, aiming to expand SME access to modern technologies, advisory services and innovation financing. Complementing this, the Strategy for the Development of Industry 2021-2027 reinforces these objectives through Priority 2.3: Modernisation and digital transformation of industrial production, which outlines measures to support technology adoption, strengthen co-operation between industrial R&D actors, and introduce digital management systems across manufacturing enterprises. Similarly, the Strategy for the Development of Science and Technology, Higher Education and Information Society 2023-2029 focuses on building a knowledge-based economy under the strategic goal on the development of the information society and digital transformation, with actions to expand ICT infrastructure; enhance digital skills; and promote collaboration between research institutions, universities and businesses, including SMEs.
Lastly, Measure 1.1.3 of the Development Strategy of the Brcko District 2021-2027 and Action Plan specifically refers to support for SME innovation and digitalisation (PEM Consult, 2024[9]). The measure promotes “smart growth” by boosting knowledge-intensive products and strengthening the Brcko District’s integration into European digitalisation trends. With a budget of BAM 3.6 million (≈ EUR 1.8 million), it aims to increase value added, support innovation and improve SME participation in modern value chains.
Together these frameworks represent incremental progress toward improving the enabling environment for SME digitalisation, but they fall short of a coherent, integrated approach capable of driving digital transformation across the economy. Policy efforts remain distributed across entities and the Brcko District, with no overarching co-ordination or monitoring mechanism to ensure that objectives, instruments and funding across different levels of government are mutually aligned and consistently directed toward a common set of SME digitalisation outcomes. At the entity level, there are measures addressing digital uptake, advisory support and financing – and they show progress. However, the absence of a shared strategic framework means that the scope, depth and institutional ownership of these measures vary significantly across the economy, leaving SMEs without consistent access to support depending on where they are located. As a result, current SME digital transformation initiatives risk remaining uneven in coverage and impact, with limited potential to drive economy-wide transformation, boost productivity, or enable participation in regional and EU digital markets.
Financial and technical support for SME digitalisation in Bosnia and Herzegovina remains primarily donor-driven, with relatively few government-led instruments offering dedicated, SME-targeted assistance (Table 4.2Until 2024, the EU4DigitalSME project, co-financed by the European Union and Germany, provided direct support to SMEs by strengthening digital innovation hubs (DIHs) and improving SMEs’ access to digital transformation financing mechanisms (GIZ, 2020[10]) (Table 4.2). Building on this experience, GIZ is currently implementing the regional EU4Digital programme for the Western Balkans, under which Bosnia and Herzegovina continues to participate as a beneficiary, with a continued focus on expanding SME access to advisory services, skills support and digital investment finance. In parallel, the European Bank for Reconstruction and Development’s Go Digital in Bosnia and Herzegovina initiative was implemented as a pilot through partner financial institutions, offering SMEs blended finance instruments to support investments in digitalisation and automation solutions (EBRD, 2025[11]). Based on the pilot’s results, the European Bank for Reconstruction and Development has since launched the broader Go Digital in the Western Balkans programme, under which BiH SMEs are expected to benefit from a dedicated EUR 50 million credit line, finalised in December 2025 (EBRD, 2025[12]).
Notes: ERP: enterprise resource planning; CRM: customer relationship management; EBRD: European Bank for Reconstruction and Development; MoFTER: Ministry of Foreign Trade and Economic Relations; UNDP: United Nations Development Programme; IPA: Instrument for Pre-Accession Assistance. The table includes an overview of government and donor financial support for SME digital transformation.
Source: OECD compilation based on publicly available information.
In parallel, entity-level mechanisms operate within the domestic policy architecture. In the Federation of Bosnia and Herzegovina, SME digitalisation support is primarily channelled through the Small Business Development Strategy Fund, managed by the FMRPO, which provides grants of up to BAM 30 000 (≈ EUR 15 000) for technology adoption and digital upgrading through its Support for SMEs in the IT sector project (FMRPO, 2025[13]). Implementation of this measure is co-ordinated by the FMRPO, which in 2023 fully executed its digitalisation budget allocation of BAM 1.3 million (≈ EUR 650 000), reflecting 100% of planned expenditure for SME digital transformation support (Development Programming Institute of FBiH, 2023[14]). In parallel, the Development Bank of the Federation of Bosnia and Herzegovina provides additional financing instruments that support the IT sector and digital transformation, including loans for fixed assets related to ICT infrastructure upgrades and, where applicable, partial financing of current assets (Development Bank of the Federation of Bosnia and Herzegovina, 2025[15]). In Republika Srpska, incentives for SME digital transformation co-finance eligible investments ranging from BAM 10 000 to BAM 30 000 (≈ EUR 5 000-15 000), with a lower threshold of BAM 1 000‑2 000 (≈ EUR 500-1 000) when support is limited to the development of a certified digital transformation strategy. These grant schemes are currently active, with a new public call expected to be announced in 2026. In the past, the Ministry of Economy and Entrepreneurship of Republika Srpska ran incentive schemes for digital business transformation, including software/platform procurement, training and advisory services, with public calls offering grants up to BAM 20 000 (≈ EUR 10 000) per project (Government of Republika Srpska, 2021[16]). Meanwhile, the Investment-Development Bank of Republika Srpska also provides SME credit lines and loans channelled via partner banks that can finance equipment and technology upgrades (IRBRS, 2025[17]).
Co-ordination for SME digital transformation in Bosnia and Herzegovina remains structurally complex due to its multi-level governance system. At the state level, the Ministry of Foreign Trade and Economic Relations (MoFTER) plays a co-ordinating role in SME policy, facilitating alignment between entity-level institutions, while digitalisation responsibilities fall under the Ministry of Communications and Transport. There is no dedicated agency for information society at the state level. In the Federation of Bosnia and Herzegovina, the FMRPO leads SME support, whereas in Republika Srpska these functions fall under the Ministry of Economy and Entrepreneurship and the Agency for Information and Communication Technologies of Republika Srpska. In Brcko District, responsibilities are divided between the Department for Economic Development, Sports and Culture and the Department for Informatics. Given the constitutional division of competences, co-ordination of SME digital transformation support primarily takes place at the entity level, with alignment across entities encouraged by EU-supported initiatives but not yet resulting in a unified approach.
The distribution of competences across levels of government also affects the reach and effectiveness of SME digitalisation incentives. While various programmes demonstrate growing awareness of the need to support SME digital transformation, their impact is constrained by the absence of a shared co-ordination framework, uneven reach, and reliance on external and donor funding. Most initiatives operate on a project basis, with limited monitoring of results and little integration into long-term policy frameworks.
Beyond financing, structured advisory support for SME digital transformation remains limited across Bosnia and Herzegovina. No dedicated economy-wide instrument or institutional framework provides continuous, structured advisory or technical assistance for SMEs seeking to digitalise. At the entity level, some advisory support exists but provision varies across entities. International partners, including the UNDP as a long‑standing strategic partner of BiH institutions, have contributed practical tools and guidance to support digitalisation processes (UNDP, 2022[18]). However, scaling up these efforts into a more systematic, government-anchored advisory framework remains a priority.
4.1.2. Assessing the digital maturity of SMEs in Bosnia and Herzegovina
Assessing SME digital readiness requires moving beyond headline adoption rates to examine how deeply digital tools are embedded in business operations and decision making. Evidence shows that digital uptake among smaller firms is often incremental rather than transformative, with many SMEs relying on basic applications that improve visibility or administrative efficiency but do not fundamentally alter productivity or business models (OECD, 2023[19]). Deeper digital upgrading, such as the adoption of data-driven management, automation or integrated enterprise systems, typically depends on structured public support that combines skills development, advisory services and accessible finance, helping SMEs overcome capability constraints and investment risks (OECD, 2021[1]; 2023[19]). This distinction is especially important in Bosnia and Herzegovina, where structural constraints SMEs face heighten the risk that digitalisation remains confined to basic tools unless supported by co-ordinated public policies and targeted capability-building measures.
A survey conducted by the OECD among SMEs in the Western Balkans and Türkiye (see Methodology Annex) indicates that digital tools adoption among SMEs in Bosnia and Herzegovina is growing but remains largely centred on basic technologies. Almost all surveyed SMEs (94%) report using at least one digital tool, with full adoption among firms established after 2015 (OECD, forthcoming[20]). The most commonly used tools are company websites (66% of surveyed SMEs), followed by social media platforms (63%) and e-invoicing systems (37%) (Figure 4.1), which mirrors patterns observed across most other Western Balkan and Türkiye (WBT) economies. Conversely, a lower share of surveyed SMEs uses more complex digital technologies: only 29% use cloud computing, 23% use ERP, 9% use e-commerce, and only 6% use big data or CRM. While this indicates progress in establishing an online presence and digitising routine operations, it also points to limited use of more advanced tools that enable data-driven management, automation or process optimisation. This pattern is consistent with evidence from the OECD sample, which shows that SME digital adoption is often confined to basic services, with adoption gaps widening as technologies become more sophisticated (Kergroach, 2021[21]).
Source: OECD (forthcoming[20]).
Moreover, understanding SMEs’ motivations for adopting digital tools can provide insight into the depth of their digital ambitions and strategic orientation. Results show that the main drivers for digitalisation among SMEs in Bosnia and Herzegovina remain commercial and operational: 64% of surveyed SMEs adopt digital tools to broaden their customer base and 55% to increase domestic sales, while 42% cite process automation, activity monitoring or expanding international sales as key motivations (Figure 4.2) (OECD, forthcoming[20]). Unlike in some other WBT economies, over a third of SMEs in Bosnia and Herzegovina also report using digital tools to explore new sources of revenue and to enhance their products, indicating an emerging awareness of digitalisation’s potential for innovation and business diversification.
Note: The chart excludes respondents who cited “Do not use digital tools” in the previous question. See Figure 4.1.
Source: OECD (forthcoming[20]).
In contrast, more strategic uses such as teleworking (relying on cloud services, digital document and workflow management systems, and collaboration platforms) and employer branding remain limited, suggesting that most SMEs still view digital tools as a supplementary benefit that can support and enhance business models rather than as a catalyst for broader internal organisational transformation.
Furthermore, barriers to deeper digital transformation among SMEs in Bosnia and Herzegovina are visible, with financial constraints emerging as a central concern among surveyed SMEs. The costs of acquiring and maintaining digital tools are reported as some of the main challenges to the uptake of digital tools, followed closely by the time and financial resources required for training to implement new technologies (Figure 4.3) (OECD, forthcoming[20]). This pattern mirrors findings from the OECD sample, where financial limitations, limited digital skills and time constraints are among the main factors slowing SME investment in digital technologies (OECD, 2024[22]). Importantly, these skills-related barriers are closely intertwined with cost considerations: limited in-house digital expertise increases reliance on external support and training, thereby raising the effective cost of adoption. This is particularly noteworthy given that awareness of government digitalisation programmes is relatively high: 41% of surveyed SMEs report being informed about such initiatives (OECD, forthcoming[20]). The coexistence of relatively strong awareness with persistent cost and skills barriers suggests that existing programmes may not yet be sufficiently accessible, well-targeted or scaled to translate awareness into deeper digital adoption.
Note: “None” refers to respondents who reported no challenges related to digital tool use (i.e. they did not cite any of the listed challenges), regardless of whether they use digital tools.
