SMEs depend on a supportive business environment to start, operate and grow, making sound policies, fair competition, access to finance and effective support services essential to their development. This cluster examines whether the policy, regulatory and institutional environment enables SMEs to start, operate, grow and exit the market under clear, predictable and proportionate conditions. It assesses how effectively SME considerations are embedded in policy design, as well as whether SMEs operate on a level playing field, including efforts to reduce informality, protect competition, ensure fair access to public procurement, and provide timely access to justice.
SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Kosovo
Abstract
In Kosovo, small and medium-sized enterprises (SMEs) are the backbone of economic activity, accounting for 99.8% of all registered enterprises and 79% of total employment, both above EU levels (KAS, 2024[1]; Eurostat, 2025[2]). This structural predominance underscores the need for SME-specific considerations to be systematically embedded across all policy domains affecting private-sector development. Although substantially improved over this assessment period, SME density in Kosovo remains significantly below that of well-functioning market economies, with only 34 active SMEs per 1 000 inhabitants (the EU average stands at around 60 per 1 000 inhabitants), pointing to continued potential for improving framework conditions that support market entry, firm growth and business formalisation (KAS, 2024[1]).
Creating conditions for SMEs to invest, innovate, and expand requires clear, predictable legislation, well-targeted support measures, and effective co-ordination across government institutions. In this context, this section assesses government initiatives to promote an enabling environment for SMEs, in line with OECD principles on regulatory quality, better regulation and SME policy (OECD, 2022[3]; 2025[4]). It examines measures to facilitate market entry and exit, ensure that legislative and policy frameworks are evidence-based, proportionate and responsive to SME needs, minimising administrative and compliance burdens. The section also considers the effectiveness of consultation mechanisms and the extent to which structured stakeholder engagement supports transparent, accountable and predictable policymaking.
2.1.1. Reinforcing regulatory, institutional and policy frameworks for SME lifecycle support
A sound regulatory and institutional framework is essential to provide effective support for SMEs across all stages of their development, from business creation and growth to, where relevant, market exit. While Kosovo continues to perform comparatively weakly among the Western Balkan 6 (WB6) economies in indicators assessing the quality of regulations for private-sector development, firms in Kosovo are consistently among the most optimistic in their assessments of regulatory and operational obstacles to business growth (World Bank, 2024[5]; RCC, 2025[6]). This contrast reflects a business environment in which regulatory and administrative simplification efforts have delivered tangible improvements, reducing bureaucratic burdens. At the same time, strategic formulation and effective implementation of private-sector development policies continue to present substantial limitations.
Over recent years, Kosovo has taken meaningful steps to modernise this environment, notably by updating its strategic policy framework, expanding digital public services and advancing efforts to simplify administrative procedures. Taken together, these developments signal a clear policy intent to improve business conditions and bring SME-related frameworks closer to European standards. However, such progress at the policy level has not always been matched by consistent implementation. Institutional capacity remains uneven, the systematic use of evidence in policymaking is limited, and engagement with SMEs is both limited and irregular.
Following the conclusion of the previous strategy in 2022, Kosovo has repositioned private-sector support within a newly established framework for broader industrial policy, adopted in mid-2023. The Strategy for Industrial Development and Business Support 2023-2030 introduces a longer-term orientation centred on industrial upgrading and deeper integration into international markets, marking a shift away from standalone business support strategies towards a more integrated policy approach anchored in Kosovo’s Development Strategy (Government of Kosovo, 2023[7]). Industrial development is framed around a set of structural objectives, with particular emphasis on expanding industrial production, which represents the central policy priority and accounts for more than one-third of the total planned resources. To operationalise the strategy, the government adopted a first Action Plan for 2023-2025, structured around ten priority actions1 selected for their strategic relevance and informed by an industrial performance diagnostic benchmarking Kosovo against regional peers and Slovenia and Estonia as longer-term reference models. While the framework reflects an effort to strengthen strategic coherence, early implementation suggests that translating it into consistent delivery remains a key challenge, as execution rates remain rather low and uneven across policy areas, in part due to governance discontinuity following the February 2025 elections (MIETI, 2025[8]) (see Dimension 3).
Responsibility for implementing the overall industrial strategy rests primarily with the Ministry of Industry, Entrepreneurship, Trade, and Innovation (MIETI), which also carries overall co-ordination and monitoring functions. While this institutional concentration provides a clear accountability anchor, effective delivery depends on MIETI’s ability to align a wide set of line ministries and public bodies with differentiated mandates. To address this challenge, the strategy had foreseen the establishment of an Implementation Committee, intended to facilitate co-ordination among the multiple ministries, agencies and public bodies involved in delivery. However, in light of persisting challenges, a recalibrated approach is expected for the next programming period (2025-2028). Progress on the overall strategy continues to be monitored through annual implementation reports prepared by MIETI against predefined performance targets. At the same time, operational responsibility for SME-related support measures remains concentrated within the Kosovo Investment and Enterprise Support Agency (KIESA), which also publishes annual reports on its activities.
In 2024, KIESA supported over 300 SMEs through grant schemes targeting productive investment, export readiness and innovation, with a strong focus on manufacturing-oriented firms (KIESA, 2025[9]). Ongoing institutional reforms seek to strengthen this delivery model by separating SME support functions from investment promotion activities through the establishment of a dedicated Agency for Investments and Export, allowing KIESA to refocus exclusively on enterprise and innovation support. However, this institutional reorganisation has experienced delays. While delivery capacity has been strengthened through a substantial increase in KIESA’s financial allocations over the assessment period, persistent resource and co-ordination constraints, especially at the ministerial level, continue to pose key challenges to the pace and consistency of implementation (European Commission, 2025[10]).
One of Kosovo’s most notable developments during this assessment cycle has been the intensified focus on simplifying the business environment, followed by tangible progress. Business Barometer surveys indicate that firms in Kosovo perceive regulatory and administrative burdens to be lower than those of most regional peers, suggesting improved conditions on the ground compared to previous editions (RCC, 2025[6]). Much of this policy effort is associated with the implementation of the Administrative Burden Prevention and Reduction Programme 2022-2027, which marks a shift towards a more structured and preventive approach to regulatory simplification. The programme introduces administrative burden considerations earlier in the policy cycle, notably through dedicated guidance on how regulatory impact assessment (RIA) should identify and address potential burdens arising from new laws and bylaws. This preventive dimension is complemented by preparatory work towards introducing a “one in, one out” principle.2 In practice, however, the bulk of reform efforts has focussed on ex post simplification, particularly through the digitalisation of services and procedures at both central and local levels (Office of the Prime Minister, 2023[11]). While implementation under the initial action plan has advanced steadily, the absence of disaggregated data limits the ability to assess the programme’s concrete impact on businesses. The recalibration of the programme for the 2025-2028 period, however, points to a learning-by-doing approach, reflecting continued political commitment and a good level of policy maturity.
As part of its policy efforts to reduce the regulatory burden, Kosovo has pursued measures to simplify administrative procedures affecting firms. With the launch of the Administrative Burden Prevention and Reduction Programme, around 20% of the 480 existing business permits were targeted for being simplified over the first year of implementation, which proved to be misaligned with institutional capacity and was then recalibrated towards more realistic targets (Government of Kosovo, 2022[12]; European Commission, 2022[13]). Furthermore, the government accelerated its digital government reform by anchoring e‑government development in the Kosovo Digital Agenda 2030 and the E-government Strategy 2023-2027, positioning digital service delivery as a core pillar of public administration modernisation. The eKosova platform has become the central gateway for public services, with around 320 services digitalised by 2025, including 87 new services added during the year, and ambitious targets to bring half of all central government services online by 2027 and all key services by 2030 (eKosova, 2025[14]). Dedicated platforms for business registration and tax administration further support enterprise interactions with government, while donor-backed initiatives such as the EU-funded Kosovo e-ID projects help expand functionality and encourage business uptake (Ministry of Economy, 2025[15]). Despite progress and reform momentum, there is a need to shift from counting digitised services toward measuring how effectively SMEs benefit from them in practice.
In terms of administrative procedures for company registration, Kosovo continues to be a regional top performer, alongside Albania (see Dimension 4). The system is built around a centralised digital one-stop-shop operated by KBRA, which enables the fully electronic submission of registration applications and co-ordinated processing with municipal authorities. Since mid-2025, business registration through the e-Kosova platform allows for end-to-end online applications and the issuance of legally valid digital certificates bearing electronic seals and signatures. For SMEs, the availability of online and centralised registration for all legal forms, electronic payments, free registration for limited liability companies and the absence of minimum paid-in capital requirements translate into significantly lower formal entry barriers (see Section 2.2.1 and Dimension 4). Moreover, the integration of digital payment functionalities into e-Kosova further supports the usability and uptake of digital public services. This positions Kosovo favourably in terms of cost and procedural simplicity for business entry, although the effective time to practically transition to full operationality after registration often exceeds statutory targets (Parliament of Montenegro, 2024[16]).
The development of a centralised e-licence portal within the eKosova platform signals progress towards a more integrated, user-oriented system, though by the end of 2024, only a limited number of permits and licences appear to have been digitalised and operationalised through the portal. The system's governance is supported by the Central Registry of Permits and Licences, which provides inter-institutional oversight, while transparency at the entry stage is reinforced by guidance from the Kosovo Business Registration Agency (KBRA). Although both registration and licensing procedures are expected to be streamlined with the upcoming launch of infrastructure for electronic identification, including the e-Wallet app, the impact will depend on their effective economy-wide rollout beyond the current pilot phase. While monitoring mechanisms are in place for all administrative services, they remain primarily focussed on oversight of basic service delivery and operational performance.
Kosovo’s tax framework combines relatively low statutory rates with ongoing challenges related to compliance capacity and firm-level administrative burdens. The 10% flat corporate income tax (CIT), moderate social security contributions and value-added tax (VAT) rates position Kosovo among lower tax jurisdictions in the region. However, for small firms with limited administrative capacity and constrained liquidity, the timing of tax payments, reporting requirements, and cash flow management can affect the effective cost of compliance. Recent reforms (see Dimension 4) have aimed to improve equity and procedural efficiency, while ongoing digitalisation of filing, payment and data-sharing systems is expected to reduce administrative frictions and support transparency over time. Nonetheless, the tax system's structural features continue to favour debt over equity. Furthermore, the sharp increase in the statutory minimum wage in 2024 (see Dimension 4) is expected to have a visible impact on labour cost structures, particularly for SMEs operating in labour-intensive sectors. Overall, while recent measures point to gradual improvements in tax administration and fairness, further efforts could focus on ensuring that the tax framework supports investment, formalisation and growth, while maintaining predictability and proportionality for SMEs.
