SMEs are particularly exposed to rising economic and environmental pressures, including climate risks, shifting trade dynamics, and the wider transition to a green economy. This cluster evaluates policies that strengthen SME resilience and competitiveness in this context. It examines five broader areas, assessing frameworks for SME greening, disaster resilience mechanisms, access to financial support, non-financial support and the role of business networks, as well as innovation ecosystems in supporting the transition.
SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Kosovo
Abstract
Although Kosovo recorded a strong post COVID-19 recovery, economic growth has moderated in recent years. Small and medium-sized enterprises (SMEs) face various challenges, including sharp increases in commodity prices, particularly in energy, since the outbreak of the war in Ukraine (IMF, 2023[1]). Business profitability is already under pressure and is now further challenged by rising decarbonisation demands, driven by growing environmental concerns, the European Union’s climate ambitions, and the Green Agenda for the Western Balkans.
Against a backdrop of long-standing structural constraints, such as infrastructure gaps compared to the European Union, Kosovo’s SMEs are operating in an increasingly complex transition landscape. The green transition is unfolding alongside other megatrends, including geopolitical realignments, evolving trade systems, shifting consumer preferences, and rapid digitalisation (OECD, 2023[2]). This underscores the urgent need to strengthen SME adaptability. This section therefore examines policies that enable firms to navigate evolving regulatory and market requirements, enhance resilience and competitiveness, seize new opportunities, and respond effectively to the growing global demand for low-carbon products and services.
3.1.1. Smoothing SME pathways to a green economy
Kosovo’s economic performance and sustainable development depend heavily on the adaptability and resilience of its SMEs. This will become even more critical as the economy advances its obligations under the Green Agenda. As SMEs play a major role in value added and employment, they inevitably become key drivers of the green economy (European Commission, 2022[3]). However, they also face significant challenges as production and trade standards shift toward low-carbon models. This transition is especially complicated by Kosovo’s strong dependence on fossil fuels: around 90% of its electricity is generated from two outdated and highly polluting lignite power plants (OECD, 2025[4]), resulting in high carbon intensity across industries.
Carbon intensity is currently estimated at around 0.9 kg CO₂/USD (2024), a 32% reduction over the past decade, yet still twice the level observed in peer economies, like Montenegro (World Bank, 2025[5]; Global Carbon Budget, 2025[6]). While enterprises benefit from relatively low electricity prices, these prices are heavily subsidised, thereby distorting market signals and discouraging investment in cleaner, more efficient production methods. SMEs also face significant financial and capacity constraints that limit their ability to switch to renewable energy, improve energy efficiency, or adopt circular production models. To ensure a fair and effective transition, the government needs to create the right enabling conditions and incentives that support SMEs in gradually greening their operations without undermining competitiveness.
To address these concerns, Kosovo has adopted a range of key strategies and policies that shape the SME pathway toward a green economy (see Table 3.1). The overarching framework for sustainable transformation is the Development Strategy and Plan 2030, which sets goals to mobilise industry toward the circular economy and to improve sustainability in sectors such as agriculture and tourism. The Climate Change Strategy 2019-28 and the Strategy for Environmental Protection and Sustainable Development 2022-31 address climate action more broadly with indirect relevance to private-sector needs.
More directly aligned with SME greening are the Strategy for Industrial Development and Business Support 2023-2030 (called industrial policy) and the Energy Strategy 2022-2031. The industrial policy includes a dedicated objective to facilitate the transition to a circular and green industry, while the Energy Strategy prioritises improvements in energy efficiency, an area further emphasised in Kosovo’s draft Energy and Climate Plan (NECP) 2025-2030. Once finalised, this document will guide industrial decarbonisation efforts and support alignment with emerging EU carbon pricing mechanisms. Lastly, Kosovo’s Reform Agenda complements and aligns with these strategies, being particularly important for securing investments that can bring the economy closer to integration with the EU Single Market and its sustainability standards.
Note: Indirectly refers to the private sector being considered in the policy document, but no concrete SME-targeted measures are included.
Source: Information provided by Kosovo’s government during the assessment period in 2025.