Source: OECD (forthcoming[20]).
In addition, employee resistance to change emerges as a notable barrier for roughly a quarter of surveyed SMEs, ranking fifth overall and appearing more pronounced than in several other economies in the WBT region. Together these findings point to structural weaknesses in financial and human capital that could slow SMEs’ progress toward higher levels of digital maturity if not addressed through targeted advisory and capability-building support.
4.1.3. Enhancing digital skills and capacities
SMEs’ demand for digital skills is shifting globally, as firms increasingly need advanced competencies such as data analysis, cloud service integration and strategic digital leadership (OECD, 2021[1]). Governments and policymakers point out that while SMEs often struggle with foundational digital literacy, the real barrier to competitive growth lies in building cross-functional capabilities that link technology use with business strategy and innovation (OECD, 2023[19]). These trends underline the importance of upskilling not only in technical tools, but in managerial and organisational mindsets, enabling SMEs to translate digital investments into productivity and growth (OECD, 2021[1]).
Against this broader backdrop, findings on SME digital skills development in Bosnia and Herzegovina reveal a mixed and uneven landscape. About 17% of surveyed SMEs identify insufficient digital skills as a barrier to their digital transformation (Figure 4.4), placing the economy among the middle-ranking economies in the WBT in terms of perceived skills constraints (OECD, forthcoming[20]). Moreover, more than 55% of surveyed SMEs rely on external consultants for digital expertise, above the regional average of 47%, while only 15% employ in-house IT specialists (OECD, forthcoming[20]). Interestingly, 15% of SMEs depend on friends or family for technical support, reflecting both the informality of the SME sector and limited access to professional digital services. This reliance on ad hoc or external expertise suggests that many enterprises address digital needs reactively rather than building sustained in-house capacities, which may hinder long-term digital maturity and innovation potential.
Source: OECD (forthcoming[20]).
So far, entity-level governments have taken some steps to strengthen the digital skills ecosystem, although progress remains uneven across levels of government. In line with the constitutional arrangement, education and skills development are the competence of the entities and, in the case of the Federation of Bosnia and Herzegovina, the ten cantons, while the Ministry of Civil Affairs holds a limited co-ordinating role at the state level and the Ministry of Communications and Transport carries responsibility for digital skills matters within its remit. As a result, digital skills policy is designed and implemented at the entity level, with varying priorities and capacities, and there is no overarching mechanism linking skills development with labour market needs and SME digitalisation across the economy (see Cluster 4).
In the Federation of Bosnia and Herzegovina, the Development Strategy 2021-2027 explicitly recognises the need to develop digital competences and promote digital literacy to support innovation and labour market adaptability. These objectives are reinforced by a specific strategic objective to enhance the quality of education and better align skills with market needs, which includes measures to strengthen ICT education, expand access to lifelong learning, and integrate digital technologies into teaching and vocational training. Together these commitments provide a solid strategic foundation for building digital skills, but implementation has not yet fully translated into targeted instruments for SMEs. In parallel, the FBiH government also adopted the Employment Strategy 2023-2030, which, while acknowledging the importance of digitalisation for the public sector, does not incorporate SME digitalisation into its strategic objectives. This limits the coherence between employment, skills and enterprise development policies.
In Republika Srpska, the Strategy for the Development of Science and Technology, Higher Education and Information Society 2023-2030 explicitly prioritises digital skills, with a focus on improving the digital skills of citizens and specialists in ICT technologies. It recognises digital skills development as a prerequisite for advancing the ICT industry, supporting the digitalisation of the economy and enabling broader societal transformation. Measure 3.2.1 calls for the systematic monitoring and improvement of citizens’ digital skills . Complementing this, the Republika Srpska Employment Strategy 2021-2027 acknowledges the growing importance of digital competences for employability and competitiveness, but only addresses them in general terms, focusing primarily on reducing skills mismatches rather than developing structured systems for digital upskilling or labour market foresight.
In Brcko District, the Development Strategy 2021-2027 embeds digitalisation within its broader education and human capital priorities, calling for the integration of digital competencies at all education levels and the enhancement of training infrastructure. Despite these commitments, targeted interventions supporting SME-specific digital skills development remain limited across all levels of government.
Furthermore, Bosnia and Herzegovina’s education system has undergone moderate reforms to address digital skills gaps. Both entities have expanded ICT profiles in vocational schools and universities and digital content is increasingly included in teacher training programmes. At the state level, the working document “Priorities in integrating entrepreneurial and digital competence into education systems in Bosnia and Herzegovina 2019-2030”, adopted in 2019, seeks to align digital skills development with the European Digital Competence Framework (ILO, 2023[23]), and both entities have initiated measures to modernise ICT teaching. Recent efforts such as the Reimagining Education initiative, which trained more than 2 000 teachers in digital and blended learning, demonstrate growing momentum (UNESCO, 2023[24]). Nevertheless, alignment between educational reforms and labour market needs remains limited. Only 30% of adults in Bosnia and Herzegovina possessed at least basic digital skills in 2023, well below the EU average of 55.6% and a decline from 34.7% in 2021 (Eurostat, 2023[25]). For SMEs, these structural weaknesses in the skills pipeline continue to constrain technology adoption and innovation capacity.
Across Bosnia and Herzegovina, technology centres and innovation hubs provide practical support for SME digital skills development. In the Federation of Bosnia and Herzegovina, INTERA Technology Park and SPARK offer hands-on digital entrepreneurship and software trainings, while the Industrial Hub Tuzla delivers a growing portfolio of courses focused on digital skills and modern production practices (INTERA, 2025[26]; SPARK, 2025[27]; Industrial Hub Tuzla, 2025[28]). The Verlab Research Institute’s Centre for Digital Transformation recently launched the “Transformation for Competitiveness: Digital and Green” call, supported by the Federal Ministry of Development, Entrepreneurship and Crafts, providing SMEs with digital audits and energy-efficiency guidance delivered by certified consultants (Verlab Institute, 2025[29]). In Republika Srpska, the Innovation Centre Banja Luka (ICBL) created a business incubator, and delivers tailored workshops and advisory services to strengthen SMEs’ digital capacities (ICBL, 2025[30]). The Development Agency of Republika Srpska (RARS), together with the ICBL, the Chamber of Commerce of Republika Srpska, the Faculty of Electrical Engineering of the University of Banja Luka and the Enterprise Development Agency (EDA), delivers support through the IDEMO Digital Innovation Hub (IDEMO Digital Innovation Hub, 2025[31]). Republika Srpska is also home to European Digital Innovation Hub ONEX Banja Luka, a competence network supported under the Digital Europe Programme that provides professional support for business development and digital transformation for SMEs across sectors, focusing on bringing together users and providers of digital solutions and raising awareness of digital opportunities.
In parallel, several donor and non-governmental programmes have further contributed to addressing digital skills gaps. The Innovation and Digitalisation of SMEs project implemented by GIZ previously provided structured training and mentoring for SMEs on digital readiness, although the programme has now concluded. Building on earlier pilots, the European Bank for Reconstruction and Development’s Go Digital in Bosnia and Herzegovina initiative is transitioning into the broader Go Digital in the Western Balkans Programme, under which workshops and advisory support for SMEs will be organised through partner financial institutions (EBRD, 2025[11]; GIZ, 2019[32]). Non-governmental actors such as Bit Alliance (Box 4.1) and the Mozaik Foundation continue to strengthen human capital through upskilling and mentorship programmes (Bit Alliance, 2020[33]; Mozaik Foundation, 2025[34]). Despite this mix of hub-based, donor-funded and non-governmental organisation-led initiatives, support remains uneven and limited in scale relative to the digital skills needs of the broader SME sector.
Founded in 2014, Bit Alliance is the leading association of IT companies in Bosnia and Herzegovina, bringing together 58 firms that employ around 80% of the economy’s IT workforce and generate approximately EUR 250 million annually.
Created to address key sectoral constraints, such as a shortage of 6 000 qualified IT professionals and weak institutional support, the Bit Alliance applies a triple-helix model connecting education, business and public policy. Its work focuses on:
Aligning education with labour market needs through curriculum reform, dual education, and training initiatives such as CoderDojo and EduBits-IT courses.
Advocating for legislative and tax reforms to support IT growth.
Facilitating co-operation among member firms and start-ups. It also partners in EU and donor-funded projects, including Smart Cities – Towards Digital Transformation of Cities in BiH, DUALSCI and RDBIH.
Bit Alliance has become the central co-ordination platform for Bosnia and Herzegovina’s IT sector, contributing to policy reforms, the creation of over 45 start-ups and the training of more than 800 young professionals. The IT sector now records average annual revenue growth of about 25%, driven by stronger links between education, research and industry.
Source: Bit Alliance (2026[35]).
The way forward
Better harmonise cross-governmental support for SME digital transformation. Building on the Reform Agenda’s strong emphasis on secure digital public infrastructure and trusted digital services, Bosnia and Herzegovina should establish an agreed-upon SME digital transformation reform pillar with clear objectives, defined responsibilities across levels of government, an allocated budget and a shared monitoring framework. Given the multi-level distribution of competences, the priority should be to operationalise co-ordination (e.g. a cross-governmental mechanism, common delivery standards and public reporting against a core set of SME digital adoption indicators). This would help create more predictable pathways from basic adoption to productivity-enhancing digital upgrading.
Develop a co-financing mechanism for SME digital tool adoption, building on the Reform Agenda's digital economy objectives and existing entity-level instruments. A dedicated financing mechanism, designed and implemented at the entity level and supported through co‑ordination facilitated by MoFTER, could help enterprises adopt the technologies needed to benefit from upgraded digital infrastructure, cybersecurity frameworks and e-ID systems. The mechanism should be light and fast-disbursing, providing small grants to co-finance investments in practical digital tools such as accounting and invoicing software, e-commerce platforms, cloud services, ERP/CRM systems, and basic cybersecurity upgrades. To ensure that support reaches the most constrained firms, a fixed share of resources could be earmarked for micro and small enterprises. Aligning the design principles of such schemes across entities, with MoFTER playing a facilitating and harmonising role, would help ensure consistency of approach and maximise impact across the economy, increasing productivity, competitiveness and preparedness for the EU Single Market.
Consolidate and scale SME-focused digital skills programmes across all levels of government. Despite growing demand for advanced digital and managerial skills, SME upskilling in Bosnia and Herzegovina remains uneven across entities, districts and donor-led initiatives, with no overarching co-ordination framework linking skills development to SME digital transformation and labour market needs. Public authorities at state, entity and district levels should, therefore, work towards a more coherent approach, embedding SME-oriented digital competences into mainstream vocational education and training, higher education, and adult learning systems, and aligning these efforts with existing development and employment strategies. Expanding financial incentives, such as training vouchers, co-financed courses or tax deductions for enterprise-based training, could help SMEs invest in workforce upskilling while formalised partnerships with technology parks, innovation hubs, universities and chambers of commerce would scale delivery and improve outreach beyond major urban centres. In parallel, more targeted support for management-level, data-driven, sector-specific digital competences would help SMEs move from reactive outsourcing to building in-house capabilities, linking technology adoption with strategic planning, organisational change and long-term productivity growth.