Kosovo’s market exit framework for SMEs is relatively well developed in formal terms, with dedicated insolvency procedures and recent reforms that have strengthened alignment with EU standards. The introduction of an expedited SME insolvency track and the establishment of the Commercial Court have improved predictability and access to formal resolution mechanisms. However, the absence of a legal basis for out-of-court restructuring and limited data on procedural performance continue to constrain timely and flexible exits, thereby reducing the framework’s effectiveness in supporting orderly market exits and potential business recovery for SMEs (see Dimension 2 for more information).
2.1.2. Securing systematic, comprehensive and transparent dialogue between policymakers and SMEs
Meaningful engagement of the private sector in policymaking is essential to ensure that new regulations are proportionate, well-designed and aligned with the operational realities of SMEs. When instruments such as public consultations and regulatory impact assessments are applied systematically, and at an early stage of the policy cycle, they enable policymakers to ground decisions in stronger evidence, contributing to greater regulatory clarity and predictability. In this context, Kosovo has established a relatively robust formal architecture for public consultations, underpinned by central oversight arrangements and a unified digital consultation platform. Reflecting these institutional foundations, 49% of citizens report that the Government of Kosovo consults sufficiently when developing new policies, well above the Western Balkan average (OECD, 2025[17]). However, important limitations persist in moving from procedural compliance towards substantive and meaningful engagement.
The legal framework governing public-private consultations (PPCs) in Kosovo is set out in the new Government Rules of Procedure (RoP) adopted in 2024, which consolidated and replaced the previous regulation. Under Article 46, public consultations are mandatory for draft concept documents, draft laws, draft strategic documents and government-initiated secondary legislation, with limited exemptions relating to draft laws ratifying international agreements and internal acts (Government of Kosovo, 2024[18]). New procedural standards state that written consultations must remain open for a minimum of 15 working days, extendable to 30 days for complex or high-impact proposals, while public meetings require at least 7 calendar days’ advance notice. While these minimum procedural requirements are generally respected during consultations, implementation data indicate significant gaps in coverage. In 2024, more than 20% of draft laws were not opened to public consultation, representing a marked decline from 2021, when consultation coverage was close to universal. Although this performance remains stronger than in many peer economies, the declining trend signals weakening compliance with mandatory consultation requirements (OECD, 2022[19]; 2025[17]).
Beyond coverage, the effectiveness of consultations as a tool for evidence-based policymaking is constrained by shortcomings in their quality and transparency. In Kosovo, consultations are frequently organised late in the policy cycle, often after key policy choices have already been defined, limiting their capacity to meaningfully inform policy design and reducing their relevance for SMEs. Advance notice is not consistently provided, and essential supporting documentation (i.e. concept documents, fiscal impact assessments or analytical annexes) is not systematically published alongside draft texts. Although consultation reports are formally required and play a critical role in ensuring transparency and accountability, only 144 out of 251 consultations closed in 2024 (57%) were accompanied by a final report, a decline from 69% compliance in 2021 (Office of the Prime Minister, 2025[20]; 2022[21]). Moreover, even when published, consultation reports are not systematically submitted as part of the documentation accompanying draft laws to the government, limiting decision makers’ visibility over stakeholder inputs and weakening accountability for how feedback is addressed.
By 2024, external stakeholders were almost exclusively consulted through the centralised platform (https://konsultimet.rks-gov.net/), which serves as the mandatory publication point for consultations at the central government level. While e-consultation, among the most formalised in the Western Balkans and Türkiye (WBT) region, reduces fragmentation and enhances accessibility, the platform remains underutilised as a tool for effective and meaningful engagement. While in 2021 more than 2 000 stakeholders participated through alternative formats, such as workshops, roundtables or targeted meetings, contributing to a total of 2 163 submitted comments, information on stakeholder participation through alternative consultation methods was no longer reported in the 2024 annual monitoring data, suggesting diminishing relevance (Office of the Prime Minister, 2022[21]). As a result, in 2024, only 53 out of 268 published consultations received comments, amounting to around 170 submissions in total, the vast majority of which were provided in writing (Office of the Prime Minister, 2025[20]). This low level of participation suggests limited perceived influence of consultations, or the presence of accessibility and outreach barriers, reinforcing concerns about the weakening of consultation depth and inclusiveness over time.
Institutional oversight of PPCs is entrusted to the Office of Good Governance (OGG) within the Office of the Prime Minister, supported by designated consultation co-ordinators across line ministries and, more recently, at the municipal level. In line with the new RoP, the OGG is responsible for monitoring compliance with consultation standards and for preparing the annual Public Consultation Report, which aggregates information submitted by institutions. However, monitoring remains largely procedural, focusing on volumes, timelines and formal reporting rather than on the quality, inclusiveness or policy impact of consultations. The absence of disaggregated data on stakeholder categories limits the ability to assess whether consultations effectively reach and engage SMEs. Moreover, the OGG does not systematically assess how stakeholder input influences final policy decisions, constraining accountability and institutional learning. As a result, while Kosovo has established a centralised and relatively transparent PPC infrastructure, monitoring arrangements have yet to evolve into a tool for steering and continuous improvement of SME-policymaker dialogue.
Complementing the formal consultation framework, Kosovo’s Council for Economy and Investments, established in 2023, was created to facilitate structured dialogue between government institutions, private-sector representatives and civil society. Supported by a full-time independent secretariat, with backing from the European Bank for Reconstruction and Development (EBRD) and funding from the Swiss State Secretariat for Economic Affairs (SECO), the Council for Economy and Investments provides an institutionalised platform for policy exchange outside the standard written consultation process, strengthening the formal ecosystem for public-private dialogue. However, its influence on shaping concrete policy outcomes has so far remained limited, with engagement often centred on information exchange rather than systematically integrating private-sector input into decision making.
The way forward
Strengthen implementation capacity for SME policy delivery. The Government of Kosovo could prioritise the effective implementation of the Strategy for Industrial Development and Business Support 2023-2030 by addressing persistent capacity constraints. In particular, MIETI requires a targeted strengthening of human, analytical and co-ordination capacities to fulfil its policy leadership and oversight role. With regard to KIESA, moving towards a multi-year budgeting framework for SME support measures, aligned with the action plan cycles, would help reduce reliance on short-term, grant-driven interventions. At the same time, the institutional reform separating investment promotion from SME and innovation support should be completed without further delays by fully operationalising the two dedicated agencies and ensuring that both are adequately resourced.
Ensure systematic and effective use of regulatory impact assessment. The Government of Kosovo may consider strengthening the practical enforcement of RIA by ensuring that concept documents are not only prepared but also actively used to guide decisions throughout the drafting, consultation, and adoption stages. The Office of the Prime Minister could progressively strengthen quality control by requiring ministries to address identified analysis gaps before final submission for government approval. Most importantly, concept documents need to be systematically updated throughout the policy cycle whenever proposals undergo material changes.
Develop stronger SME data systems to support evidence-based policymaking. The Government of Kosovo could prioritise strengthening the availability, consistency and analytical use of SME-relevant data across institutions. While core economic data are produced by the Kosovo Agency of Statistics and complemented by administrative sources, significant gaps persist in SME-level outcomes. Greater integration of existing administrative and statistical data, clearer protocols for data sharing among MIETI, implementing agencies, and statistical authorities, and targeted expansion of SME-specific indicators would strengthen monitoring, evaluation, and policy design, and reduce reliance on one-off analytical exercises.
Encourage business growth by assessing the structure and incidence of the tax burden on SMEs. While statutory rates are relatively low, targeted review of the regular tax regime for unincorporated SMEs needs to examine the cumulative impact of income taxation, social security contributions and indirect taxes on formalisation and scale-up incentives. At the same time, simplified tax regimes could be assessed to identify potential thresholds, cliff effects, or design features that may discourage firm growth or discourage a transition to the standard regime. Particular attention also needs to be paid to the impact of rising labour costs on SMEs’ cost structures. These efforts could be complemented by clearer guidance and targeted information campaigns to improve SME awareness and effective uptake of existing tax incentives.
The “Hub and Spoke” model provides an effective institutional solution to the fragmentation of data and statistical capacities across government, as reflected in several OECD systems where strong central statistical or analytical bodies are complemented by distributed expertise. For instance, in France, INSEE operates as a central hub coordinating a network of statisticians embedded across ministries, ensuring coherence in data production and use. Similarly, the Irish Government Economic and Evaluation Service (IGEES) in Ireland connects analysts working with administrative and statistical data across departments, promoting shared methodologies and data governance practices. In the Czech Republic, the Government Analytical Unit plays a coordinating role in improving the quality and consistency of data-driven analysis across government.
The implementation of a “Hub and Spoke” model facilitates data sharing and integration, enhancing the capacity to conduct robust impact assessments, monitor policy outcomes, and design more targeted interventions. The model also supports more efficient use of limited statistical resources by reducing duplication of data collection and analysis efforts across ministries. By creating structured channels for data exchange between the central hub and ministerial units, the model helps ensure that statistical evidence is actively transmitted and used in decision-making processes.
For Kosovo, strengthening the use of data and statistical evidence in policymaking remains a key challenge, particularly given the limited analytical capacity within individual ministries. A “Hub and Spoke” model could position the Kosovo Agency of Statistics, in close coordination with the Office of the Prime Minister and supported by other actors that already manage important administrative data systems, as a central hub responsible for setting data standards, promoting interoperability between administrative datasets, and facilitating secure access to microdata for policy analysis. At the same time, designated analytical or data focal points within line ministries could act as “spokes”, ensuring that sectoral data are systematically collected, curated, and translated into policy-relevant insights. In a context of limited resources, such a model offers a cost-effective way to build a more integrated and sustainable data ecosystem.
Source: (OECD/European Commission, 2025[22]).