Although greening measures are embedded across Kosovo’s strategic documents, there are no consolidated data on budget allocations for SME-targeted activities since 2022. Under the industrial policy, EUR 10.3 million was earmarked for greening measures for 2023-2025. However, implementation remains slow: only 29% of activities under the strategy’s green objective were carried out in 2024, consisting mainly of two workshops with 30 firms on circular business models and 12 grants for green industrial symbiosis under a project funded by the United Nations Development Programme (UNDP). The implementation report does not clearly show how allocated funds were used for planned measures. Several key actions, such as establishing a circular economy funding window within a to-be-established Innovation Fund, did not progress at all. A structured support mechanism for this is expected by the end of 2026, as outlined also in Kosovo’s Reform Agenda. In the meantime, ongoing donor-funded programmes target SME circular innovation (see Section 3.5). Tracking progress is further hindered by the absence of data for core indicators outlined in the industrial policy, including reducing energy intensity in manufacturing, increasing the market share of environmentally friendly products, or boosting value added from circular-economy activities. Baselines remain missing for relevant indicators, impeding meaningful assessment. Even if fully delivered, the planned financial and technical support under the green objectives of the industrial policy would reach only 170 companies over 2023-2025, too limited to drive systemic transformation. Positively, however, the Ministry of Industry, Entrepreneurship and Trade (MIET) is currently conducting the mid-term review of the industrial policy action plan, revising selected indicators and assessing implementation progress to date.
Monitoring data for the Energy Strategy (2022–2023) reflects similar delays. Only 20% of a SME-relevant measure related to energy efficiency measures was implemented by 2023. Although a budget of EUR 5 million had been foreseen, substantially lower funding was released to SMEs in 2024 (see Section 3.3). Together, these gaps point to a persistent implementation bottleneck that limits the pace and possible scale of SME contributions to Kosovo’s green transition. Combined with a lack of demand-side data, green product and service output statistics, and circular-economy contribution metrics, Kosovo currently lacks the evidence base needed to evaluate the real impact of its green transition policies.
Existing survey data gathered by the Regional Cooperation Council (RCC) indicate that businesses in Kosovo increasingly report taking steps to reduce their environmental impact, with self-declared engagement rising from 54% in 2019 to 78% in 2024 (RCC, 2024[7]). As shown in Figure 3.1, renewable energy use and material efficiency feature prominently among the measures companies say they are prioritising.
Notes: n = 73, representing roughly 0.14% of SMEs in Kosovo as of 2023. Total counts exclude responses of “No/No steps have been taken” and “DK/refuse”. The question was “What steps has your business taken over the last 12 months to reduce its environmental impact?”. Firms were selected to achieve balanced representation across sectors and business types in the sample, using data from the Business Centers in each surveyed economy.
Source: RCC (2024[7]).
Despite this positive trend in awareness, progress in reducing administrative and regulatory burdens associated with the Green Agenda has been limited since the 2022 OECD assessment. In practice, business engagement in circular-economy activities remains low (Balkan Green Foundation, 2025[8]). The implementation status of the Circular Economy Roadmap (adopted in 2023) is unclear, and SMEs still lack targeted incentives or programmes to support circular approaches.
Although the Energy Efficiency Law was adopted in 2025, and the Kosovo Energy Efficiency Fund has begun developing secondary legislation to accelerate implementation, support remains largely focussed on public and residential projects (IMF, 2025[9]). Businesses that wish to produce and consume their own on-site renewable energy as prosumers also face lengthy bureaucratic procedures, including 13 steps to obtain a permit (Haxha, 2024[10]).
These gaps are particularly concerning given the recent opening of the energy market, which affects more than 1 000 companies, leading to increased production costs (Bami, 2025[11]; Kosovo Chamber of Commerce, 2025[12]). Stakeholder consultation during the reform process was limited, leaving many firms unprepared for the shift and at risk of facing supply shortages for one of their most essential production inputs. This is an issue, as a lack of energy security raises business costs and makes Kosovo’s market less attractive to foreign direct investment (FDI) (European Commission, 2025[13]). At the same time, positive developments, such as strengthened environmental enforcement through the Ministry of Environment and Spatial Planning’s Green Task Force,1 may lead to unintended burdens on small businesses if not paired with targeted training and capacity building to support compliance and adoption of good environmental practices (see Section 3.4).
3.1.2. Boosting SME competitiveness in sustainable value chains
Compared to other Western Balkan economies which on average export 63% of their export value to the European Union, Kosovo’s share of exports to the European Union is considerably lower at around 33% in 2024 (European Commission, 2025[13]). Yet, this share remains significant enough to make regulatory alignment with the EU sustainability framework essential. Stronger integration of SMEs into sustainable value chains will be important as Kosovo aims to shift its export structure toward higher value-added goods. In this context, decarbonisation represents not only a compliance requirement but also a strategic opportunity to modernise industrial capacities and enhance economic resilience.