Latvia has sought to increase employer investment in workforce skills through a co-ordinated policy package combining financial incentives, regulatory tools and capacity-building measures. Implemented with support from the European Union’s Technical Support Instrument, the initiative aims to address the low levels of enterprise training by reducing financial, informational and co-ordination barriers, particularly among small and medium-sized enterprises (SMEs).
The Latvian approach is built around several complementary elements:
Financial incentives for training: Enterprises can access subsidised training projects funded by EU Structural Funds, as well as tax exemptions on training expenditures. These measures help reduce the direct cost of employee training, which is a key barrier for SMEs.
Training vouchers and active labour market programmes: The State Employment Agency provides vouchers for training, including digital and online courses, supporting unemployed individuals and workers at risk of displacement.
Employer-centred support instruments: The policy package includes tools such as additional training agreements, payback clauses and planned sectoral Skills Funds, which pool resources across firms to co-finance training and reduce the risk of employee poaching.
Capacity-building and co-ordination measures: The reform emphasises the role of diagnostic tools, coaching, competence centres, and co-operation between enterprises and education providers, recognising that financial incentives alone are insufficient without support for organisational learning and skills planning.
Latvia’s experience shows that improving enterprise training requires a balanced mix of financial support, regulatory incentives and institutional co-ordination.
Sources: OECD (2022[36]); European Commission (2022[37]).
Once foundational conditions for digital adoption are in place, the central issue becomes whether digitalisation translates into productivity gains at the firm level. Evidence shows that productivity growth among SMEs is shaped by how effectively firms use digital channels to sell, innovate, reorganise operations and engage with markets (OECD, 2023[19]; 2021[1]). SMEs that actively engage in e-commerce and digital innovation are more likely to expand markets, diversify revenues and improve efficiency while firms that remain digitally passive risk falling behind as competitive pressures intensify (OECD, 2023[38]; European Commission, 2024[39]). Crucially, productivity gains do not arise from digital presence alone, they materialise when online sales, innovation activities and organisational change are mutually reinforcing, enabling firms to scale beyond local markets and adapt business models over time (OECD, 2023[19]; 2021[1]).
While basic digital adoption has expanded across Bosnia and Herzegovina's SME sector, structural constraints continue to hinder translating digital tools into sustained productivity growth. Limited co‑ordination, low access to scalable e-commerce solutions, and weak links between digitalisation and innovation ecosystems constrain SMEs’ ability to move beyond incremental efficiency improvements. This section examines how digitalisation can contribute more effectively to SME productivity in Bosnia and Herzegovina, focusing on two key channels: 1) leveraging the use of e-commerce and online platforms to drive SME growth; and 2) fostering digital innovation and collaboration for SME productivity.
4.2.1. Leveraging the use of e-commerce and online platforms to drive SME growth
E-commerce and online platforms constitute a key channel through which digitalisation can translate into productivity gains for SMEs. When online sales channels are integrated into core business processes rather than used as stand-alone add-ons, they can reduce transaction costs, broaden customer bases and enable more systematic use of data for strategic decision making (OECD, 2025[40]). SMEs adopting hybrid sales models, combining physical presence with online channels, are more likely to improve their efficiency and scale their operations, while firms that rely on basic or informal digital channels capture fewer productivity benefits (OECD, 2023[38]). More broadly, the growing role of digital platforms in trade and value chain participation underscores the importance of e-commerce as a pathway for SMEs to access new markets and customers beyond local demand (OECD, 2019[41]; 2025[42]).
E-commerce adoption among SMEs in Bosnia and Herzegovina reflects these dynamics but remains limited, pointing to an early stage of digital market engagement. About 51% of surveyed SMEs report selling through their own websites, 40% use social media platforms for online sales and almost 9% use other sales platforms; however, nearly 29% of surveyed SMEs still do not use any form of e-commerce (Figure 4.5) (OECD, forthcoming[20]). Notably, none of the SMEs in the sample reported using third-party marketplaces,1 indicating that most firms rely on basic, low-cost channels rather than structured or scalable e-commerce solutions. This pattern suggests that while awareness of online sales opportunities is increasing, SMEs in Bosnia and Herzegovina remain cautious about adopting more advanced or diversified digital sales models.
Note: None of the surveyed SMEs reported using international third-party marketplaces (e.g. Amazon, eBay).
Source: OECD (forthcoming[20]).
Moreover, e-commerce currently contributes only marginally to SME revenues in Bosnia and Herzegovina. Over 80% of surveyed SMEs using e-commerce report that online sales account for less than 10% of their total income, while only around 3% generate more than half of their revenue through e-commerce (OECD, forthcoming[20]). This underlines the still-limited commercial impact of digital sales channels, despite growing awareness of their potential. Notably, 41% of surveyed SMEs report being aware of government programmes related to digitalisation, more than double the average observed in comparable samples across the region (OECD, forthcoming[20]), suggesting that policy visibility is improving. However, this awareness has yet to translate into more extensive or profitable e-commerce use, as most SMEs remain focused on basic domestic sales rather than scaling up to cross-border or platform-based trade.
Government policy efforts to boost e-commerce uptake also remain insufficient, with Bosnia and Herzegovina being the only WBT economy without a comprehensive law on e-commerce, relying instead on the outdated Law on Electronic Legal and Business Transactions (Salihović-Whalen and Balta, 2025[43]). The law provides only basic principles for online business and is not aligned with the EU Directive on Electronic Commerce or internal market rules governing cross-border digital trade. Although responsibilities around e-commerce are divided across state and entity levels, contributing to prolonged regulatory delays, some reform efforts have recently accelerated. A draft of a new Law on E-commerce has been under development, and a preliminary Draft Law for the Federation of Bosnia and Herzegovina has now been finalised and at the time of writing was expected to be submitted to the FBiH government in the coming days (Faktor, 2025[44]). This marks the first substantive step toward modernising Bosnia and Herzegovina’s e-commerce framework, though full alignment will require co‑ordinated legislative action across all levels of government. Moreover, the initiation of the ratification process for CEFTA Decision 2/2024 represents a potentially important step towards facilitating regional digital trade, but implementation remains at an early stage and its impact on SME uptake has yet to materialise.
Government efforts to boost e-commerce uptake remain at an early stage. While Republika Srpska has a Law on E-Business in place, Bosnia and Herzegovina lacks a comprehensive, harmonised e-commerce framework aligned with the EU Directive on Electronic Commerce or internal market rules governing cross-border digital trade (Salihović-Whalen and Balta, 2025[43]). A draft Law on E-Commerce for the Federation of Bosnia and Herzegovina is still awaiting binding opinions before formal submission to the FBiH government, though progress on related instruments has been more tangible: the FBiH government adopted a Draft Law on Fiscalisation of Transactions in late 2025, introducing mandatory e-invoicing and real-time reporting for business to business, business to government and business to consumer transactions, which has since been accepted by the House of Representatives and at the time of writing was under parliamentary procedure for final adoption. In Republika Srpska, the adoption of a new Consumer Protection Law in 2025 further strengthens the legal framework for online transactions. At the state level, while the Agency for Identification Documents, Registers and Data Exchange of Bosnia and Herzegovina (IDDEEA) has made meaningful technical progress – including an eIDAS-compliant e-ID, a qualified electronic signature, and a first-phase digital wallet launched with support from the European Union and GIZ – the adoption of a new Law on Electronic Identification and Trust Services drafted to fully comply with eIDAS has been stalled (OECD, 2025[45]). These technical advances have yet to translate into strong SME engagement in e‑commerce. Moreover, the initiation of the ratification process for CEFTA Decision 2/2024 represents a potentially important step toward facilitating regional digital trade, but implementation remains at an early stage.
Additionally, the state-level Law on Electronic Signature 2006 and the Law on Electronic Document 2014 provide the basis for electronic authentication and document validity, but they remain only partially aligned with the EU eIDAS Regulation (OECD, 2025[45]; World Bank, 2023[46]). Against a backdrop of legislative delay, progress on building a digital identity ecosystem has been accompanied by unresolved legal and institutional questions regarding the competences and legal basis of the institutions involved. While IDDEEA has implemented the key components of a digital identity ecosystem aligned with European frameworks, including an eIDAS‑compliant electronic identification (e-ID), a qualified electronic signature (QU Sign), a mobile identity solution (e-IDDEEA) and an interoperable data exchange platform (DataXChange) connecting public institutions (IDDEEA, 2025[47]), the legal framework governing these services remains unresolved, limiting their reliable uptake by businesses and citizens. The first phase of a digital wallet has been launched with support from the European Union and GIZ, accompanied by the establishment of a secure personalisation and data storage centre in Banja Luka that meets EU security and ISO standards (IDDEEA, 2024[48]; 2025[49]). However, compared with several other WBT economies that introduced operational e-ID and trust service frameworks earlier, Bosnia and Herzegovina has only recently developed the capacity to operationalise qualified electronic signatures (OECD, 2025[45]). More co‑ordinated efforts – including the adoption of a clear legislative framework – will be needed to convert infrastructure progress into broader business uptake and trust in online transactions.
A solution would thus be to boost engagement through targeted e-commerce programmes. The Foreign Trade Chamber of Bosnia and Herzegovina, through the Enterprise Europe Network, has introduced hybrid formats for international business networking, such as the online and in-person business to business meetings organised during the International Economic Fair Mostar 2025, which enable SMEs to explore new partners and markets through digital channels (Mostar Fair 2025, 2025[50]).
A notable effort is also the first E-Commerce Academy, organised by the Association eComm in partnership with GIZ, which offers structured training on online sales, digital marketing and e-business operations (GIZ, 2022[51]). In addition, the project Innovation and Digitalisation of SMEs, implemented by GIZ and linked to the wider EU4DigitalSME programme, aimed to create a more supportive environment for SME digital transformation (GIZ, 2020[10]). Although not exclusively focused on e-commerce, the project provides advisory support, coaching and digital readiness activities that help SMEs improve their online presence and enhance internationalisation potential. Furthermore, the Association eComm has launched the first eCommerce EXPO in Bosnia and Herzegovina, a dedicated event bringing together online retailers, logistics providers, payment service operators and technology partners, giving SMEs access to practical demonstrations, trends and tailored guidance on how to expand sales through digital channels (eComm Association BiH, 2025[52]). Despite this, support for SME e-commerce uptake in Bosnia and Herzegovina remains scarce, ad hoc and mostly externally funded, with no sustained government-led schemes specifically designed to meet enterprise needs. Such initiatives also remain largely absent at entity and Brcko District levels, where no dedicated e-commerce support measures for SMEs have been introduced.
4.2.2. Fostering digital innovation and collaboration for SME productivity
Digitalisation contributes to productivity growth not only through sales channels, but through its interaction with innovation and knowledge diffusion within firms. Evidence shows that SMEs engaging in digital and data-driven innovation tend to have greater productivity gains, resilience and growth potential, as innovation improves products, processes and organisational efficiency (Hall, Lotti and Mairesse, 2012[53]; Mohnen, Polder and Van Leeuwen, 2018[54]). However, these gains are unevenly distributed: firms that already possess stronger organisational capabilities, skills and intangible assets are better positioned to capture the benefits of digital technologies while less-prepared SMEs struggle to move beyond incremental improvements (Brynjolfsson and McAfee, 2011[55]). Across OECD countries, these trends have contributed to widening productivity gaps between leading and lagging firms, particularly in ICT-intensive sectors, where larger and more capable firms are better positioned to exploit digital technologies (Andrews, Criscuolo and Gal, 2016[56]). This dynamic creates a risk that digitalisation reinforces existing productivity gaps rather than narrowing them. Similar patterns persist across the European Union, reflecting structural barriers for SMEs such as limited access to finance, weak technology transfer mechanisms and low absorptive capacity (European Commission, 2024[39]). Effective policy frameworks and institutional support are, therefore, critical to ensuring that digital innovation contributes to broad-based productivity growth rather than progress concentrated among a small group of advanced firms.