For the business environment to effectively foster SME development, it is essential to maintain a level playing field where the same rules and conditions apply to all market participants. When informal practices, weak enforcement and market distortions persist, competitiveness is undermined and SMEs are placed at a structural disadvantage, as smaller firms are particularly vulnerable to high compliance costs and regulatory uncertainty due to their limited financial and administrative resources.
One of the main barriers faced by SMEs in Kosovo remains the persistently high level of informality, which raises costs for compliant firms and undermines the business environment for SME development and growth. This is reflected by high levels of informal employment in the economy, despite growing efforts by Kosovo’s authorities to tackle the issue. Additionally, ensuring a level playing field for SMEs depends in part on the effective functioning of competition policy, public procurement, and state ownership frameworks, as well as the institutions responsible for their oversight. In Kosovo, competition institutions operate within an improved legal framework but face persistent constraints on enforcement capacity, while public procurement markets, despite high SME participation, show signs of weakening competition in higher-value contracts. Lastly, a fair business environment for SMEs requires access to timely and affordable justice, both through courts and alternative dispute resolution (ADR) mechanisms. While Kosovo has strengthened its commercial justice system through the establishment of a specialised Commercial Court, the uptake of ADR remains limited, constraining SMEs’ ability to resolve disputes efficiently and at low cost. The following section will outline the efforts undertaken by Kosovo’s authorities to foster a level playing field by tackling informality, protecting fair competition in private and public contracts, and improving access to justice for SMEs.
2.2.1. Tackling informality for a more competitive business environment
Informality remains a significant impediment to Kosovo’s business environment, placing compliant SMEs at a competitive disadvantage relative to businesses that underreport income, operate without registration, or fail to register employees. Data from the European Commission continues to identify the informal economy as a major constraint on Kosovo’s economic development, with informal employment remaining widespread and structurally entrenched (European Commission, 2025[10]). Business surveys reflect this assessment, with Kosovo recording one of the highest shares of firms in the Western Balkans (between 25.5% and 55%) identifying informal competition as a major constraint on enterprise growth (RCC, 2024[23]). Recent estimates suggest that Kosovo’s informal economy accounts for 23.5% to 30% of gross domestic product (GDP) (EBRD, 2022[24]; OECD, 2024[25]). Although these levels remain high, available evidence points to a downward trend, declining from an estimated 34% to 40% of GDP in 2010 (Krasniqi and Topxhiu, 2012[26]).
A substantial part of Kosovo’s informal economy is driven by persistently high levels of unregistered employment, estimated at around 30% of total employment, which, despite a gradual decline from approximately 40% in 2016, indicates a structural labour‑market equilibrium where informality remains the dominant adjustment mechanism (OECD, 2025[27]). The concentration of informal labour in services – particularly hospitality, trade and transportation – followed by construction and agriculture, reflects sectoral features such as seasonality, low value‑added and thin profit margins that systematically weaken employers’ incentives to formalise (EBRD, 2022[24]). These sectoral patterns align with Kosovo’s firm‑size distribution, as the same sectors host the highest concentration of micro‑enterprises, suggesting that informality is partly a function of enterprise demography rather than only regulatory non‑compliance (KAS, 2025[28]). In 2024, wholesale and retail trade alone accounted for 34% of all micro firms, while manufacturing, accommodation and food services, and construction made up an additional 25%, meaning that nearly 60% of microenterprises operate in sectors where structural conditions favour informality (KAS, 2025[28]). Given the central role of micro firms in employment generation, particularly in trade and construction (where they account for 55% of total employment), this concentration reinforces a structural link between SME dynamics and informality (KAS, 2025[28]). The dominance of micro firms in high-informality sectors therefore risks reinforcing a self-perpetuating dynamic, where limited compliance capacity and weak incentives for formalisation contribute to persistently high levels of informality.
Since the previous assessment, Kosovo has continued implementing the Strategy and Action Plan for Formalisation of the Informal Economy 2019-2023, the fourth strategic document since 2008, reflecting sustained policy attention to tackling informality (Government of Kosovo, 2019[29]). The latest implementation reports highlight the completion of approximately 70% of total measures (Government of Kosovo, 2024[30]). Progress was strongest in enforcement, as the Tax Administration and Labour Inspectorate expanded risk-based inspections, and joint enforcement led to the identification of more than 6 000 unregistered workers in 2023 (Government of Kosovo, 2024[30]). Additionally, data collection on informality improved through the adoption of Eurostat methodologies, alongside measures to reduce cash usage, including lowering thresholds for business-to-business cash transactions (Government of Kosovo, 2024[30]). By contrast, implementation was weaker or absent in structural reforms, including e-invoicing, the unified address system, and the adoption of a new Labour Law, slowing progress in reducing administrative costs for SMEs (Government of Kosovo, 2024[30]). Importantly, Kosovo currently lacks a successor strategy, interrupting the previously continuous cycle of anti-informality strategies and undermining policy continuity, as remaining anti-informality measures are now implemented through separate government programmes without a unified strategic framework.
In parallel with enforcement-focused measures, Kosovo’s tax system features relatively low, flat tax rates, which contribute to the formalisation of small business activity (see Section 2.1.1). CIT is a flat 10%, and personal income tax ranges from 0% to 10%, effectively representing a very low tax burden (PWC, 2022[31]). Moreover, mandatory social contributions are limited to a 5% pension contribution by employers and 5% by employees, far below regional contribution rates, which can reach up to 35% (PWC, 2022[31]). This comparatively low level of taxation decreases the cost of operating formally and may reduce the incentive for firms to hide income or wages. To further strengthen tax compliance, the 2024 Law on Tax Administration and Procedures lowered the threshold for mandatory non-cash transactions to EUR 300, requiring payments above this level to be made via traceable bank transfers and limiting the scope for concealing sales and wages (OECD, 2024[25]).
Kosovo’s government has also pledged to evaluate tax exemptions, introduce e-invoicing, and upgrade e-fiscalisation systems as part of its Economic Reform Programme, which should streamline compliance for SMEs and improve sales reporting to tax authorities (OECD, 2024[25]). Progress has been made at the preparatory and regulatory levels, including the completion of a tax expenditure assessment and the issuance of administrative guidelines for electronic fiscal reporting, while the existing hardware-based fiscalisation system remains in operation. However, implementation remains partial and expected gains have yet to fully materialise. The implemented reforms, taken together, are estimated to have contributed around 1.1% of GDP to Kosovo’s revenue growth since 2017, signalling a business environment in which SME formalisation is becoming both more economically viable and increasingly unavoidable (IMF, 2025[32]).
Beyond taxation, an efficient business registration system is a key determinant of formalisation outcomes, as high administrative barriers to entry are a major driver of informality among SMEs. In this regard, Kosovo has made notable progress in streamlining business registration through KBRA, which operates a one-stop shop and, since June 2025, enables full company registration to be completed online without requiring in-person visits (see Section 2.1.1) (Government of Kosovo, 2025[33]). For SMEs, this reduces entry costs in Kosovo’s formal economy, making formal market participation more accessible and lowering the incentive to operate informally at the early stages of business development.
2.2.2. Protecting and monitoring fair market competition
Maintaining a level playing field for SMEs requires ensuring fair competition in the business environment, where firms compete on equal terms, and smaller enterprises are not hindered by disproportionate barriers to accessing both private and public markets. This is particularly important in areas such as public procurement, where fair competition determines the extent to which smaller firms can access public demand, and in the governance of state-owned enterprises (SOEs), where weak oversight or preferential support can distort incentives and tilt market outcomes. When these conditions are not met, SMEs risk facing structural barriers that limit their ability to compete on equal terms.
Kosovo’s competition framework is governed by the 2010 Law on Protection of Competition, which was consolidated in 2022 and establishes the Kosovo Competition Authority (KCA) as the enforcing authority (Government of Kosovo, 2022[34]). The consolidated law improves the competition legislative framework and includes measures that can benefit SMEs, such as interim measures and market studies, which enable swifter intervention in cases of potential harm to competition and improve awareness of competition rules among businesses. Additionally, the financial thresholds that trigger KCA oversight were substantially lowered in 2022 (from EUR 100 million to EUR 20 million in international turnover), thereby legally increasing the agency’s oversight of domestic transactions and improving its capacity to safeguard competitive conditions in markets where SMEs operate. However, the absence of a dedicated SME complaints unit within the KCA may limit the practical accessibility of competition enforcement for smaller firms, in turn constraining their ability to seek timely remedies in cases of anti-competitive conduct.
Positively, since 2022, the KCA has focused its monitoring activity on a broad range of sectors. Although some sectors under supervision, such as telecommunications and energy, are less SME-intensive, the KCA has also intervened in markets with a high concentration of SMEs, including steel processing and agriculture (European Commission, 2025[10]). Despite a legally sound framework and a strong monitoring record, enforcement has remained limited. This is particularly relevant for SMEs, which strongly depend on effective competition enforcement to safeguard their access to markets. European Commission data indicate that since 2022, the KCA’s ability to enforce its decisions has not substantially improved during the assessment period, and its advocacy activities have not specifically targeted SMEs (European Commission, 2025[10]). Additionally, no new strategy has been introduced to improve the KCA’s enforcement capacity.
While weaknesses in competition enforcement directly affect SMEs’ ability to operate in fair and contestable markets, the broader institutional environment shaping SME competitiveness also depends heavily on the allocation of public contracts. Public procurement represents a major opportunity for SME growth, as it occupies a significant and growing share of Kosovo’s economy, reaching 9.31% of GDP in 2024, up from 6.50% in 2022 (PPRC, 2025[35]). SME participation in public procurement has remained very high, with Kosovo recording one of the strongest SME presences in the region. In 2024, SMEs were awarded approximately 95% of all contracts and accounted for around 90% of total contract value, indicating that their participation extends beyond small-scale tenders to economically significant contracts (Figure 2.1) (PPRC, 2025[35]).
Note: WBT average does not include data for Montenegro or Türkiye.
Source: PPRC (2025[35]).
The large share of SMEs can be partly explained by increased transparency in the allocation of public contracts. This is demonstrated by both the sharply decreasing share of negotiated procedures without prior publication and the increasing use of quality-based award criteria, marking a positive shift towards more open and competitive procurement procedures.
