The 2026 edition of the SME Policy Index comes at a critical juncture for the Western Balkans and Türkiye. Over the past decade, governments in the region have made sustained efforts to strengthen SME policy frameworks and align them with European standards. Yet, the context in which these policies operate has fundamentally changed, shaped by successive global shocks, accelerating green and digital transitions and rising geopolitical uncertainty.
Beyond these immediate pressures, a deeper shift is underway. Uncertainty has become structural, while the systems traditionally used to manage it are under strain. In this context, the challenge is no longer primarily to design better SME policies, but to ensure that the existing frameworks deliver.
SMEs remain central to economic growth in Kosovo, accounting for a significant share of both employment and value added. Against this backdrop, the economy has made progress across several areas key to SME development since the previous assessment cycle:
Survival and bankruptcy procedures have been significantly strengthened through legislative and institutional reforms. Kosovo remains one of only two economies in the Western Balkans and Türkiye with an expedited insolvency procedure specifically targeting SMEs. Legislative progress has been made through 2024 amendments to the Law on Bankruptcy, which bring the framework more closely in line with the EU acquis. Efficiency gains were also achieved following the establishment of the Commercial Court in 2022, which improved the speed and predictability of insolvency proceedings. Together, these reforms have contributed to a 33% decline in business closures, falling from 1 637 cases in 2023 to 1 104 in 2024.
Kosovo has made notable advances in supporting SME greening, reflecting both stronger government commitment and a shift in business behaviour. Greening has become an increasingly prominent policy priority, with SME-targeted measures now embedded across industrial, energy and development strategies. The range of supporting instruments has expanded in parallel: green credit lines, grants and credit guarantee schemes are all now available to SMEs, while the government is taking initial steps to support eco-innovation through plans to construct green industrial parks as well as proposed tax incentives for green investment. At the business level, self-declared engagement in environmental impact reduction has risen markedly from 54% in 2019 to 78% in 2024.
Support for women's entrepreneurship is growing, underpinned by expanding financing programmes and improved data collection. The Kosovo Credit Guarantee Fund's "Women in Business" window remains the most visible instrument of government support. Recent increases in maximum loan amounts and extended maturities have driven strong uptake, with the number of beneficiaries more than doubling from 71 to 158 enterprises between 2023 and 2024. Progress has also been made on data collection, with the Central Bank and Business Registration Agency, supported by the European Bank for Reconstruction and Development, working to build a comprehensive gender-disaggregated dataset to strengthen monitoring and evaluation.
However, despite these achievements, several challenges remain that constrain the ability of Kosovo’s SMEs to drive EU convergence:
SME digitalisation is broad but shallow, with structural weaknesses limiting meaningful transformation. While 79% of SMEs use at least one digital tool, adoption is largely concentrated in basic applications such as social media and company websites, with more transformative technologies (e.g. e-commerce, cloud computing, big data) each used by fewer than 10% of firms. This reflects underlying structural weaknesses: digital skills remain low, with only 38% of citizens aged 16-74 possessing at least basic competencies, and SME-tailored financing instruments are scarce and donor-dependent. Kosovo's Digital Agenda 2030 provides a policy framework for advancing SME digitalisation, but limited implementation to date has curtailed its practical impact.
Skills shortages and mismatches represent a significant obstacle for SMEs. The available talent pool is limited by the lowest rate of labour market participation among women in the Western Balkans and Türkiye (25.9%) and high emigration, with an estimated 23% of the population living abroad. Demand for upskilling is high—65% of workers report unmet learning needs—yet participation in adult learning stands at just 4.5%, well below the EU average of 12.8%, in part due to weak incentives for firms and individuals to invest in training. Skills intelligence tools exist but are neither regularly updated nor systematically integrated into policymaking, limiting the ability of firms to anticipate and respond to evolving labour market needs.
Access to alternative financing mechanisms remain underdeveloped, constraining SMEs’ ability to scale and innovate. Around 50% of businesses in the economy report access to finance as a major or moderate obstacle. While bank financing is relatively accessible—supported by the Kosovo Credit Guarantee Fund, the most developed such instrument in the region—it does not fully meet SME needs. Alternative financing mechanisms that could fill this gap remain largely absent. Key legal frameworks for non-bank financing have yet to be adopted, including laws on capital markets and publicly offered investment funds. Without these foundations, instruments such as venture capital remain effectively non-functional: no investments were recorded in 2022 or 2023, and only a single transaction of EUR 9 million took place in 2024.
Going forward, addressing these gaps will be critical if Kosovo's SMEs are to fulfil their role as drivers of growth and convergence in an increasingly competitive global economy.