The government’s efforts to strengthen digital innovation and collaboration in Bosnia and Herzegovina remain modest in scale. Most initiatives are either small in scope, donor-supported or institution-led pilots that focus on start-ups and innovation hubs, with limited outreach to the broader base of established SMEs across sectors. The BH TechLab, launched by BH Telecom, provides financing and incubation for digital start-ups, supporting early-stage firms in commercialising innovative digital solutions (BH TechLab, 2025[57]). The Tech4Impact Fund complements this by offering grants and investment-readiness programmes for technology-driven enterprises, with a focus on scalable digital and green innovations (Tech4Impact Fund, 2025[58]). In parallel, FabLab BiH, the Digital Fabrication Laboratory, provides SMEs with access to prototyping equipment, 3D printing and product development support, enabling firms to test digital and hardware innovations at relatively low cost (FabLab BiH, 2025[59]).
Complementing these initiatives, the former EU4DigitalSME project, completed in 2024, supported the creation and scaling of digital innovation hubs in Sarajevo, Banja Luka and Tuzla (GIZ, 2025[60]). These hubs provided SMEs with digital maturity assessments, “test-before-invest” services and training programmes in advanced technologies, while also enabling firms to experiment with digital solutions and strengthen internal innovation processes. The DIHs further act as knowledge-exchange platforms, linking SMEs with universities and research centres, including the ICBL, the University of Sarajevo’s Centre for Digital Transformation and the University of Mostar’s INTERA Technology Park.
Moreover, several entity- and locally based initiatives have emerged to foster SME innovation and digital transformation. In the Federation of Bosnia and Herzegovina, the INTERA Technology Park has run projects such as BOOST and BITNET, as well as a Startup Academy, enabling SMEs to test automation tools and develop competitive digital business models (INTERA, 2019[61]). The BOOST project, which supported at least 40 SMEs through co‑operation with academia and DIHs, shows early progress. Its continuation, BOOST2, expands this approach by planning support for at least 100 SMEs via an Innovation Voucher Scheme that connects firms with academic and innovation service providers (INTERA, 2025[62]). Similarly, the SPARK Business Park in Mostar offers incubation, mentoring and technical support for SMEs adopting advanced digital solutions, while also fostering innovation ecosystems (SPARK, 2025[27]). Other important platforms that strengthen digital innovation in the Federation of Bosnia and Herzegovina include the BIT Alliance, which co-ordinates ICT sector innovation networks and bootcamps for start-ups (Bit Alliance, 2026[35]), as well as the BH Tech Lab’s and Mozaik Foundation’s collaboration with the “Lonac” platform, promoting digital entrepreneurship and innovation among start-ups and youth (BH Telecom, 2023[63]).
In Republika Srpska, RARS, through the European Enterprise Network and the IDEMO DIH, provides SMEs with training, advisory services and networking opportunities to support the adoption of digital technologies (IDEMO Digital Innovation Hub, 2025[31]). Other partners in DiHs provide the same support. The Chamber of Commerce of Republika Srpska has also established a Centre for Digital Transformation (CDT PKRS). Founded in 2020, it was the first institution in Bosnia and Herzegovina to train and certify digital transformation consultants in accordance with the international standard ISO 17024. Between 2022 and 2024, with the support of international donors, the CDT PKRS supported 47 companies from the wood- and metal-processing sector in developing digital strategies and implementing digital solutions, with a total investment of BAM 600 000. The centre offers practical tools such as InnDigitSME – a Digitalisation and Innovation Assessment Tool designed to help SMEs evaluate digital maturity, identify innovation gaps and design tailored improvement plans (InnDigit, 2024[64]) (Box 4.3). Additionally, RS authorities and business support institutions periodically launch targeted capacity-building initiatives, including the public call for training on the Application of Innovative Digital Trends in the Function of Economic Development, aimed at equipping SMEs with up-to-date knowledge on emerging technologies and their application in business transformation (Chamber of Commerce and Industry of Republika Srpska, 2024[65]).
However, publicly available monitoring or evaluation reports assessing the reach, outcomes or SME-level impact of these initiatives remain limited, constraining the ability to assess their effectiveness and to inform the scaling or adjustment of support instruments.
Implemented between November 2023 and September 2024, the InnDigitSME (Innovation & Digitally Connected R&D in SMEs in Bosnia and Herzegovina’s entity Republika Srpska) project aimed to strengthen innovation and accelerate the digital transformation of small and medium-sized enterprises (SMEs) in Republika Srpska. The initiative was led by the Chamber of Commerce and Industry of Republika Srpska, in partnership with the Faculty of Mechanical Engineering at the University of Banja Luka and the Center for Digital Transformation of Serbia’s Chamber of Commerce, with support from the EU4DigitalSME programme co-funded by the European Union and the German government.
One of the project’s key outcomes was the development of the InnDigit Tool, an online digitalisation and innovation assessment platform designed to help SMEs evaluate their level of digital maturity and identify potential for innovation. Accessible through the Chamber of Commerce’s “InfoBiz PKRS” portal, the tool enables SMEs to self-assess their digital capabilities through an online questionnaire covering the key aspects of digitalisation. Based on the results, it automatically generates tailored recommendations for improvement and provides guidance on strengthening collaboration between businesses and academia. The tool also supports the Center for Digital Transformation by supplying data on SME needs, helping consultants design targeted advisory interventions.
The InnDigit Tool was piloted with ten export-oriented companies and following the completion of the project was made publicly available to all firms. In the pilot phase, three SMEs received in-depth consultancy support and implemented specific digital solutions based on the tool’s recommendations. Since its official launch in May 2024, 44 companies have used it to assess their digital maturity and plan innovation activities.
The InnDigitSME project also tested a new service model within the Center for Digital Transformation, which provides tailored advisory support, connects companies with research institutions and promotes technology transfer. Through these mechanisms, SMEs improved their process efficiency, product quality and innovation readiness while contributing to the digitalisation of traditional industries in Republika Srpska.
Sources: Chamber of Commerce and Industry of Republika Srpska (2023[66]); InfoBIZ PKRS (2024[67]).
On the demand side, digital innovation is gaining momentum among SMEs in Bosnia and Herzegovina, with 65% of surveyed SMEs already applying some form of digital innovation to improve their products, services or processes (OECD, forthcoming[20]). Among surveyed enterprises, about 38% report using digital innovation at a moderate level and 27% at a significant level, while a further 24% state that they intend to adopt such practices in the near future (Figure 4.6). Only 12% of surveyed SMEs report no engagement in digital innovation, indicating a relatively small share of laggards. Notably, female-led SMEs are more likely to use digital innovation – at 83%, compared to 53% of male-led firms – and newer enterprises established after 2015 show higher uptake than those founded earlier, at 75% and 58%, respectively. These findings suggest a growing culture of digital innovation among SMEs in Bosnia and Herzegovina, although it remains concentrated among newer businesses.
Source: OECD (forthcoming[20]).
Moreover, the institutional and collaborative infrastructure needed to sustain the emerging innovation culture remains underdeveloped. In particular, collaboration with external innovation actors, such as universities, R&D institutions, or innovation centres, remains weak and insufficiently institutionalised. Bosnia and Herzegovina is one of the only WBT economies not having available data on the share of innovative SMEs collaborating with other enterprises or institutions (European Commission, 2025[68]), reflecting a lack of systematic monitoring and limited policy attention to innovation linkages. This absence of structured collaboration mechanisms constrains knowledge transfer, weakens the research-industry interface and hampers the development of a dynamic innovation ecosystem capable of supporting SME digital transformation.
Innovation financing also represents a major structural bottleneck. The latest available data from 2021 indicate that investment in R&D stood at 0.19% of GDP (Figure 4.7), significantly below the European Union’s 2021 expenditure average of 2.24% (Eurostat, 2021[69]; OECD, 2025[70]). This gap highlights the underinvestment in research and innovation, limiting SMEs’ ability to develop new products, integrate digital technologies and compete in knowledge-intensive markets.
Notes: Research and development expenditure as a percentage of GDP encompasses spending by governments, higher education institutions, business enterprises and private non-profit organisations. The 2014-2016 and 2020-2023 figures represent three-year unweighted averages of research and development expenditure as a percentage of gross domestic product.
Source: Eurostat (2024[71]).
The way forward
Accelerate and complete the harmonisation of e-commerce legal frameworks at entity level, ensuring full alignment with the EU Directive on Electronic Commerce. Entity-level governments should prioritise the adoption of dedicated e-commerce laws, ensuring full alignment with the EU Directive on Electronic Commerce and internal market rules. In the Federation of Bosnia and Herzegovina, the priority should be to finalise and adopt the draft Law on E-Commerce, which partially aligns with the EU Directive on Electronic Commerce and complements the Law on Internal Trade adopted in 2024. Harmonising requirements across the Federation of Bosnia and Herzegovina, Republika Srpska and the Brcko District would provide SMEs with a more predictable and secure environment for online sales. To ensure effective implementation, authorities could establish a single, economy-wide support function, such as an E-commerce Support Centre or digital helpdesk, responsible for translating legal provisions into practical guidance for SMEs, covering consumer protection, data security, online contracting, platform participation and cross-border requirements. Small-scale grants or vouchers for e‑commerce onboarding, legal compliance or platform integration could further help SMEs move from informal social media sales to structured online trade.
Denmark complements its EU-aligned e-commerce legal framework with targeted small and medium‑sized enterprise (SME) implementation support through an initiative under SMEs: Digital, established in 2018 as part of the government’s Strategy for Digital Growth. The programme supports digital transformation across all sectors, with the E-Commerce Centre serving as a dedicated pillar for SME online sales. The initiative illustrates how harmonised rules can be translated into practical SME compliance:
A dedicated SME-focused delivery mechanism: The E-Commerce Centre functions as a one-stop support structure for SMEs seeking to develop or expand online sales. It is led by the Ministry of Industry, Business and Financial Affairs, with contributions from the Ministry of Foreign Affairs, particularly on export promotion and framework conditions for cross-border e‑commerce.
Sustained public funding and practical instruments: Public funding (DKK 10 million in 2018, DKK 20 million in 2019 and DKK 25 million in 2020-2021) supports grants for private consultancy (up to DKK 100 000), personalised e-commerce strategies and workshops combining expert advice with small grants. These instruments help SMEs address concrete legal, technical and commercial barriers to online sales.
Regulatory guidance and trust building: A core function of the E-Commerce Centre is providing practical guidance on EU and national e-commerce rules, including consumer protection, platform use, export requirements and unfair competition. By translating legal obligations into operational steps, the centre reduces uncertainty and builds SMEs’ trust in online channels.