Despite these improvements, SMEs have continued to face challenges due to weakening economic competition conditions. The average number of bids per tender declined from 4.08 in 2022 to 3.5 in 2024 (compared to the WBT average of 3.1), and approximately 25% of tenders above EUR 10 000 received only one bid in 2023, outlining a context of declining competition, especially in higher-value contracts.
Additionally, recent OECD data underscore concerns on both transparency and effectiveness of the review system of the Procurement Review Body, the institution responsible for the legal protection of businesses in public procurement, noting a context where SMEs could be discouraged from seeking legal protection or competing altogether for fear of a lack of legal protection (OECD, 2025[17]).
To guide public procurement reforms, the Government of Kosovo adopted the Public Finance Management Strategy 2022-2026, which despite addressing gaps especially in terms of selection criteria and standards, lacks specific measures to reduce administrative and procedural barriers for SMEs (Ministry of Finance, 2022[36]). Additionally, a new Law on Public Procurement has not yet been adopted to consolidate the current legal framework, despite the strategy’s objective to do so by 2023. The current law, adopted in 2011, is generally aligned with EU guidelines, but does not fully transpose key instruments, such as flexible subcontracting rules and the use of self-declarations at the selection stage, which facilitate smaller firms’ access to public tenders. While SME participation in public procurement in Kosovo is high in both contract numbers and value, the absence of these tools may reduce procurement market efficiency by increasing administrative burdens and limiting flexible participation modalities – effects that tend to weigh more heavily on smaller firms and can constrain fair market competition.
SME development can also be adversely affected when the legislative and competitive frameworks governing SOEs are limited, allowing them to crowd out private investment and undermine the level playing field. Kosovo’s main SOE portfolio consists of 18 enterprises in addition to a legacy portfolio of more than 500 socially owned enterprises managed by the Kosovo Privatisation Agency (PAK), despite the latter’s planned dissolution and replacement by a sovereign fund (OECD, 2024[25]). At the end of 2022, SOEs accounted for nearly 3% of total employment, and were concentrated mainly in energy and telecommunications. Their financial performance remained weak, with more than half of the main SOEs reporting negative returns on equity in 2022, indicating persistent inefficiencies (OECD, 2024[25]).Furthermore, labour market distortions were reinforced by a substantial SOE wage premium (EUR 769 vs. EUR 380 in 2020), reducing the attractiveness of private-sector employment and placing private companies, including SMEs, at a structural disadvantage in attracting and retaining skilled labour (EBRD, 2022[24]). The state ownership framework has also not been consolidated or updated since its introduction in 2008, with no evidence of a systematic review of its implementation or effectiveness (OECD, 2024[25]). As a result, fragmented financial oversight and limited performance monitoring continue to distort competitive dynamics, constraining SMEs’ ability to compete on equal terms.
2.2.3. Providing efficient judicial and out-of-court dispute resolution mechanisms
Ensuring timely and efficient access to justice is essential for a business environment where SMEs can operate securely and competitively. Given their smaller size and limited resources, SMEs are particularly susceptible to the risks posed by lengthy legal proceedings, as they may struggle to manage prolonged uncertainty and operational disruptions. These constraints often deter smaller firms from initiating legal action, leaving them exposed to unfair conduct and breaches of contract. This makes ADR mechanisms essential, as they offer quicker, more cost-effective avenues to resolve disputes. Yet in Kosovo, ADR solutions remain underused despite extensive reforms to its justice system.
Since 2022, SMEs seeking judicial remedies in Kosovo must turn to the newly established Commercial Court, created by Law No. 08/L-015 on the Commercial Court, which replaced the previous handling of commercial disputes within civil courts, and centralised the handling of business-related cases. Before the reform, data showed that the average disposition time for first-instance commercial cases could exceed 1 500 days (CEPEJ, 2023[37]). Since becoming fully operational in August 2022, the Commercial Court has made progress in expediting case resolution. By early 2023, it had achieved a sustained clearance rate above 100%, meaning it began resolving more cases than it received on a monthly basis. Thanks to these efficiency gains, Kosovo’s courts reduced the backlog in civil cases in 2023 while raising their case clearance rates. By 2024, the average time to dispose of a first-instance business lawsuit had dropped to approximately 561 days, suggesting faster legal resolution for SMEs (CEPEJ, 2025[38]). However, disposition times remain above regional benchmarks in both first and second-instance commercial cases, at 631 days on average (CEPEJ, 2025[38]). In this context, the draft Law on the Administrative Court introduced in 2024 could, if adopted, partially reverse the benefits of centralisation by reassigning business-related administrative disputes away from commercial courts, requiring SMEs to engage with multiple court systems and potentially increasing procedural complexity and administrative costs (Government of Kosovo, 2024[39]). To further accelerate legal procedures for SMEs, effective ADR mechanisms can offer faster, less costly options for resolving disputes, with mediation and arbitration typically the most cost-effective for smaller businesses.
In Kosovo, mediation is a legally recognised solution by the 2018 Law No. 06/L‑009 on Mediation, which sets the general scope of mediation, but lacks measures that may directly benefit SMEs, such as interim measures or mandatory mediation for business-related cases (Government of Kosovo, 2018[40]). As of 2024, Kosovo had approximately 100 accredited mediators, approximately 6.2 per 100 000 inhabitants, slightly above the regional average of 5.9 but a decreasing number since 2022 (10.4 mediators per 100 000 inhabitants) (CEPEJ, 2025[38]; 2023[37]). In comparison with neighbouring economies, Kosovo records relatively high use of mediation, with around 7 800 cases resolved in 2024, although the lack of data on business users limits the ability to assess the relevance and accessibility of mediation for SMEs (CEPEJ, 2025[38]). To improve its mediation framework, Kosovo has identified mediation promotion as a priority under the Strategy on Rule of Law 2021–2026, including awareness-raising among legal professionals and strengthening of the regulatory framework for mediators. Early implementation reports, however, show no evidence of systematic rollout or impact assessment, or dedicated mediation policy for SMEs (Government of Kosovo, 2025[41]).
Arbitration is another ADR avenue in Kosovo’s legal system, offering binding private dispute resolution, especially for businesses operating across borders. In practice, however, it sees very limited use among SMEs, despite the law3 establishing provisions beneficial to SMEs, such as interim measures and cost-proportionality safeguards for firms with lower financial resilience. When it comes to enforcement, two permanent arbitration bodies operate in Kosovo: the Arbitration Center of the American Chamber of Commerce in Kosovo and the Permanent Tribunal of Arbitration at the Kosovo Chamber of Commerce (KCC). Available evidence points to very limited arbitration use, with the Permanent Tribunal of Arbitration handling only 20 commercial disputes to date, and although the American Chamber of Commerce reports an 18% increase in cases between 2019 and 2021, the absence of data on the profile of users prevents an assessment of uptake by SMEs (KCC, 2026[42]). Through advocacy activities such as Arbitration Week, both institutions promote arbitration and mediation among businesses, which may help SMEs by improving awareness of accessible dispute resolution mechanisms. However, SME participation in these initiatives remains undocumented (American Chamber of Commerce, 2024[43]). Despite arbitration being referenced in the Strategy on Rule of Law 2021-2026, Kosovo has yet to adopt targeted measures to strengthen it for businesses, and the lack of implementation evidence or caseload data limits assessment of its usefulness for SMEs (Ministry of Justice, 2025[44]).
Limitations in the use and promotion of arbitration mirror broader enforcement challenges in Kosovo, particularly in intellectual property rights (IPR), where SMEs often struggle to secure timely and effective protection. IPR infringement cases, whether concerning trademarks, patents or copyrights, are currently handled by the Commercial Court as standard commercial disputes (Government of Kosovo, 2022[45]). This is reinforced by Kosovo’s consolidation of its intellectual property framework through the adoption of new legislation, which may provide more predictable conditions for SME (European Commission, 2023[46]). In practice, however, implementation has remained limited, and SMEs have continued to face several enforcement-related bottlenecks. For instance, handling IPR cases through the Commercial Court may entail longer wait times, as disputes are processed alongside other commercial litigation rather than on a dedicated IPR track, thereby increasing compliance costs and procedural burdens for SMEs. Data from both the European Commission and the International Trade Administration (USITA) outline a similar picture, indicating that Kosovo’s institutions responsible for patents and trademarks remain underfunded (European Commission, 2023[46]; USITA, 2025[47]).
The way forward
Adopt a successor strategy on formalisation and informal economy reduction. While Kosovo has implemented most measures under the Strategy and Action Plan for Formalisation of the Informal Economy 2019-2023, no successor strategy has been adopted, and anti-informality measures are now implemented across separate government programmes without a unified framework. By adopting a new comprehensive formalisation strategy, tackling remaining gaps from the previous programmes, such as the introduction of e-invoicing and a unified address system, authorities could strengthen policy continuity and co-ordination.
Improve procurement competition and reduce administrative barriers affecting SMEs. Despite high SME participation in public procurement and improved transparency, competition has weakened in higher-value tenders and key EU procurement instruments remain only partially transposed. The consolidation of the current legal framework by introducing flexible subcontracting and self-declaration mechanisms, together with improvements to the Procurement Review Body's effectiveness, may reduce procedural costs and support more efficient SME participation.
Strengthen state-owned enterprise governance and financial oversight to safeguard competitive neutrality. Kosovo’s SOE portfolio continues to face challenges, including persistent financial underperformance, high wage premiums and fragmented oversight, which distort competition and crowd out private investment. By updating its state ownership policy and strengthening financial reporting, Kosovo could improve the business environment for SMEs.
Strengthen the accessibility and uptake of alternative dispute resolution for SMEs. While Kosovo has established a specialised Commercial Court and maintains a legal framework for mediation and arbitration, ADR mechanisms remain underused by businesses, and no dedicated SME-oriented ADR policy or monitoring framework exists. A targeted ADR strategy for commercial disputes that strengthens mediator capacity and the introduction of SME-friendly procedural tools may improve case resolution for SMEs.
Access to finance is a critical enabler of SME establishment, growth and resilience, allowing firms to invest, expand operations, and manage cash flow, while limited access can disproportionately constrain smaller businesses compared with larger firms. Overall, following recent policy rate cuts, SME borrowing costs have eased in most OECD Member countries, but they remain above pre-COVID levels: reflecting still-tight financing conditions, 25 of 39 countries recorded a lower share of outstanding SME loan stocks in 2024 than in 2023 (OECD, 2026[48]). Kosovo mirrors this difficult financing environment: as in 2024, only 20% of businesses indicated that access to finance is not an obstacle to their growth (RCC, 2024[23]).