Under the industrial policy, Kosovo has introduced several measures to expand its export base, particularly in manufacturing, and to improve product quality and international certification, both of which are essential for complying with emerging EU sustainability requirements such as the Ecodesign for Sustainable Products Regulation (ESPR)2. However, explicit alignment between export-promotion initiatives and the European Union’s evolving green trade standards remains lacking. The industrial policy does not reference the EU Carbon Border Adjustment Mechanism (CBAM) or other key EU Green Deal regulations that will directly shape EU market access for firms from Kosovo.
The implementation of main activities is equally unclear. There are no available data on the establishment of certification bodies, the delivery of business trainings, or insights into how business-to-business networking activities help firms integrate into sustainable value chains. Planned annual analyses of export-promotion measures have also not been produced. Beyond the mere collection of data, such as the number of businesses participating in trade fairs for export product promotion (a total of 172 in 2024), this limits the ability to assess effectiveness, identify gaps, and scale high-impact interventions.
Some information is available, however, on the uptake of support through the Export Window of the Credit Guarantee Fund, introduced in 2023, which supported 63 SMEs with loans amounting to EUR 10.4 million (Kosovo Credit Guarantee Fund, 2025[14]). However, its link to the Green Agenda is not evident.
Some progress has been made through the Kosovo Investment and Enterprise Support Agency (KIESA) grant scheme supporting SMEs in purchasing advanced manufacturing and processing equipment. Between 2024 and 2025, a total of 296 SMEs benefitted (see Section 3.3.2). However, there are no consolidated data on the number of SMEs supported since the scheme’s launch in 2018, nor on the extent to which these investments have contributed to greener production, such as improved resource or energy efficiency or stronger environmental compliance within priority sectors. This is particularly important given that, since 2025, the scheme’s selection criteria include an assessment of projects’ expected impact on the green economy.
Most critically, Kosovo, like other Western Balkan economies and Türkiye (WBT), will need to comply with the CBAM, which places a carbon price on products whose embedded emissions do not align with EU Emissions Trading Scheme benchmarks. Existing analyses suggest Kosovo’s overall exposure will be lower than that of other Western Balkan 6 (WB6) economies, as exports to the European Union account for only 2-4% of gross domestic product (GDP) (2019–2024), and CBAM-covered goods represent just 0.4-1.2% of GDP (German Economic Team, 2024[15]). Nevertheless, the cumulative CBAM cost is projected to reach EUR 93 million by 2034, with key affected sectors including mining and quarrying, manufacturing, and electricity (IMF, 2025[9]). Without accelerated decarbonisation efforts and targeted support for innovation, these sectors may experience reduced competitiveness and lower inflows of FDI.
This underscores the need to build an enabling environment that helps businesses adopt green technologies and integrate into sustainable value chains. A key milestone is the 2024 launch of construction of a green industrial park in Drenas, an investment of EUR 7.7 million, expected to become operational in 2027 (MIET, 2024[16]). The park will span 36.5 hectares and is expected to host around 50 manufacturing and processing firms. However, it is not purposefully designed to promote industrial symbiosis for green innovation (see Section 3.5) and more focussed on easing renewable energy access, modern waste-management facilities, and other sustainable infrastructure.
The industrial policy action plan also foresees the development of three modern industrial parks with environmentally friendly features to attract investment and strengthen business linkages. However, no updates on these commitments have been published to date. Encouragingly, the Luxembourg Development Agency is conducting studies to assess the potential to increase the value of using natural resources and minimally processed goods in Kosovo, as well as opportunities for industrial symbiosis, which could help inform future policy actions.
Prioritising the implementation of the industrial policy activities would be instrumental in helping domestic firms more effectively integrate into emerging green value chains, especially as many SMEs remain inward-oriented and have limited capacity to leverage nearshoring and regionalisation opportunities through FDI (wiiw & WB6 CIF, 2024[17]).
Although net FDI inflows declined from 8.7% to 8.3% of GDP between 2023 and 2024 (World Bank, 2025[18]), Kosovo still attracts the highest FDI share in the WBT region. Most investment, however, continues to flow into low-spillover sectors such as real estate and construction. Encouragingly, sectors with greater transformation potential, information and communication technology (ICT), infrastructure, and energy, are expected to draw more FDI in the coming years (U.S. Department of State, 2025[19]). Aligning these inflows with sustainable, resource-efficient production through targeted incentives will be essential to strengthening SMEs’ competitiveness and advancing the industrial policy’s objective of boosting investment in green manufacturing value chains.
Another lever that the government could use to stimulate local demand in green value chains is green public procurement (GPP). However, progress in this area has been limited. To date, the only advancement has been a 2023 presentation on sustainable procurement, which served as a precursor to a planned advanced training programme. More practical, actionable guidance materials are urgently needed for SMEs and contracting authorities. Furthermore, there is currently no system to collect or monitor data on socially responsible or green procurement, meaning the policy’s impact on the market remains negligible (OECD, 2025[20]).