Denmark’s experience shows that harmonised e-commerce legislation needs accompanying implementation support to be effective for SMEs. By combining legal alignment with sustained funding, hands-on advisory services and a dedicated one-stop structure, Denmark has helped SMEs move from basic online presence to more structured and export-oriented e-commerce activities.
Sources: Denmark Ministry of Industry, Business and Financial Affairs (2018[72]); OECD (2021[1]).
Introduce an innovation voucher scheme at entity level that enables SME collaboration with research and technology partners. Entity-level governments should establish a demand-driven innovation voucher scheme that allows SMEs to purchase applied research and technology services from universities, research centres and technology parks. Administered and implemented through entity institutions and existing innovation intermediaries, the vouchers could cover services such as digital product development, prototyping, testing, feasibility studies, process optimisation and technology integration. To ensure accessibility, the scheme should rely on a light application process, small fixed-value vouchers and a broad network of eligible service providers across entities. Complementary matchmaking activities, such as brokerage events, online partner directories, and advisory support through chambers of commerce or digital innovation hubs, could help SMEs identify suitable research partners and define project scopes. Pilot rounds could initially target priority sectors or export-oriented SMEs, with gradual scaling based on demand and evaluation results.
Ireland has addressed weak research-industry linkages among small and medium-sized enterprises (SMEs) through a long-running Innovation Voucher scheme administered by Enterprise Ireland. Introduced in 2007, the scheme enables SMEs to collaborate with universities, institutes of technology and public research organisations on applied, short-term innovation projects, lowering the cost and risk of first-time co-operation. The scheme is designed as a simple, demand-driven instrument:
Simple, SME-oriented design: Innovation vouchers provide SMEs with flexible funding (approximately EUR 5 000) to use knowledge-intensive services from eligible research providers. Supported activities include feasibility studies, prototype, testing, process improvement and digital product development.
Focus on applied outcomes: Projects are short, practical and business-led, ensuring relevance for SMEs while encouraging research institutions to engage in problem-solving rather than purely academic or research work.
Broad eligibility and decentralised delivery: A wide range of public research organisations participate, creating multiple access points for SMEs and strengthening regional innovation ecosystems.
Catalyst for longer term collaboration: Evidence from Ireland shows that innovation vouchers often act as an entry point to deeper co-operation, including follow-on R&D projects and co‑funded innovation programmes.
Ireland’s experience demonstrates how small-scale vouchers can generate high spillovers by boosting collaboration between SMEs and knowledge institutions, helping firms test new ideas, access technical expertise and gradually build longer term innovation partnerships.
Sources: Enterprise Ireland (2025[73]); OECD (2017[74]).
Globally, SMEs have become a primary target for cybercriminals, as they often lack the financial, technical and organisational capacity to implement robust security measures (OECD, 2021[1]). Small firms are experiencing a sharp rise in phishing, ransomware and business email compromise attacks, with organisations facing almost 2 000 cyberattacks per week globally at the start of 2025, a 47% increase from the previous year. Total cybercrime losses are expected to reach USD 10.29 trillion (Durbin, 2026[75]). As supply chains become increasingly interconnected, SMEs in economies with more complex institutional arrangements are particularly vulnerable, as attackers often exploit smaller companies as entry points into larger systems (ENISA, 2023[76]).
In Bosnia and Herzegovina, the growing use of digital tools among SMEs has outpaced the development of coherent data protection and cybersecurity frameworks tailored to enterprise needs. While recent legislative progress signals movement toward EU-aligned digital safety standards, institutional fragmentation, limited enforcement capacity and the absence of sustained SME-focused support leave many firms exposed as digitalisation accelerates. This section examines the adequacy of the regulatory and institutional framework, as well as the extent to which SMEs are equipped to manage data protection and cybersecurity risks and to adopt and use digital technologies in a safe, resilient and sustainable manner.
4.3.1. Adapting data protection to evolving digital threats
As digitalisation deepens across Bosnia and Herzegovina, safeguarding personal and business data is becoming a core component of SME resilience. Globally, SMEs face heightened exposure to data breaches due to limited technical capacity, and even a single incident can lead to severe financial, operational and reputational damage (Vergara Cobos and Cakir, 2024[77]; KPMG, 2016[78]). Effective data governance is, therefore, essential not only for maintaining customer trust but also for enabling SMEs to participate securely in increasingly digital value chains. Understanding how SMEs in Bosnia and Herzegovina manage data protection and integrate data governance practices is thus critical for assessing the resilience, credibility and sustainability of their digital activities.
At the enterprise level, surveyed SMEs in Bosnia and Herzegovina show moderate progress in adopting data protection practices, though significant gaps remain. About 59% of surveyed SMEs report having a data privacy policy in place, while 41% still lack one (OECD, forthcoming[20]). The likelihood of having such a policy increases with firm size: 63% of medium-sized enterprises have a policy, compared with 60% of small firms and 42% of microenterprises. This pattern reflects larger firms’ greater administrative capacity and access to legal or technical expertise.
When it comes to data storage, practices among SMEs in Bosnia and Herzegovina appear mixed. At 41%, the largest share of surveyed SMEs store data both on-site and in the cloud, indicating relatively mature digital behaviour, while 35% rely exclusively on on-site storage, a method that is less digitalised and more vulnerable to security risks (Figure 4.8) (OECD, forthcoming[20]). In parallel, 15% of SMEs are unsure how or where their data are stored, reflecting low digital awareness and limited access to professional guidance. Only 9% of surveyed SMEs rely on cloud storage. Additionally, when asked about data protection, most surveyed SMEs described it as “neutral” in terms of challenge, with 65% giving this response, while only 15% found it difficult – the smallest share among all categories (OECD, forthcoming[20]). Interestingly, newer SMEs established after 2015 were more likely to report data protection as challenging, likely due to their more complex digital processes and higher awareness of cybersecurity risks. Overall, this unevenness underscores persistent gaps in understanding and managing data security, leaving enterprises potentially exposed to digital vulnerabilities.
Source: OECD (forthcoming[20]).
Against this backdrop of uneven enterprise-level practices, the regulatory framework governing data protection has recently been reformed. Bosnia and Herzegovina’s legal and institutional framework for data protection is now defined by the Law on Protection of Personal Data, adopted in February 2025 and applicable as of October 2025 (Letica, 2025[79]; Simić, 2025[80]). This new law replaces the previous framework from 2006/2011, which was modelled on the EU Data Protection Directive 95/46/EC and therefore lacked many of the modern safeguards introduced by the EU General Data Protection Regulation (GDPR). The 2025 law brings Bosnia and Herzegovina largely into line with the GDPR by strengthening data-subject rights, introducing clearer obligations for controllers and processors, setting out breach notification requirements, and modernising rules on cross-border data transfers and supervisory enforcement (Letica, 2025[79]). While this reform represents a significant step forward in creating a predictable and EU-aligned environment for digital business, the new obligations, such as mapping data-processing activities, revising privacy policies, updating contracts, implementing technical and organisational safeguards, handling data subject requests, conducting Data Protection Impact Assessments where necessary, and appointing a Data Protection Officer, impose substantial financial and regulatory burdens on SMEs, which often lack the internal expertise and resources required for full compliance.
The effectiveness of this strengthened legal framework therefore depends largely on the capacity of the supervisory authority to enforce the rules and provide practical guidance to businesses. The Agency for Protection of Personal Data of Bosnia and Herzegovina functions as the independent supervisory authority responsible for monitoring compliance, investigating personal data breaches and promoting awareness of data protection obligations. Its Draft Strategy for 2023-2025 sets the priorities of strengthening public awareness, aligning legal frameworks with the GDPR, and improving co-operation with international structures such as the Global Privacy Assembly and regional data protection networks (European Commission, 2024[81]; AZLP, 2023[82]). However, the EU assessment notes that the agency’s independence and human and financial resources have not improved and underscores the need for the Agency for Protection of Personal Data of Bosnia and Herzegovina to better balance the protection of privacy with broader public interest considerations, including media freedom, electoral integrity and the fight against corruption. These limitations in capacity and mandate focus constrain the agency’s ability to expand its activities towards more proactive guidance and outreach, including to SMEs (European Commission, 2024[81]). As a result, enforcement actions remain relatively modest in scale, and sanction levels, while legally defined, are not yet comparable to those issued by bigger EU supervisory authorities.
Moreover, practical support mechanisms for SMEs in establishing data protection measures and mechanisms are largely absent. There are no publicly available SME-focused toolkits, checklists or audit subsidies to facilitate compliance, and awareness efforts tend to be pursued individually rather than part of a sustained, economy-wide programme. This can lead to a knowledge gap among SMEs, further restricting them from implementing robust data governance and risk management practices.
4.3.2. Strengthening SME cybersecurity resilience
Cyber incidents can have disproportionately severe consequences for smaller firms (OECD, 2021[1]), but weak cybersecurity can also function as a market barrier: SMEs with insufficient safeguards risk exclusion from procurement opportunities, international value chains and collaboration with larger firms that impose stricter digital security requirements (OECD, 2023[19]). Strengthening SME cybersecurity is thus not only about risk mitigation but also about safeguarding market access as digital ecosystems become more interconnected and regulated. This is relevant for SMEs in Bosnia and Herzegovina, which are increasingly exposed to cyber threats while operating with limited cybersecurity resources and low institutional support.
Evidence shows that more than 15 million cyber threats targeted companies and institutions in Bosnia and Herzegovina between January and August 2023, a steep rise compared with the over 9 million attempted breaches recorded the previous year, some of which temporarily shut down major media portals (CESS, 2025[83]). Across the WB6 region as a whole, cyberattacks on companies are becoming increasingly sophisticated, with an estimated one cyber-fraud occurring per day and average losses of around EUR 50 000 per incident, underscoring firms’ growing exposure to cyber risks (Šurlan, 2024[84]). These trends highlight a rapidly escalating threat environment in which Bosnia and Herzegovina’s SMEs, typically operating with limited cybersecurity budgets, skills and protection systems, are particularly exposed and face growing operational and financial vulnerabilities.
Although Bosnia and Herzegovina has begun developing a cybersecurity framework, key elements remain incomplete. No state-level Cybersecurity Strategy has been adopted. Cybersecurity responsibilities are shared across state and entity levels: at the state level, the Ministry of Security leads security policy and the Ministry of Communications and Transport oversees network and information systems regulation. Entities maintain their own frameworks, including Republika Srpska, which is currently finalising its Information Security Strategy 2025-2031. A computer emergency response team (CERT) operates within the Ministry of Security of Bosnia and Herzegovina, and the Ministry of Defence maintains its own CERT, providing some capacity for incident response, though the establishment of a more comprehensive economy-wide cybersecurity co-ordination structure, as foreseen in the Reform Agenda, remains pending (European Commission, 2025[5]). Reform efforts are nonetheless underway. The Parliamentary Assembly of Bosnia and Herzegovina has confirmed that the Ministry of Communications and Transport is preparing a Law on Cybersecurity aligned with the revised EU Network and Information Security Directive, which is included in its official Work Programme, while the Ministry of Security is responsible for drafting the Cybersecurity Strategy. Ongoing IPA III technical assistance supports the drafting process (European Commission, 2025[85]). However, until these reforms are formally adopted, the existing Law on Information Security continues to apply, primarily covering public institutions and critical infrastructure, with limited obligations for the private sector or SMEs.