The limited availability of non-bank financing, combined with structural barriers to credit access, continues to constrain SMEs in Kosovo. Public authorities could help address these constraints by strengthening lending conditions, particularly by improving collateral usability, and by developing alternative financing channels to diversify funding beyond bank loans. This includes strengthening equity finance (e.g. venture capital and private equity) and developing alternative debt and asset-based finance channels, notably corporate bonds, factoring and leasing. Complementary grant schemes in innovation, greening and digital transformation can strengthen SMEs’ capacity to invest and grow despite existing financial constraints.
In this context, this section assesses the success of policies in enabling SMEs’ access to bank finance and alternative financing avenues, as well as the direct financial support implemented to encourage SME establishment, operations and growth.
2.3.1. Facilitating bank lending to SMEs
Access to bank finance is crucial for Kosovo’s SMEs to support their operations and growth. In Kosovo, the financial system relies mainly on the banking industry, which accounted for 67.1% of total financial system assets in December 2024, followed by pension funds (25.1%) (Central Bank of Kosovo, 2025[49]). Kosovo’s banking sector is generally well-capitalised, therefore resilient to economic shocks: in December 2024, the core capital adequacy ratio4 was 17.4% (Central Bank of Kosovo, 2025[50]), surpassing the euro area (15.7%) (ECB, 2025[51]). The banking sector is also broadly liquid, profitable and compounded by high liquidity assets, with non-performing loans falling to 2.1% of total gross loans in November 2025 (Central Bank of Kosovo, 2025[52]), the lowest within the WBT region.
Outstanding loans represented 55.9% of GDP in 2024, largely above their 2019 level (42.8%) and the WBT average of 42.6% (World Bank, 2025[53]) (Figure 2.2). Moreover, SMEs accounted for 96% of total outstanding loans from commercial banks in 2024,5 a share that has remained relatively stable since 2019, and considerably higher than in Serbia (28%),6 Albania (46%),7 North Macedonia (62%),8 and Montenegro (73%),9 indicating that SMEs’ access to credit in Kosovo is comparatively favourable within the region. Overall, Kosovo’s performance may stem from its large-scale policies aimed at fostering access to bank finance, despite structural limitations in asset registration, secured transactions, the insolvency framework and credit information.
Source: World Bank (2025[53]).
One of Kosovo’s key strengths in facilitating SME access to bank finance lies in the credit guarantee schemes (CGS) provided by the Kosovo Credit Guarantee Fund (KCGF). Launched in 2016, the KCGF’s portfolio has steadily increased to reach a substantial size, supporting EUR 173 million in loans in 2024 (Kosovo Credit Guarantee Fund, 2025[54]) (1.7% of GDP), nearly twice the level in 2022 (EUR 97.5 million) (Kosovo Credit Guarantee Fund, 2023[55]). The KCGF’s portfolio has expanded substantially since 2022, with the creation of dedicated thematic investment windows: the Green Recovery and Opportunity Window and the Export Window in 2022; the Women in Business Window and the Startup Window in 2023; and the Diaspora Investment Window in 2024. However, the bulk of the KCGF’s activity remains concentrated on its Standard Window, standing for 76.3% of the total loans supported (see Table 2.1). In terms of effectiveness, internal assessments estimate that the KCGF enabled access to bank finance to 2 571 businesses, with associated employment effects amounting to 4 801 new jobs created in 2024 (Kosovo Credit Guarantee Fund, 2025[54]). However, these results are based on internal monitoring and have not yet been assessed through an independent external evaluation of the fund’s additionality and impact.
Note: The KCGF credit guarantees are intended exclusively for SMEs.
Source: Kosovo Credit Guarantee Fund (2025[54]).
The KCGF is further complemented by four initiatives stemming from the European Investment Fund (EIF) and the EBRD, with an estimated amount of provided guarantees of around EUR 20 million in 2024 (0.2% of GDP) (see Table 2.2).
Notes: Active credit guarantee schemes also include the EU-KfW Western Balkans Guarantee - Supporting Entrepreneurs’ and MSMEs’ Resilience program; EBRD’s HI-BAR program, the EBRD’s Risk sharing for ESG projects program, the EBRD’s Credit Enhancement of Green Bonds, the EBRD’s Growth for All program, KfW’s MSME Guarantee Platform, the EBRD’s Digital Transformation Platform Guarantee, For more details, see Western Balkans Investment Framework (2026[56]).
Sources :1. EIF (2024[57]; 2025[58]); 2. EBRD (2025[59]).
Despite these conducive policies, Kosovo's ability to facilitate SME access to bank finance is constrained by gaps in the asset registration system, particularly for movable and intangible assets, restricting the collateral base for secured lending. The real estate cadastre is accessible through the Kosovo Cadastral Information System on the digitised eKosova platform and covers the entire economy, providing a comprehensive basis for collateralising land and buildings. Nevertheless, despite efforts to reconstruct cadastral information through the implementation of the World Bank-supported Real Estate and Geospatial Infrastructure Project, historic ownership regularisation gaps remain and continue to affect the reliability and bankability of collateral (World Bank, 2025[60]). Regarding movable assets, the Pledge Registry does not record information on the valuation of pledged assets, meaning that commercial banks cannot use registry data to assess collateral values or monitor loan-to-value ratios, which tends to keep them conservative when lending against movable property. In addition, all electronic search requests in the Pledge Registry made by registered users, such as commercial banks, are subject to fees,10 which increases the transaction costs associated with using movable assets as collateral. Regarding intangible assets, the absence of an explicit list of eligible intangible asset categories hinders innovative firms’ access to bank finance.
Another structural obstacle to access to bank finance may stem from Kosovo’s secured transactions and insolvency framework, which still falls short of some creditor-rights features. A key caveat of the framework is that, during reorganisation, existing owners and directors generally remain in control of the firm’s assets and operations rather than being automatically replaced by an insolvency administrator, thereby reducing creditors’ leverage over assets while the procedure is ongoing. Overall, in addition to potential bottlenecks following the 2022 establishment of the Commercial Court (see Dimension 2 for more details), this gap in creditor rights contributes to making recovery values in distressed situations somewhat less certain for banks, particularly for SME exposures, and may translate into higher risk premiums and tighter collateral requirements.
Finally, Kosovo has a public credit registry operated by the Central Bank of Kosovo that collects and distributes credit information on both natural persons and legal entities. All licensed banks, microfinance institutions, non-bank financial institutions and insurance companies are required to report loans and guarantees to the Credit Registry of Kosovo. At the same time, Kosovo does not have a separate private credit bureau, and the registry’s data sources are limited to regulated credit providers, with no clear evidence that alternative data that could help assess creditworthiness, such as utilities or telecoms records, are used in practice. As a result, while the Credit Registry of Kosovo significantly reduces information asymmetries and supports risk-based lending for borrowers with an established credit history, commercial banks may still be incentivised to rely on traditional financial statements and collateral when assessing asset-light SMEs for loan applications.
2.3.2. Providing alternatives to bank finance
In addition to maintaining an adequate supply of bank credit, governments can facilitate SMEs’ access to a broader range of external financing options to support their growth. In Kosovo, however, SMEs still have access to only a very limited set of alternatives to bank financing, as most relevant legal frameworks have yet to be implemented.
Established SMEs in Kosovo currently lack access to capital-market financing, as the economy lacks a stock exchange and a dedicated legal framework for the issuance and trading of corporate securities. To address this gap, the government adopted in 2024 the Concept Document for the Development of the Regulatory Framework for Capital Markets, developed with support from the vInvestment Promotion and Access to Finance project funded by the US Agency for International Development. The concept document initiated preparations for a package of primary legislation (notably a Law on Capital Markets and a Law on Publicly Offered Investment Funds), as well as amendments to related rules on securities, payments, and financial market infrastructure. However, progress has stalled, and no adoption timeline has been communicated to date (Government of Kosovo, 2024[61]).
Kosovo’s early-stage businesses also face very limited alternatives to bank finance for funding their investments. Private equity and its riskiest form, venture capital (VC), operate only sparingly in Kosovo, constraining high-potential SMEs from scaling up due to a lack of funding for their investments. Expressed in purchasing power parity in 2021 prices, VC activity remains marginal in Kosovo, with the absence of investment in 2022 and 2023, followed by a USD 10.4 million (EUR 9.0 million) investment of the United States International Development Finance Corporation into a single company in 2024 (Dealroom, 2025[62]) (Figure 2.3). The absence of domestic private equity activity in Kosovo is largely attributable to the lack of a dedicated legal framework for alternative investment vehicles. This gap is also expected to be addressed through the Concept Document for the Development of the Regulatory Framework for Capital Markets, which foresees the preparation of a new Law on Alternative Investment Funds.
Another underexploited alternative avenue for accessing finance is crowdfunding, which could be particularly useful for early-stage businesses. Crowdfunding is a way to better channel diaspora’s financial transfers, which are significant in Kosovo: remittance inflows accounted for 17.3% of GDP in 2024, the highest level among the WBT economies, and well above the regional average of 8.0% (World Bank, 2025[63]). However, in the absence of a legal framework governing crowdfunding, Kosovo’s SMEs are currently unable to leverage these diaspora resources at scale, and there are no plans for adopting such a framework at the time of writing.
Notes: For comparability, Türkiye’s data have been excluded from the figure. In 2024, Türkiye’s VC volume was estimated at EUR 2.5 billion (2021 PPP).
Source: OECD calculations based on Dealroom (2025[62]).
Despite the absence of related data, available evidence suggests that factoring is an underdeveloped avenue for finance in Kosovo (Agence Française de Développement, 2022[64]). While the legal framework for factoring is available, it is incomplete, generating high transaction costs for factoring contracts and potentially hindering its development. Regulatory gaps are related to the assignment of receivables and the registration of assignments, which respectively increase the risk of double assignment and disputes with other creditors. Moreover, no active policies support the development of factoring, such as tax incentives, assistance, or training for SMEs, further limiting its development.