This structural and legislative gap leaves SMEs especially exposed: while threats are increasing, regulatory clarity and enforcement are not yet comprehensive, hindering private sector resilience and participation in the digital economy. This translates into concerns about digital safety, which are visible among the broader public in Bosnia and Herzegovina, where 35% of citizens identify hybrid threats as a source of insecurity, well above the WB6 regional average of 25% (RCC, 2023[86]).
At the entity level, progress on cybersecurity policy and legislation remains uneven. In the Federation of Bosnia and Herzegovina, authorities drafted a Law on Information Security in late 2022, but the bill has not yet been adopted and as of early 2025 appears to be stalled (Jovanović and Brkan, 2023[87]). In contrast, Republika Srpska has a Law on Information Security from 2011 that regulates the protection of information systems and critical infrastructure within the entity (CESS, 2025[83]). The Agency for Information and Communication Technologies of Republika Srpska is preparing an Information Security Strategy 2025-2031, the development of which has been formally initiated by a Decision of the Government of Republika Srpska and is currently in its final phase. Adoption was initially expected in the second quarter of 2026 but has not yet been publicly confirmed. However, publicly available documentation does not yet confirm SME-specific provisions or dedicated funding for implementation (CESS, 2025[83]). Consequently, private sector, and in particular SME-targeted obligations, remain limited across the entities, and institutional capacity to support SMEs in cybersecurity needs further development.
Without a comprehensive cybersecurity support framework in place, Bosnia and Herzegovina has primarily relied on donor-supported initiatives to strengthen cyber resilience among SMEs. The Digital Pulse BiH platform, developed with support from the UNDP under the DigitalBIZ initiative, provides SMEs with a self‑assessment tool to evaluate digital maturity, including cybersecurity readiness, helping firms understand their vulnerabilities and areas for improvement (UNDP, 2021[88]). Moreover, the CyberFort project, implemented across Albania, Bosnia and Herzegovina, and Türkiye, develops cybersecurity training materials and curricula for SMEs and vocational institutions (IUS, 2025[89]). In parallel, Bosnia and Herzegovina now hosts the annual Cyber Security Summit, which brings together SMEs, public institutions and technology providers to share good practices and discuss cyber-threat trends (Cyber Security Summit, 2025[90]). The recently established e‑Transformation Association has also begun offering free cybersecurity training for SMEs and publishing practical guidance on baseline cyber hygiene measures tailored to small businesses, addressing an important gap in accessible local training (e-Transformation Association, 2025[91]; 2025[92]).
An additional contribution comes from Women4Cyber BiH Initiative, part of the European Women4Cyber Foundation, which promotes cybersecurity awareness and skills development, with a particular focus on empowering women in the field. The initiative produces accessible training resources and has developed practical tools such as the Cyber Security Guide for SMEs (Box 4.6), supporting smaller firms in understanding essential protection measures (W4CBiH, 2025[93]).
Women4Cyber BiH, as part of the European Women4Cyber Foundation, has developed Cyber Security: A Guide to Cyber Security for SMEs, a practical and accessible tool designed to help small and medium-sized enterprises (SMEs) strengthen their digital resilience. Created in collaboration with Cranfield University in the United Kingdom and supported by funding from the UK government, the guide translates complex cybersecurity concepts into clear, actionable steps tailored to the needs and realities of smaller firms.
The guide, revolving around 13 key recommendations, provides a structured overview of essential protections for SMEs, including secure password practices, data backup procedures, network security basics, incident-response planning and staff awareness training. It also includes checklists, self‑assessment questions and practical examples to help businesses identify vulnerabilities and prioritise improvements without requiring specialised technical expertise. Women4Cyber BiH supports dissemination through awareness events, workshops and online resources, helping SMEs – particularly those with limited in-house IT capacity – build foundational cybersecurity practices.
As one of the few locally developed SME-focused cybersecurity tools in Bosnia and Herzegovina, the guide fills a critical gap in practical, user-friendly support. Its focus on clarity, accessibility and capacity building makes it a valuable reference for SMEs beginning to develop cybersecurity routines while also contributing to broader efforts to promote women’s engagement and leadership in the cybersecurity field.
Sources: SME Cyber Security (2024[94]); W4CBiH (2025[93]).
International partners further contribute to capacity-building efforts. The North Atlantic Treaty Organization, through its Defence Capacity Building programme, is supporting the Ministry of Defense by strengthening institutional cyber-preparedness and developing strategic and operational cyber-defense capabilities (eGa, 2025[95]). Similarly, the OSCE Annual Cybersecurity Forum 2025 convened more than 100 policymakers, regulators, private sector representatives and academics to discuss Bosnia and Herzegovina’s main structural gaps, including the absence of a state-level strategy, dedicated legislation and a CERT, and to highlight the need for stronger cross‑sector co-ordination (OSCE, 2025[96]). Most recently, the Cyber Readiness Institute, in partnership with Lanaco and with support from AmCham BiH, launched its first local chapter, providing a structured programme to help 60 SMEs adopt global cybersecurity best practices and build long-term cyber-readiness (Caine, 2025[97]). Despite these efforts, support remains predominantly project-based, with no long-term, state-financed programme dedicated to SME cybersecurity, thereby restricting SMEs’ long-term capacity building and resilience development.
At the entity level, efforts also remain uneven. In the Federation of Bosnia and Herzegovina, institutional mechanisms or SME-targeted cybersecurity programmes are limited, with no dedicated CERT structure in place and only sporadic capacities across individual institutions. In contrast, Republika Srpska has taken more concrete steps: the Agency for Information and Communication Technologies of Republika Srpska, through CERT RS, operates an institutionalised incident response capability with membership in the Trusted Introducer and FIRST international organisations, publishing regular cyber threat intelligence reports and public advisories on malware, vulnerabilities and emerging threats (CERT RS, 2025[98]), providing structured support to public institutions and SMEs. In Brcko District, as in the Federation of Bosnia and Herzegovina, comparable structures remain largely absent, and publicly available information on cybersecurity support mechanisms for SMEs is minimal, pointing to significant capacity gaps and uneven progress across the economy.
Furthermore, surveyed SMEs in Bosnia and Herzegovina show relatively high basic awareness of the need for ICT security, though adoption remains concentrated on simple protective measures. Most surveyed SMEs rely on basic tools such as strong passwords and antivirus software, both used by around 57% of firms (Figure 4.9). More advanced measures, including two-factor authentication, regular security audits and cybersecurity training, remain less common. However, almost 26% of surveyed SMEs do not have any cybersecurity measures in place (OECD, forthcoming[20]), indicating that although SMEs in Bosnia and Herzegovina recognise the need for basic protection measures, their cybersecurity practices are still limited in scope and depth, leaving enterprises potentially vulnerable to growing cyber threats.
Note: VPN: virtual private network.
Source: OECD (forthcoming[20]).
Moreover, cybersecurity incidents appear to be underreported and less monitored among SMEs in Bosnia and Herzegovina. Only 12% of surveyed firms report having experienced a cyberattack, considerably below the OECD survey sample average of 32% (OECD, forthcoming[20]; Bianchini and Lasheras Sancho, 2025[3]). Nearly two out of five SMEs, or 38%, state they have not been hacked, while 50% are unsure whether their systems have ever been breached. This lower reported rate should be interpreted with caution, as it may reflect weaker detection and monitoring capacity rather than stronger cybersecurity resilience, with firms of limited digital intensity being less likely to identify or report incidents. The findings indicate that cybersecurity remains largely reactive rather than preventive, risking SMEs’ ability to mitigate digital security risks effectively.
The way forward
Develop SME-tailored data protection support tools and introduce a light compliance model for micro and small enterprises. Bosnia and Herzegovina should complement the 2025 Law on Protection of Personal Data with practical, SME-oriented compliance mechanisms to ensure that smaller firms can meet new legal obligations without disproportionate administrative or financial burden. This could include developing a unified SME Data Protection Toolkit, containing templates for privacy policies, consent forms, records of processing activities and data-breach procedures, made available through a centralised state-level portal. To further support implementation, the Agency for Protection of Personal Data could introduce a simplified compliance pathway for micro and small enterprises, aligned with GDPR risk-based principles, reducing documentation requirements for low-risk processors. Targeted awareness workshops delivered through chambers of commerce and development agencies would help SMEs understand the new law and apply practical steps.
In 2022, the United States launched the Cybersecurity for Small Business Pilot Programme, implemented by the Small Business Administration in co-operation with the Cybersecurity and Infrastructure Security Agency, to help small businesses improve cybersecurity practices through practical training and counselling. The programme was designed to address capacity constraints faced by small and medium-sized enterprises (SMEs) by pairing financial support with guidance, rather than imposing complex compliance requirements.
The pilot focused on providing SMEs with access to basic cybersecurity assessments, tailored training and advisory support, alongside practical tools such as checklists and guidance on data protection, incident response and cyber hygiene. The programme enabled smaller firms to strengthen compliance with data protection and cybersecurity expectations without disproportionate administrative or financial burden.
The programme demonstrates how governments can support SME cybersecurity resilience through practical, facilitation-oriented approaches – combining accessible tools, targeted training and proportionate compliance pathways – rather than relying on enforcement alone.
Source: United States Small Business Administration (2022[99]).
Develop entity-level SME cybersecurity support programmes, with co-ordinated design principles to ensure consistency across the economy. Entity-level governments, through their respective ICT agencies and ministries, should establish dedicated SME cybersecurity support programmes that introduce a Basic Cyber Hygiene Standard for SMEs, defining a small set of essential practices such as strong authentication, regular updates, backup protocols and secure cloud usage, alongside a voluntary “Cyber-Ready SME” label to incentivise adoption. A single online helpdesk at entity level offering step-by-step guidance, checklists, model policies and clear instructions on how SMEs can respond to and report cyber incidents would strengthen resilience and address the current absence of accessible, practical support. Training and advisory clinics delivered through chambers of commerce, digital innovation hubs and business associations would support implementation, while donor-supported pilots such as CyberFort could be scaled into permanent structures. To maximise impact and avoid duplication, the Ministry of Security and the Ministry of Communications and Transport could facilitate co-ordination between entity-level programmes, ensuring alignment of standards and enabling cross-entity knowledge exchange.
Austria has strengthened small and medium-sized enterprise (SME) cybersecurity and IT capabilities through KMU.Digital, launched in 2017 by the Federal Ministry of Labour and Economy to support SME digital transformation. The initiative addresses skills gaps and low awareness by combining assessments, training and subsidised consultancy, with cybersecurity as a core component.
KMU.Digital supports SMEs through a small set of practical instruments:
digital and IT security checks that help SMEs identify basic cybersecurity gaps and prioritise actions
targeted training and advisory services, focusing on essential practices such as secure system configuration, data protection, safe use of cloud tools and incident prevention
public co-financing that lowers participation costs and encourages uptake among micro and small enterprises
delivery through chambers of commerce and certified advisors, ensuring trusted access points and wide SME outreach.
Austria’s experience illustrates how a well co-ordinated, modular cybersecurity support programme built around clear minimum standards, practical tools and trusted delivery channels can help SMEs of all sizes build cyber resilience in a proportionate and accessible manner, without imposing disproportionate compliance burdens.
Source: KMU.DIGITAL (2026[100]).
The adoption of advanced digital technologies is increasingly recognised as a critical driver of competitiveness and long-term growth for SMEs worldwide. Artificial intelligence (AI), the Internet of Things (IoT), data analytics, automation and cloud-based solutions enable firms to optimise production, improve quality control, and introduce new digital services and business models (OECD, 2024[101]). At the same time, integrating these technologies introduces new risks that require careful management. Poorly governed AI systems can create challenges related to accuracy, transparency and fairness, while IoT and cloud-based tools can expand a firm’s cybersecurity exposure if not properly secured (OECD, 2024[102]). Advanced technologies also come with environmental implications, as energy-intensive digital solutions can increase carbon footprints unless paired with efficiency measures or renewable energy sourcing (IEA, 2023[103]).
For SMEs in Bosnia and Herzegovina, many of which operate with constrained resources and limited strategic digital planning, these risks may deter adoption or generate unintended costs. This section examines how SMEs in Bosnia and Herzegovina are adopting AI and other emerging technologies and assesses the extent to which existing policy instruments and support mechanisms enable a secure, sustainable and energy-efficient uptake, highlighting progress achieved and remaining bottlenecks.
4.4.1. Encouraging SME adoption of artificial intelligence and emerging technologies
AI and other data-driven technologies are reshaping production, service delivery and decision making, creating new opportunities for efficiency and innovation across sectors (OECD, 2022[104]). Yet evidence shows that SMEs capture far fewer AI-related benefits than larger firms because they typically lack the data infrastructure, managerial know-how and strategic planning capabilities needed to integrate AI into their everyday operations (OECD, 2021[1]). This picture is evolving with the advent of generative AI, whose lower entry costs and ease of use have significantly reduced barriers to initial adoption for smaller firms, yet even where adoption is growing, use tends to remain confined to basic, general-purpose applications rather than deeper integration into core business processes (OECD, 2025[105]). The organisational restructuring and process redesign needed to unlock sustained productivity improvements typically do not occur in the absence of targeted policy support. Effective policy frameworks should, therefore, be differentiated, reflecting firms’ varying levels of digital maturity and AI readiness, and designed to accompany SMEs progressively from initial experimentation toward more substantive integration of AI into their business activities (OECD, 2025[105]). For SMEs in Bosnia and Herzegovina, this underscores the importance of developing accessible guidance and practical support instruments to help smaller firms participate in the transition toward more data-driven business models.
Against this backdrop, Bosnia and Herzegovina has not yet established a dedicated strategy or regulatory framework for AI (Table 4.3). Existing documents, such as the Policy for Information Society Development 2017-2021, reference emerging technologies like AI but do not define specific measures, governance structures or implementation mechanisms (Interoperable Europe, 2024[106]). Although some progress has been made at the international level, domestic regulation remains limited. Bosnia and Herzegovina has participated in the Council of Europe’s Committee on Artificial Intelligence’s work, including in the development of the Council of Europe AI Convention, which Bosnia and Herzegovina has committed to adopting, and has engaged with related frameworks such as the HUDERIA model for human rights, democracy and rule of law impact assessment. Following the completion of the Committee on Artificial Intelligence’s mandate (2022-2025), this work is now being carried forward by the Steering Committee for New and Emerging Digital Technologies (Council of Ministers of Bosnia and Herzegovina, 2025[6]). Ethical Guidelines and Codes for the Use of AI are under preparation.
However, the legal landscape in Bosnia and Herzegovina still lacks specific provisions tailored to AI and machine-learning technologies (IBA, 2024[107]). While international engagement is progressing, there is no publicly available information confirming the scope or adoption timelines of domestic AI frameworks, nor whether they will introduce SME-specific measures.
At the entity level, digitalisation is recognised as a horizontal priority across development strategies, but concrete measures to support the adoption of AI and other emerging technologies remain limited. In the Federation of Bosnia and Herzegovina, the Development Strategy 2021-2027 identifies digital transformation and innovation as key drivers of competitiveness and includes the “Accelerator for Innovation and Digitalisation of Small Businesses” as one of its flagship measures. While this accelerator refers broadly to the development and application of advanced digital solutions, publicly available documents do not specify dedicated instruments or financing mechanisms for AI, IoT or blockchain adoption by SMEs. Similarly, in Republika Srpska, the SME Development Strategy 2021-2027 positions digitalisation and innovation as central pillars for enterprise competitiveness. The accompanying regulatory framework includes concrete financial incentives for digital transformation, with the Regulation on Competitiveness explicitly recognising AI, big data, ERP, CRM and other advanced digital tools as eligible investments under its SME support scheme. However, the scale and uptake of these instruments, and their specific reach among SMEs seeking to adopt emerging technologies, are not yet systematically monitored or publicly reported. In Brcko District, the Development Strategy 2021-2027 prioritises improvements in ICT infrastructure, digital literacy and e-government services but does not include initiatives related to advanced technology diffusion among SMEs. Overall, entity-level policy frameworks indicate growing awareness of the importance of digital transformation, yet Bosnia and Herzegovina still lacks a coherent approach to regulating, incentivising or financing SME adoption of AI and other advanced technologies.
Source: Information provided by state and entity levels of Bosnia and Herzegovina during the assessment period (2025).
In terms of financial and technical support, there are no comprehensive incentives or programmes at the state level that support SME uptake of emerging technologies. In the Federation of Bosnia and Herzegovina, emerging technology support for SMEs is primarily delivered through innovation centres operating on a project basis rather than through formal government programmes. The INTERA Technology Park in Mostar organises hackathons, training workshops and accelerator programmes that introduce SMEs and young professionals to applied uses of AI, robotics and cloud computing. The SPARK Business Park in Mostar similarly provides start‑ups and SMEs with mentorship, digital skills training and exposure to emerging technologies through bootcamps and accelerator formats. In addition, the Industrial Hub Tuzla offers a range of practical trainings and capacity-building activities for SMEs, focusing on digital skills, automation and the application of advanced technologies in industrial processes (Industrial Hub Tuzla, 2025[28]). The Sarajevo Digital Storm Hub also promotes collaboration between academia, government and the private sector in areas such as AI and automation (EU4DigitalSMEs, 2025[108]).
Republika Srpska has taken some concrete steps to support SME adoption of emerging technologies. RARS and the ICBL play an active role in enabling SMEs to experiment with and adopt advanced technologies. The IDEMO DIH brings together several partners, including RARS, the ICBL, the Chamber of Commerce and Industry of Republika Srpska and the Enterprise Development Agency (EDA), which leads the DESET project implemented within the hub. Through their involvement in IDEMO, SMEs have access to services related to automation, robotics, AI applications and data analytics (Box 4.9) (IDEMO, 2025[109]). So far, more than 60 SMEs have already taken part in IDEMO’s practical workshops (although not all exclusively related to emerging technologies), webinars and test‑before-invest services, and the hub continues to provide advisory support beyond the initial EU‑funded phase (Government of Republika Srpska, 2025[110]). The ICBL further supports SMEs through prototyping services, mentorship and applied research activities in data-driven business models.
The Innovation Center Banja Luka (ICBL) is the first hub for development and support for entrepreneurship in Republika Srpska, founded to support knowledge-based business development and foster innovation-driven growth. Acting as a bridge between research institutions, entrepreneurs, and small and medium-sized enterprises (SMEs), the ICBL provides incubation services, consulting and accredited training programmes to strengthen business competitiveness and technological capacity.
In 2025, the ICBL launched the AI Forward project to help SMEs adopt artificial intelligence (AI) tools to improve productivity, process efficiency and innovation capacity. Supported by the European Union, BMZ and the EU for Private Sector Development project under the broader GIZ SEDEPiNBiH programme, the initiative offers a structured learning programme composed of two core modules on the fundamentals of AI and four specialised tracks tailored to business needs: 1) applied machine learning; 2) AI for business optimisation; 3) digital marketing automation; and 4) data analytics for decision making. Participating firms receive practical guidance on integrating AI into business operations, supported by expert mentoring and follow-up consultations.
The programme has enabled SMEs across Bosnia and Herzegovina to gain hands-on experience in using AI technologies for process automation, market analysis and product innovation. By improving digital literacy and AI readiness, the training helps SMEs identify use cases with measurable business value while reducing uncertainty around new technology adoption. The initiative complements the ICBL’s broader innovation ecosystem, which includes pre-incubation and virtual incubation services, technical mentoring, and certified training in areas such as energy management and agile business development.
Source: ICBL (2025[111]).
On the demand side, SMEs’ adoption of AI in Bosnia and Herzegovina is emerging but remains limited in depth and scope. About 40% of surveyed SMEs report using some form of AI in their core products or processes, though this use is predominantly focused on generative AI tools and platforms for content creation or information generation (Figure 4.10) (OECD, forthcoming[20]). On the other hand, only 14% of surveyed SMEs employ more advanced AI applications such as machine learning, while about 9% use custom AI systems tailored to their business needs, and more than half do not use any form of AI in their daily operations (OECD, forthcoming[20]).
Note: AI: artificial intelligence.
Source: OECD (forthcoming[20]).
Perceptions of generative AI among SMEs in Bosnia and Herzegovina are broadly optimistic. Most surveyed firms view AI as a valuable business asset, with 79% agreeing that it enhances innovation and 65% that it improves daily efficiency (OECD, forthcoming[20]). This enthusiasm is accompanied by a general dismissal of potential downsides: 71% of surveyed SMEs express little concern about data privacy issues, 68% are unconcerned about copyright or legal risks, and 79% see no major problem with inaccurate information. Moreover, 65% of respondents believe they understand how to use generative AI and manage its risks. Yet when it comes to AI’s broader business implications, perceptions become more cautious. SMEs are divided on whether AI can reduce staffing needs, and a majority disagree that it provides new revenue opportunities, indicating that while confidence in the technology’s practical utility is strong, its strategic potential remains underappreciated.
Furthermore, as Bosnia and Herzegovina moves towards more sophisticated digitalisation, integrating environmental safeguards into technology adoption will be crucial for ensuring a sustainable twin transition. The growing use of advanced technologies such as AI, cloud computing and data-intensive automation carries significant environmental implications that are increasingly relevant for Bosnia and Herzegovina. Energy demand from data centres and AI-driven services continues to rise sharply across the world, with global data-centre electricity consumption projected to more than double by 2030 (IEA, 2025[112]). These systems also require substantial amounts of water for cooling, placing additional pressure on local resources, an important consideration in Bosnia and Herzegovina, where climate-related water stress has intensified in recent years (World Bank, 2023[113]). In parallel, the rapid turnover of digital equipment associated with advanced technologies contributes to growing volumes of electronic waste, which remain insufficiently managed across the WB6 economies (EEA, 2022[114]). For SMEs in Bosnia and Herzegovina, these environmental costs are often invisible, yet they may influence future compliance with EU sustainability standards, including those related to energy efficiency and responsible technology use.
4.4.2. Promoting a sustainable digital transformation
Digitalisation is increasingly intertwined with environmental performance, shaping how SMEs manage energy use, resources and regulatory compliance. While digital tools can significantly improve energy efficiency, monitoring and reporting, they may also increase costs and emissions if adopted without sustainability considerations (OECD, 2024[4]; 2023[19]). For SMEs in Bosnia and Herzegovina, where energy costs are rising and alignment with EU climate and environmental, social and governance standards is gaining importance, the absence of integrated green-digital guidance risks slowing productivity gains and environmental adaptation.