Among alternative financing instruments in Kosovo, leasing finance is the most widely used option. Leasing volumes have increased significantly, reaching 1.0% of GDP in 2023 (EUR 103.1 million) (Central Bank of Kosovo, 2025[49]), up from 0.75% in 2019 (EUR 52.7 million), though this level remains below the EU average of 2.05% in 2023 (Leaseurope, 2024[65]). Available data indicate that the main driver of leasing growth is businesses, which accounted for 73.1% of total leasing in 2023, compared with only 54.8% in 2020 (Central Bank of Kosovo, 2025[49]), which suggests their growing use by domestic SMEs. Unlike most alternative financing avenues, Kosovo has a core legal and supervisory framework for financial leasing and at least one well-established leasing provider. However, Kosovo has not implemented specific policies to develop this market, such as tax incentives to promote its use, which may limit its overall uptake.
2.3.3. Providing direct financial support to SMEs’ operations and growth
When SMEs struggle to obtain affordable external financing, public support plays a vital role in maintaining entrepreneurship, stimulating investment, and driving key structural transitions. Instruments such as grants, dedicated funds, and co-financing schemes enable SMEs to offset the constraints posed by underdeveloped capital markets and a banking sector still reluctant to finance riskier ventures. Beyond providing temporary liquidity, these tools can support enterprise growth, including promoting international expansion, fostering research and innovation, and advancing the twin transitions.
Aside from donor-led initiatives, programmes providing direct financial support to SME establishment remain limited in Kosovo. Since January 2024, Kosovo has begun piloting the Youth Guarantee Scheme, which, alongside employment and training offers, provides grants to support transitions into self-employment (Table 2.3). The pilot targets around 3 000 not in employment, education or training (NEETs) by the end of 2025 (ETF, 2024[66]), but implementation faces several constraints, including low registration among young NEETs with the Employment Agency (see Cluster 4 for more details).
Direct support is more developed once firms enter the growth phase, though provision remains uneven across areas. Kosovo has recently strengthened its financial support for innovation, but domestic direct financial support for internationalisation and the twin transitions remains largely limited.
Kosovo has recently expanded direct financial support for innovative SMEs,11 with a particular focus on the digital transformation (Table 2.3). Under the remit of MIETI and KIESA, the flagship Innovation Grant Scheme was launched in 2024, with two windows – one for established micro, small and medium-sized enterprises (MSMEs) and one for start-ups,co-financed by the Government of Kosovo and the Luxembourg Agency for Development Cooperation (LuxDev) for a total of EUR 1.9 million, which benefitted a total of 34 MSMEs and 15 start-ups (KIESA, 2025[9]). Since 2025, this has been complemented by an information and communication technology (ICT) Grant Scheme for SMEs, with a budget of EUR 1 million, that supports innovation projects in the ICT sector and serves as a dedicated instrument for digital upgrading among established firms.
While there is no domestic instrument specifically targeting SME green innovation in Kosovo, this gap is partly addressed by the LuxAid Challenge Fund, launched in 2024 with a budget of over EUR 1.5 million, which provided grants to four businesses implementing innovation projects aligned with the Sustainable Development Goals (Luxembourg Development Agency, 2025[67]). Within the same financial envelope, the Demonstration Fund has also supported four businesses to scale commercially viable innovations, with a particular focus on circular-economy projects (Luxembourg Development Agency, 2025[67]). Overall, these developments represent a notable broadening of the grant portfolio for SME innovation, although the support framework remains limited in terms of coverage, reliant on donor-funded instruments and is not yet embedded in a long-term, domestically financed strategy, in a context where Kosovo’s gross research and development (R&D) expenditure stagnates at around 0.1% of GDP (see Figure 2.4).
Source: OECD (2025[27]).
In addition to tackling it through supporting innovation efforts, financial support for SME digital transformation in Kosovo has expanded gradually, but overall funding remains modest relative to the capital needs associated with more advanced technological upgrading and continues to rely heavily on donor-backed instruments, most notably the EBRD’s Go Digital programme (Table 2.3) (see Cluster 3 for more details). Similarly, direct domestically financed support for SMEs’ green transition remains limited, with assistance largely channelled through donor-led initiatives, again with the EBRD playing a central role (Table 2.3) (see Cluster 2 for more details).
While still modest in scale, Kosovo provides some direct financial support for SME internationalisation, notably through KIESA grant schemes (Table 2.3). In 2024, the Product Certification Grant Scheme supported 23 SMEs with a budget of EUR 500 000, strengthening firms’ export readiness by helping them meet international technical standards. By contrast, the Grant Scheme for the Purchase of Production and Processing Machinery, while not explicitly targeted at exporters, supported a much larger number of firms (167 SMEs) in 2024, with a substantially higher budget (around EUR 4.5 million) allocated to upgrade production capacity and improve competitiveness, with the stated objective of reducing the trade deficit (KIESA, 2025[9]). This suggests that public support has so far prioritised broad-based capacity upgrading over more targeted export-oriented interventions. While investments in production capacity can indirectly support internationalisation, the limited scale of dedicated export-readiness measures may constrain SMEs’ ability to fully access and compete in international markets.
Notes: The non-listed credit lines include the EBRD’s Western Balkans Women in Business and Youth in Business programmes, the Italian Deposits and Loans Fund’s Sustainable Access to Finance for Entrepreneurship program, the EIF’s and the German development bank KfW’s European Fund for Southeast Europe S.A. SICAV-SIF fund, KfW’s EU Market Creation Facility, the EBRD’s Green Economy Financing Facility, the EBRD’s Risk sharing for ESG projects, the EBRD’s Credit Enhancement of Green Bonds, the EBRD’s Global Green Bond Initiative, the KfW’s MSME Guarantee Platform, the KfW’s Western Balkans Guarantee - Supporting Entrepreneurs’ and MSMEs’ Resilience, the EBRD’s Enterprise Expansion Fund, the EBRD’s Single Market Ready program, the EBRD’s Growth for All program, the EBRD’s Direct Financial Framework -Rec Kos, the EBRD HI-BAR program, the EIF and KfW Green for Growth Fund, the International Finance Corporation (IFC) Western Balkans Climate Programme and the EBRD’s Digital Transformation Platform. More details are provided by Western Balkans Investment Framework (2026[56]).
* These credit lines aim to allocate 50% of the proceeds of the loan for green sub-loans in accordance with the EBRD's Green Economy Transition eligibility criteria.
MSMEs: Micro, small and medium-sized enterprises; ECIKS L.L.C: Economic Initiative for Kosovo; WB6: Western Balkan 6.
Sources: 1. ETF (2024[66]); 2. Luxembourg Development Agency (2024[68]); 3. Luxembourg Development Agency (2025[69]) and information provided by the Government of Kosovo; 4. Western Balkans Investment Framework (2026[56]); 5: KIESA (2026[70]); 6: KIESA (2025[71]) and information provided by the Government of Kosovo; 7: MIETI (2023[72]); 8: EBRD (2026[73]); 9: KIESA (2025[74]); 10: EBRD (2025[75]); 11: EBRD (2024[76]).
The way forward
Establish a comprehensive legal framework for early-stage financing and complement it with targeted policy instruments to foster market development. At present, private equity, VC and crowdfunding remain outside any dedicated legal framework, creating legal uncertainty for investors. Kosovo may consider strengthening the legal framework for key early-stage financing instruments and complementing it with targeted measures. Notably, to help crowd in private investors where the domestic early-stage financing market is thin, Kosovo could consider public participation in VC markets through (1) direct vehicles (public co-investment funds or co-investment alongside private VC and angel investors) and (2) indirect vehicles (public fund-of-funds or cornerstone commitments into privately managed VC funds.
Assess the Kosovo Credit Guarantee Fund’s performance to maximise its contribution to SME access to bank finance. Given the KCGF’s sizeable scale, a comprehensive evaluation of the KCGF’s additionality could be conducted (see Box 2.2), covering areas such as cost-effectiveness and beneficiary targeting, as current performance evidence relies largely on internal monitoring.
Continue strengthening asset registration systems to expand Kosovo’s effective collateral base. Further progress is needed to address remaining gaps in the cadastre's historic ownership regularisation, which continues to undermine the reliability and bankability of real estate collateral. For movable assets, the Pledge Registry could be upgraded to record collateral values, supporting more consistent valuation and monitoring by lenders. Finally, Kosovo could commission a comprehensive assessment of the main asset registries to verify data accuracy and identify operational improvements.
The CSBFP and its evaluation
Launched in 1999, the CSBFP is a federal CGS designed to help businesses with their financing needs by filling gaps in the lending market, particularly for higher-risk SMEs (e.g., younger, smaller). Over the 2019–2024 review period, the programme facilitated over 26 000 loans, representing CAD 6.67 billion (Canadian dollars) in financing (approximately EUR 4.12 billion) Canada, 2025[84]). Following the adoption of the Canada Small Business Financing Act in 1998, Innovation, Science and Economic Development Canada (Government of Canada, 1998[77]) began conducting a comprehensive assessment of the scheme every five years.
Policy outcomes of the 2019 evaluation
The 2019 evaluation of the CSBFP (Innovation, Science and Economic Development Canada, 2019[78]) had a substantial impact on the CSBFP’s design and delivery, leading to reforms in 2022. Building on qualitative interviews, alongside administrative and fiscal quantitative data of beneficiaries over the period 2014-2018, this evaluation estimated that about two-thirds of all CSBFP loans may not have been made in the absence of the programme and that, overall, over 80% of CSBFP borrowers likely benefitted from the existence of the programme. Moreover, the evaluation’s first policy recommendation was to expand loan classes to include intangible assets and working capital, which was followed by subsequent reforms. In July 2022, the amendments to the Canada Small Business Financing Act and Regulations (Government of Canada, 2022[79]) included intangible assets and enabled a specific credit line for working-capital costs, to better align the scheme with SMEs’ evolving financing needs.
Policy relevance for Kosovo
Established in 2016, the KCGF has built a substantial operational track record and beneficiary dataset, providing a strong basis for undertaking a Canadian-style, comprehensive evaluation of the scheme’s additionality, targeting, and cost-effectiveness, and for translating findings into concrete adjustments to design and delivery. Given the KCGF’s scale, supporting EUR 173 million in guaranteed loans in 2024 (around 1.7% of GDP) (Kosovo Credit Guarantee Fund, 2025[54]), even modest gains in effectiveness (e.g. sharper targeting of financially constrained SMEs and better-calibrated guarantee terms) could significantly improve SME access to bank finance.