At the policy level, Bosnia and Herzegovina’s strategic frameworks do not yet fully recognise or operationalise the twin green and digital transition within SME development. Although the Reform Agenda identifies the green and digital transition as a key priority and highlights the role of digital technologies in supporting resilience and sustainability, these objectives have not yet been translated into concrete, SME‑focused measures. At the state level, there is no strategy that integrates digitalisation and environmental sustainability into a unified policy approach. Instead, priorities remain scattered across separate sectoral documents, with no overarching framework to guide co-ordinated action. While the National Energy and Climate Plan and the Environmental Approximation Strategy 2017 mention the role of digital tools in areas such as energy-efficiency monitoring and emissions management, neither provides targeted measures or financing designed specifically for SMEs. As a result, despite the strong strategic intent expressed in the Reform Agenda, SMEs in Bosnia and Herzegovina currently lack co-ordinated policy support that simultaneously addresses digital transformation and environmental sustainability, leaving the twin transition largely unaddressed as a combined policy priority (PEM Consult, 2024[9]).
At the entity level, both the Federation of Bosnia and Herzegovina’s Development Strategy 2021-2027 and the Small and Medium Enterprises Development Strategy of Republika Srpska for the Period 2021‑2027 describe sustainability and digitalisation as cross-cutting priorities. In Republika Srpska, the Regulation on Competitiveness and the Action Plan for Innovation in SMEs include financial incentives for digital transformation, covering tools such as AI, ERP and CRM systems. However, dedicated instruments that simultaneously address digital transformation and environmental sustainability – helping SMEs pursue the twin transition as a coherent agenda – are still limited across both entities, and no joint action plans or institutional co-ordination mechanisms have been established for this purpose.
Government-led initiatives that simultaneously support the green and digital transitions among SMEs remain limited, with most dedicated support coming from donor-driven programmes such as the GIZ “Promoting Digital Transformation and Green Economy in BiH” project (GIZ, 2022[115]) and the SME Go Green and Go Digital in the Western Balkans projects (EBRD, 2025[116]; 2025[11]). In Republika Srpska, however, entity‑level regulatory instruments provide some coverage of both areas. The Regulation on Competitiveness supports digital transformation investments, including AI and advanced digital tools, while the Regulation on Awarding Incentives for Investments covers technological upgrading and the transition to a green and circular economy, including the acquisition of recycling equipment, pollution-reduction tools and solar panels for own production use. Recent amendments to the Regulation on the Procedure for Awarding Incentives have further introduced support for energy-efficiency monitoring devices such as SCADA systems, alongside subsidies for LED lighting and heat pumps in production facilities (Government of Republika Srpska, 2025[110]), aiming to prepare SMEs for compliance with upcoming EU mechanisms such as the Carbon Border Adjustment Mechanism. These instruments represent meaningful steps at the entity level, though they address green and digital objectives through separate regulatory tracks rather than as an integrated twin transition agenda.
This lack of engagement with sustainable digital practices is reflected at the SME level, where engagement with such practices remains limited and largely at the planning stage. Only 12% of surveyed SMEs in Bosnia and Herzegovina report having a formal strategy or plan to reduce their environmental footprint through digital tools, while 64% indicate that they do not yet have one but are planning to develop one in the future (Figure 4.11) (OECD, forthcoming[20]). This is significantly below the EU average of 24% (European Commission, 2022[117]). Additionally, 15% of surveyed SMEs in Bosnia and Herzegovina do not have a plan in place and do not plan to adopt one. This limited engagement also extends to environmental monitoring: across the broader OECD sample, only 28% of SMEs use digital tools to track environmental data, with energy consumption being the most commonly monitored indicator at 17% (Bianchini and Lasheras Sancho, 2025[3]), suggesting that weak environmental monitoring is a structural feature of SME digital maturity more broadly rather than a BiH-specific gap.
Source: OECD (forthcoming[20]).
Moreover, surveyed SMEs that already offer green products or services are notably more proactive, with 34% having or planning a carbon-neutral or sustainability strategy, compared with just 15% among SMEs without a green offering (OECD, forthcoming[20]). These findings suggest a growing awareness of sustainable digitalisation but also underline the need for targeted assistance, capacity building and financial incentives to help SMEs translate intentions into actionable strategies.
Beyond formal sustainability strategies, environmental awareness is beginning to shape procurement decisions: 67% of surveyed SMEs report considering the environmental impact of ICT products and services before purchasing them, suggesting that sustainability is entering the decision-making process (OECD, forthcoming[20]). Interestingly, this awareness is stronger among women-led enterprises: 77% of women-led enterprises take environmental factors into account, compared to 60% of male-led firms. However, without structured incentives, sector-specific guidance or clear financial benefits, translating awareness into tangible green digital investments remains slow. Most surveyed SMEs still face high upfront costs and lack the expertise to assess the environmental return on digital investments, leading to modest engagement in eco-innovation and low readiness for EU sustainability reporting obligations.
When it comes to end-of-life management and the environmental footprint of digital technologies, SME practices appear to be uneven. At 47%, nearly half of surveyed SMEs in Bosnia and Herzegovina report keeping outdated ICT equipment due to cost, uncertainty or data security concerns, while 24% are unaware of any formal procedures for disposal or recycling (OECD, forthcoming[20]). Moreover, environmental performance tracking is not sufficiently developed among SMEs in Bosnia and Herzegovina: about 50% of surveyed SMEs track their energy consumption, 32% track water usage and 27% track energy efficiency while only 12% monitor their carbon footprint (Figure 4.12) (OECD, forthcoming[20]). In parallel, almost 27% of surveyed SMEs do not track their environmental footprint at all, while 9% are unsure if or how it is being tracked. These findings indicate that sustainability practices linked to digital technologies among SMEs in Bosnia and Herzegovina remain at an early stage. Low rates of environmental tracking and unclear end‑of-life management point to structural gaps in awareness, incentives and support, which may hinder SMEs’ readiness for upcoming EU sustainability and reporting requirements.
Note: Tracking energy efficiency: e.g. reductions in energy waste, impact of energy-saving upgrades like LED lighting or efficient machinery; tracking energy consumption: e.g. electricity and gas consumption by department or production line, peak vs. off-peak usage patterns, etc.
Source: OECD (forthcoming[20]).
The way forward
Establish an SME Emerging Technology Support Programme through harmonised co‑ordinated entity-level implementation. Bosnia and Herzegovina should promote the establishment of SME emerging technology support programmes at the entity level, implemented by the competent institutions in the Federation of Bosnia and Herzegovina and Republika Srpska (e.g. the FMRPO, the Ministry of Economy and Entrepreneurship of Republika Srpska, RARS), while the state level could play a facilitating and co‑ordinating role through an inter-entity working group. As a first step, the programme could be piloted with donor funding, allowing for joint design, testing of delivery models and gradual scaling without reallocating entity budgets. The programme would provide SMEs with test-before-invest services for AI, IoT, automation and data-driven applications, building on the IDEMO DIH model in Republika Srpska and encouraging the development of comparable services in the Federation of Bosnia and Herzegovina and Brcko District. Activities could include AI readiness assessments, sector-specific use cases (e.g. manufacturing, tourism, retail), small innovation vouchers for pilot testing and advisory support to integrate emerging technologies into business models. Voluntary alignment of service standards and eligibility criteria across entities would help ensure consistency, reduce duplication and support broader diffusion of advanced technologies beyond time-limited donor projects.
The European Digital Innovation Hubs (EDIHs) Network, launched under the European Union’s (EU) Digital Europe Programme, provides a co-ordinated framework to help small and medium-sized enterprises (SMEs) adopt advanced digital and emerging technologies such as artificial intelligence, data analytics, the Internet of Things, robotics and automation. The network consists of designated hubs, co-funded by the European Commission and EU Member states, combining regional implementation with EU-level co‑ordination and common service standards.
EDIHs operate as one-stop shops for SME digital transformation, with a strong emphasis on practical adoption:
Test-before-invest services, allowing SMEs to experiment with emerging technologies in real or simulated environments before committing significant resources.
Technology and business advisory support, including digital maturity and artificial intelligence-readiness assessments, sector-specific use cases, and integration support.
Innovation financing guidance, often combined with small-scale vouchers or signposting to national and EU funding instruments.
Skills development and ecosystem building, linking SMEs with research organisations, technology providers and public authorities.
Hubs are embedded in regional innovation ecosystems and tailored to local SME needs, while EU-level co‑ordination ensures interoperability, quality standards and cross-border collaboration. This structure supports consistency and scale while avoiding duplication across countries and regions.
The EDIH model demonstrates how a structured, one-stop shop approach to emerging technology support which combines test-before-invest services, advisory support, financing guidance and skills development within a coherent regional ecosystem can effectively lower barriers to advanced technology adoption for SMEs while ensuring quality and consistency at scale.
Source: European Commission (2026[118]).
Create a Green-Digital SME Incentive Scheme supporting eco-efficient digital tools and sustainability reporting readiness. To enable SMEs to link environmental sustainability with digital transformation, entity-level governments should introduce a Green-Digital SME Incentive Scheme, implemented jointly by economic and environmental institutions at the entity level. The scheme would co-finance investments in eco-efficient digital solutions, such as IoT-based energy monitoring, resource management software, cloud-based paperless systems, and digital tools supporting ISO 14001 or future EU sustainability reporting requirements. It should also include advisory support and simple templates to help SMEs prepare basic environmental metrics (energy use, waste, emissions), addressing the current lack of measurement capacity highlighted in the survey results. Building on Republika Srpska’s recent incentives (e.g. SCADA systems, LED lighting, heat pumps), this scheme would harmonise support across entities and ensure SMEs have the financial and the technical resources to adopt digital tools that improve their environmental performance.
Germany promotes the uptake of eco-efficient digital solutions by small and medium-sized enterprises (SMEs) through a combination of digitalisation and energy-efficiency support schemes co-ordinated by the Federal Ministry for Economic Affairs and Climate Action. Rather than treating digital and environmental objectives separately, these programmes enable SMEs to invest in digital tools that also deliver measurable energy and resource efficiency gains.
A central instrument is the Digital Jetzt programme, which provides grants to SMEs for investments in digital technologies and digital skills, including software, cloud solutions and data-driven systems that improve process efficiency. In parallel, Germany’s Energy and Resource Efficiency in Industry programme supports investments in digital energy and resource management solutions, such as energy-management software; sensor-based monitoring systems; and measurement, control and regulation technologies. These tools allow SMEs to monitor energy and material use, identify efficiency gains and reduce emissions, with higher subsidy rates for small enterprises.
A key feature of Germany’s approach is the emphasis on practical implementation and performance improvement rather than complex sustainability reporting. Advisory support and standardised requirements help SMEs deploy digital systems that generate basic environmental data as a by-product of operational optimisation, lowering administrative burdens while strengthening environmental outcomes. Germany’s experience demonstrates how governments can effectively combine digital and environmental incentives into a single, accessible support offer for SMEs, avoiding the need for parallel and unconnected programmes.
Sources: Germany Federal Ministry for Economic Affairs and Energy (2025[119]); Dena (2024[120]).
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← 1. Surveyed SMEs were asked: “Which e-platforms did your business use to make online sales in 2024?” (see Annex B for more information).