Business development services are a core policy instrument for improving SME productivity, survival and competitiveness, particularly by strengthening management practices and supporting firms’ ability to adopt innovation, digitalisation and exporting strategies when market mechanisms alone are insufficient (OECD, 2021[80]).
In Kosovo, support for SMEs has expanded in scope and scale over recent years and is embedded within the broader industrial development framework, notably the Strategy for Industrial Development and Business Support 2023-2030. Public efforts have focused on widening access to finance and upgrading support through grant-based instruments, complemented by emerging innovation, digitalisation and export non-financial support initiatives. While this reflects a growing policy commitment to SME development, the current support system remains uneven across stages of firm growth and continues to rely heavily on discrete instruments rather than an integrated, lifecycle-oriented approach. Strengthening the coherence, sequencing and depth of support services is therefore central to enabling SMEs to move beyond basic upgrading toward sustained growth, international competitiveness and deeper integration into regional and European markets. Against this backdrop, this section assesses the quality, coherence and sequencing of business support services in Kosovo, distinguishing between foundational instruments focused on early-stage upgrading and broader access to finance, and more advanced support aimed at SME expansion, capability deepening, internationalisation and integration into regional and European markets.
2.4.1. Foundational SME business support services
Business support services (BSSs) in Kosovo aim to address structural constraints affecting SME productivity and competitiveness. In the absence of a stand-alone SME strategy, Kosovo’s enterprise support framework is anchored in the Strategy for Industrial Development and Business Support 2023-2030, which outlines priorities for competitiveness, digitalisation, industrial modernisation and export readiness. At the same time, the accompanying Action Plan represents a concrete step toward improved coherence by translating strategic objectives into defined measures and timelines. However, implementation has progressed more slowly than planned. By mid-2024, fewer than 40% of measures were completed or on track, while 28% remained not started, including actions directly relevant to SME support (MIETI, 2025[8]). This points to a persistent gap between strategic ambition and operational execution, consistent with patterns observed in earlier assessment cycles in which planning instruments advance faster than implementation capacity and delivery co-ordination (OECD, 2022[19]).
In practice, foundational BSS provision remains centred on grant and subsidy schemes administered primarily by KIESA and complemented by line ministries. Since 2022, the scale of financial support has expanded, as Kosovo has substantially increased co-financing levels for foundational schemes, with co-financing now ranging from 50% to100% depending on the scheme,12 while coverage has broadened across machinery investment, certification, digitalisation, innovation and trade-fair participation. Between 2021 and 2024 more than 480 enterprises benefited from foundational schemes, including 308 in 2024 alone supported with approximately EUR 7.3 million (KIESA, 2025[9]). The 2025 allocation of approximately EUR 8 million suggests continued government commitment and modest scaling of support. In 2022 and 2023, measures under the Economic Revival Package further broadened support through loan-subsidy mechanisms, channelling EUR 12.1 million in loan subsidies to around 440 businesses.
This scale-up has enabled rapid expansion of access to investment finance and reduced upfront upgrading costs for SMEs. However, it has also reinforced a service heavily skewed toward financial instruments, with non-financial foundational BSS playing a more limited, fragmented role. While information services, scheme-linked guidance and awareness-raising activities are embedded within grant delivery, more structured non-financial services – such as diagnostics, tailored advisory support, mentoring or technology-extension assistance – are not yet institutionalised as a stable public offer. Where such services exist, they are typically project-based or donor-supported, rather than systematically integrated into core foundational programmes. As a result, foundational BSS primarily support incremental investment and compliance-driven upgrading but address underlying capacity constraints only partially.
Institutional arrangements further shape this delivery model. Administrative Instruction No. 01/2018 provides the formal operational framework for grant allocation, yet key parameters – such as co-financing rates, eligible costs and thematic priorities – are defined through programme-specific annual public calls rather than embedded in multi-year rules or service frameworks. While this approach allows flexibility and responsiveness to budget availability, it reinforces a system organised around discrete instruments and annual cycles, limiting predictability and constraining the gradual consolidation of non-financial support as a core component of foundational BSSs.
Digitalisation has improved overall accessibility of public services, most notably through the eKosova platform,13 and the increased use of online calls and information sessions. At the same time, operational constraints (upload constraints, interruptions, interoperability issues) create an uneven user experience, particularly for smaller firms with lower administrative or digital readiness. This is consistent with broader skills constraints observed across the SME workforce, including low levels of foundational digital competences and cost-related barriers to adult learning participation (see Cluster 4). As a result, while digital tools have strengthened visibility and outreach, they do not yet systematically reduce structural access gaps without complementary guidance and assisted application channels.
Alongside public provision, private BSSs represent a potential complementary channel in Kosovo’s SME support system, but their role remains limited. While private providers are formally eligible to participate in co-financed grant schemes, this participation is not yet structured as a distinct delivery pillar within the overall business support framework. Eligibility is determined primarily through compliance with the minimum legal and procedural requirements14 set out in Administrative Instruction No. 01/2018, rather than through accreditation, quality assurance or performance-based criteria. Consequently, private BSSs are primarily mobilised as inputs to grant delivery rather than as an integrated advisory market, which limits the scope for service specialisation, quality differentiation and the systematic outsourcing of more advanced support functions.
In this delivery context, the way evidence and feedback are used to steer programme design plays a central role in shaping the evolution of the BSS system. Existing consultations, sectoral studies and stakeholder engagement processes15, including periodic and project-based analyses of SME training needs inform programme design, notably in setting priority sectors and adjusting grant parameters. However, they are not consolidated into a structured diagnostic framework guiding service differentiation or progression across SME growth stages. At the same time, monitoring arrangements focus primarily on implementation and compliance, with limited use of outcome-oriented indicators to assess firm-level effects or to inform structured programme adaptation over time. This mirrors wider challenges in linking skills development, productivity upgrading and SME support instruments into a coherent capability-building framework (see Cluster 4).
2.4.2. Support services for SMEs’ expansion and growth
Kosovo’s support for SME expansion operates within a broader industrial-development framework, yet the operational model remains centred on grant schemes rather than on the structured capacity-building services needed for firms to progress from early upgrading into scale-up stages. KIESA is the main implementing body and the volume of programmes has grown, but the distribution of services across the pathway from innovation and digitalisation to green upgrading, export readiness and integration into global value chains remains uneven. As a result, the system reaches many firms but offers only partial and non-sequenced support, limiting the development of the deeper capabilities required for sustained growth and competitiveness.
Innovation support illustrates how Kosovo’s SME support system functions beyond firm entry, and where it remains less effective in enabling progression toward more advanced forms of upgrading. Kosovo has built a relatively dense, though still donor-dependent, ecosystem of innovation support services for SMEs, combining a broad network of incubators with early-stage accelerator programmes and emerging technology extension services. The Innovation Centre Kosovo remains the main entry point for early-stage innovation, increasingly linking incubation to firm growth through digital-focussed mentoring, complemented by university-based initiatives such as VentureUP at the University of Pristina.16 Since 2023, more structured acceleration has begun to emerge in Kosovo, notably through the Tech Park Prishtina, described as the first accelerator centre for ICT-focussed start-ups in Kosovo, offering mentoring, grants and connections to European investors. At the same time, the Enterprise Europe Network Kosovo, managed by the Kosovo ICT Association, further connects SMEs to EU markets through advisory and matchmaking services. For more established SMEs, technology extension-services (TES) are emerging, primarily focussed on digital upgrading. These services are increasingly channelled through the Innovation and Training Park Prizren and its associated Digital Transformation Centre and Digital Innovation Gateway for Kosovo – the economy’s first European Digital Innovation Hub – which functions as a centralised entry point for digitalisation support, skills development and advisory services (see Cluster 3). However, the system still lacks a coherent innovation pipeline that would help SMEs move sequentially from idea development to capability upgrading and scale-up. Public support remains centred on small innovation grants (benefiting around 34 SMEs in 2024) while higher-value services, including mentoring, investment-readiness, technology transfer and advisory support17, continue to be delivered through donor-funded, project-based initiatives with limited institutional anchoring (KIESA, 2025[9]). As a result, progress is visible in the expansion of actors and instruments, but support instruments remain more developed in digital and creative sectors and have a more limited reach into traditional manufacturing SMEs, reducing the extent to which innovation efforts contribute to wider competitiveness upgrading.
Similar structural constraints extend beyond innovation support into digitalisation and greening, where policy ambition has outpaced the depth and integration of implementation. Kosovo has expanded its policy frameworks and support infrastructure, yet most measures remain small-scale and focussed on basic adoption rather than deeper, capability-intensive transformation. Under the Digital Agenda for Kosovo 2030 and a growing network of hubs (Innovation and Training Park [ITP] Prizren, Digital Initiative for Kosovo [DIG-4K], and Innovation Centre Kosovo [ICK]), SMEs now have broader access to early-stage digital services, but the depth of uptake remains limited, with firms primarily adopting entry-level tools and only partial access to advisory support, advanced automation or e-commerce upgrading (see Cluster 3). On the green transition side, strategic alignment has strengthened18, however, implementation remains slow, SME-targeted measures are modest in scale, and uptake of energy-efficiency or renewable-energy support remains low (see Cluster 2). Across both areas, and reflecting approach to innovation support, donor initiatives play an important complementary role yet remain project-based and not fully integrated into a system-level upgrading pathway. Consequently, Kosovo’s progress in digital and green upgrading, although more visible than in 2022, still does not translate into the deeper productivity, compliance and competitiveness capabilities needed for sustained SME growth or movement toward higher-value (external) markets.
As firms move from internal upgrading toward external growth, capacity gaps become more decisive, even though Kosovo shows its strongest progress at the export stage – the only part of the SME support pathway with consistently documented outcome-level improvements. Internationalisation support in Kosovo has expanded, but remains centred on a narrow set of instruments, with trade-fair participation subsidies forming the core mechanism, accounting for roughly one-fifth to one-quarter of KIESA’s annual programme budget (KIESA, 2025[9]). Certification support, particularly CE (Conformité Européenne) marking, provides a complementary entry point, while donor-funded initiatives offer selective matchmaking and export-readiness advisory. However, support continues to function primarily as event-driven exposure, with limited structured assistance on market intelligence, standards upgrading, export diagnostics, or sustained follow-up (see Table 2.4). These structural gaps are reflected in Kosovo’s limited integration into global value chains (GVCs). While firms gain visibility, few progress toward deeper supplier relationships or higher-value participation. Cluster development, referenced in strategic documents but not operationalised beyond manufacturing zones, remains at an early stage, constraining the collective capabilities and spillovers that typically underpin stronger GVC entry.
Against this backdrop of event-driven export support and limited GVC integration, SMEs account for a high share of Kosovo’s exports. Over the period 2020–2023, SMEs generated an estimated 70.4% of total exports, well above the WBT average (53.9%) and the EU average (37.6%) (OECD, 2025[27]). However, this high share primarily reflects the economy’s strong SME dominance rather than advanced export upgrading, as high participation has not translated into sustained productivity gains or more embedded roles within global value chains.
Notes:
* While institutional arrangements for export-related market intelligence exist through EMIC, implementation remains partial and fragmented, with no structured, widely used SME-facing market intelligence service in place.
** Institutional mandates for investment facilitation and investor aftercare exist across KIESA, IPAK and FIPA; however, no structured SME–MNE (multinational enterprise) linkage or supplier-development programme is currently in place. Investor servicing remains focused primarily on attraction and basic facilitation, with limited systematic mechanisms to connect foreign investors with domestic SMEs or support supplier upgrading (European Commission, 2024[81]) (MIETI, 2025[8]).
Sources: 1: MIETI (2025[8]; 2023[82]) and Government of Kosovo (2023[7]); 2: European Commission (2024[81]).
Across all areas, several cross-cutting features shape the effectiveness of Kosovo’s SME support system. Monitoring has strengthened through regular reporting, audits and post-activity questionnaires, yet information remains dispersed across schemes and does not track whether firms progress from basic upgrading toward more advanced capabilities or toward export readiness. Co-ordination between KIESA, ministries and donor programmes is active but largely operational, resulting in parallel rather than jointly planned interventions. The expansion of digital tools has improved outreach but varying digital capacities among SMEs and occasional platform-related constraints mean that accessibility is uneven. Overall, Kosovo now implements a broader and more structured support portfolio than in 2022, but the absence of an integrated pathway linking innovation, digitalisation, green upgrading and internationalisation limits the ability to convert high participation rates into consistently stronger competitiveness outcomes.
The way forward
Introduce a systematic SME diagnostic and regular training needs assessment to enable evidence-based service design. Existing consultations and sector studies provide valuable insights but do not replace a systematic assessment of firm capabilities, skills gaps, digital and green readiness, or stage-specific needs. An economy-wide SME diagnostic, combined with outcome-level indicators, would support the design of targeted instruments, guide diversification beyond grant schemes, and enable adjustments based on competitiveness gains rather than uptake alone.
Strengthen institutional co-ordination to systematise SME support along a coherent capacity-building pathway. KIESA, line ministries, incubators and digital/green hubs offer valuable support, but delivery remains parallel rather than integrated. Strengthening formal co-ordination mechanisms across institutions would help align instruments and clarify progression from innovation and digitalisation to green upgrading and internationalisation. Embedding SME support within a progression pathway would reduce fragmentation, improve service coherence, and enable firms to move beyond basic upgrading toward sustained productivity growth, export readiness and deeper integration into regional and European value chains.
Diversify and institutionalise non-financial support. Non-financial BSSs in Kosovo remain limited in scope and weakly institutionalised, with provision concentrated in a narrow set of project-based or donor-supported activities rather than a diversified and stable public offer. Expanding the range of non-financial support and embedding it more systematically within the SME support system (see Box 2.3) would deepen service provision and better support firms in developing the capabilities required for sustained productivity growth and competitiveness.
The Business Hubs system and its institutionalisation
Denmark institutionalised non-financial business support through the establishment of regional Business Hubs as permanent public business development centres providing advisory, mentoring and innovation-oriented support to SMEs. Introduced to address fragmentation in business advice provision, the model was subsequently consolidated under the Business Promotion Act (2018), which established a coherent national framework for productivity, competitiveness and internationalisation support. Business Hubs operate as single entry points for SMEs, offering structured diagnostics, tailored advisory and mentoring services, and referrals to specialised expertise, while enabling the continuous participation of accredited private consultants. This reform replaced a fragmented landscape of project-based initiatives with a stable and nationwide public offer of non-financial BSSs (OECD Stip Compass, 2023[83]).
Policy outcomes of the support approach
Diversification and institutionalisation of non-financial BSS through the Business Hub system strengthened co-ordination, reduced duplication across providers and reinforced the brokerage role of public institutions. Consolidating initiatives and concentrating resources with specialised delivery actors improved coherence and accessibility of advisory services, while referral mechanisms increased SME use of external expertise (OECD Stip Compass, 2023[83]). Evidence further suggests that the shift from generic advisory toward diagnostics, specialised mentoring and innovation-related support enhanced SME engagement and satisfaction, particularly among smaller and growth-oriented firms (OECD, 2018[84]).
Policy relevance for Kosovo
Denmark’s experience illustrates how diversifying and institutionalising non-financial business support can strengthen the effectiveness and coherence of SME support systems in a small economy. For Kosovo, where advisory, mentoring and TES remain limited in scope and weakly embedded within the SME support system, the Business Hub model demonstrates the value of establishing permanent delivery arrangements, and expanding the range of non-financial services. Adopting a similar trajectory could help Kosovo move beyond fragmented initiatives toward a diversified and stable public offer of non-financial BSSs, better supporting SME capacity development, productivity growth and competitiveness.
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← 1. The Government of Kosovo has defined the following priority actions within the first Action Plan 2023‑2025: 1) support creation of modern industrial parks with eco-friendly features; 2) establish a product certification facility; 3) co-finance conformity assessment bodies; 4) scale-up export finance facility of Kosovo Credit Guarantee Fund; 5) upgrade import tariff regime; 6) launch a Labor Manufacturing Program; 7) introduce a Skills Credit Scheme; 8) scale-up EBRD Reboot Program to support further investment in green technology; 9) upgrade procurement to create advantages for domestic manufacturing companies and support green transition; 10) provide tax incentives for investment in product innovation.
← 2. The “one in, one out” principle seeks to ensure that regulation remains proportionate, targeted and easy to comply with, by preventing the accumulation of unnecessary regulatory burdens. Under this approach, any legislative proposal that introduces new obligations should be accompanied by the removal of an equivalent existing burden within the same policy area.
← 3. Arbitration in the economy is regulated by the 2008 Law No. 02/L‑75 on Arbitration, which is largely aligned with the United Nations Commission on International Trade Law (UNCITRAL) Model Law principles (Government of Kosovo, 2008[85]).
← 4. This refers to the Common Equity Tier 1 (CET1) ratio, the most loss-absorbing type of capital. A strong CET1 ratio indicates that the bank can withstand shocks by utilising its most reliable capital.
← 5. Data provided by the Government of Kosovo for this assessment.
← 6. This data point refers to 2022. For more details, see OECD (2024[86]).
← 7. The Government of Albania provided this data as part of the SME Policy Index 2026 assessment.
← 8. The Government of North Macedonia provided this data as part of the SME Policy Index 2026 assessment.
← 9. The Government of Montenegro provided this data as part of the SME Policy Index 2026 assessment
← 10. In Kosovo, searches in the electronic Pledge Registry System must be made from a user account with sufficient prepaid balance, as set out in Administrative Direction No. 16/2016. Article 19 fixes the Pledge Registry fees at EUR 0.50 for a search by identifier, EUR 0.20 for a search by document number and EUR 0.30 for a systematic “tree” search, while each Pledge Registry Certificate (confirmation of registration or search result) costs EUR 0.40. There is no monthly fee for maintaining a user account. Under Article 18, user account owners who provide Public Search Services may charge clients a public search service fee of up to ten times the underlying search fee plus EUR 0.10 per printed page.
← 11. The draft Law on Innovation and Entrepreneurship, expected to be adopted in May 2026, provides for the creation of an Innovation Fund within the Agency for Innovation and Support to Enterprises in Kosovo.
← 12. Including full (100%) support for ICT and certification schemes, 80-90% for digitalisation, 50-70% for machinery upgrading, and 90% for artisan and creative-industry support.
← 13. The eKosova Platform can be consulted at https://ekosova.rks-gov.net/.
← 14. These requirements include legal registration in Kosovo; compliance with tax and statutory obligations; proof of financial viability, including an active bank account and absence of bankruptcy or court administration; submission of a project proposal specifying objectives, activities, costs and implementation timelines; declarations confirming the absence of double financing; and fulfilment of obligations arising from prior public support. Selection criteria focus on the anticipated economic contribution of the proposed project (e.g. investment, export growth, SME development and job creation), while monitoring and reporting requirements relate to project implementation and financial execution. The Instruction does not regulate the selection, qualifications, accreditation or performance of external consultants or other private service providers engaged by beneficiary enterprises.
← 15. Examples include: (i) stakeholder consultations and information sessions organised by the Kosovo Investment and Enterprise Support Agency (KIESA) in connection with annual grant calls, including meetings with SMEs and business associations; (ii) sectoral and value-chain analyses underpinning the Strategy for Industrial Development and Business Support 2030, particularly for manufacturing, ICT, creative industries and agri-processing; (iii) administrative feedback collected through post-implementation reporting, site visits and audit processes foreseen under Administrative Instruction (MTI) No. 01/2018; and (iv) project-based diagnostics and needs assessments conducted in the context of donor-supported initiatives (e.g. LuxDev-supported innovation and digitalisation schemes).
← 16. The incubator provides coaching, training and incubation to student-led start-ups.
← 17. These include: inter alia, the Innovation Scheme co-financed with LuxDev, the Digital Empowerment Initiative implemented with ADA Austria and ECIKS, the World Bank–supported Kosovo Digital Economy (KODE) project, and UNDP-led digital skills and supplier development programmes.
← 18. Supported by the Strategy for Industrial Development and Business 2031, the Energy Strategy 2022-31, and Kosovo’s Energy and Climate Plan 2025-2030.