The way forward
Improve budget execution, planning and implementation of SME greening policies. Allocated budgets for SME greening measures are still not fully used, either due to weak planning, insufficient outreach, or overly complex application procedures that discourage SME participation. At the same time, Kosovo’s policies aimed at greening SMEs remain limited and fragmented, with many initiatives driven primarily by donors, and a general lack of domestic regulatory incentives and subsidies to support the transition. In this regard, Kosovo could benefit from more closely linking green budgeting to measurable outcomes, drawing on the experience of OECD Member countries, such as Korea, as illustrated in Box 3.1. Further, the Government of Kosovo could ensure that all greening programmes are supported by proactive awareness raising, simplified administrative processes, and targeted capacity-building for SMEs. Closer co-ordination with chambers of commerce and other business support organisations can help increase engagement and ensure that measures respond to the actual needs of SMEs. At the same time, maintaining consistent budget allocations and a stable pipeline of greening instruments will be essential to achieve scale and sustain long-term impact.
Strengthen monitoring and evaluation systems to identify and tackle gaps as well as overlaps and inconsistencies that cause uncertainty and complexity for SMEs. Based on the evidence gathered, the Government of Kosovo should simplify and better co-ordinate the legal and policy framework, clarifying responsibilities, aligning instruments across institutions and removing duplicative or contradicting measures. Such streamlining would ensure that policies respond more closely to market needs and provide clearer incentives for SMEs to invest in the green economy. The government and key institutions, such as KIESA, could improve data collection on SME greening initiatives, enabling regular evaluations of strategies and policies and ensuring that public interventions demonstrate measurable economic and environmental impact. For this, Kosovo could make use of existing tools that enable economies to track progress toward environmental performance goals. The Mitigation Goal Standard Calculation Tool developed by the Greenhouse Gas Protocol (World Resources Insitute and GHG Protocol, n.d.[21]) provides a framework for assessing progression toward mitigation objectives. Key indicators that could be considered for monitoring SME-sector decarbonisation, based on a pilot dashboard developed by the OECD, include total SME greenhouse gas emissions and their share of business-sector emissions, energy consumption levels, and energy and emissions intensity. Additional resilience-related indicators, such as the energy price burden on firms, could also help inform government intervention mechanisms (OECD, 2023[22]).
Establish a systematic review of environmental regulations and targeted guidance for SMEs. Kosovo currently lacks a centralised mechanism to help businesses, particularly SMEs, understand and comply with relevant environmental legislation. The Government of Kosovo may consider conducting a comprehensive review of existing and upcoming regulations, including those linked to the EU Green Deal, and providing targeted advisory and mentoring services to strengthen SMEs’ technical capacity in key sectors that include manufacturing, agriculture, ICT, education, health, tourism, transport, energy and mining.
Mainstream SME greening and resilience concerns more prominently in export and investment promotion activities. Current export- and value-chain integration initiatives included in Kosovo’s industrial policy do not strategically link competitiveness to green requirements in the EU Single Market. Strengthening synergies between trade and investment facilitation and sustainability objectives would help SMEs compete internationally and build resilience to evolving decarbonisation standards. Going forward, Kosovo could consider introducing targeted measures to its industrial policy action plans to help SMEs prepare for EU Green Deal regulations, such as CBAM and the ESPR, while leveraging this alignment to attract green-oriented foreign investment. Targeted industrial strategies can direct innovation and growth toward major societal challenges, such as the green transition, complementing broader “horizontal” policies with focussed instruments. Kosovo’s new Law on Sustainable Investments represents a positive step toward attracting green investment (see Section 3.3). To further support exporting firms, additional instruments, such as export credit insurance for green exports, could also be considered. One relevant example is the Dutch Green Label scheme, which could offer useful insights for Kosovo when developing similar mechanisms (Atradius Dutch State Business, 2020[23]). To mitigate risks such as market distortions or the exclusion of new entrants, these strategies require robust governance, including clear objectives, regular evaluation of outcomes, and well-defined exit mechanisms, which are further assessed by the OECD’s work on industrial policies (Criscuolo et al., 2022[24]).
Experience from OECD Member countries shows a range of approaches, from developing tools to assessing the greenhouse gas (GHG) impacts of policies, to modelling the macroeconomic effects of carbon taxes, and estimating the costs of meeting climate targets.
Korea provides a concrete example. In 2023, it introduced a GHG Reduction Cognitive Budgeting System, which requires each budget proposal to include expected GHG impacts and undergo a dedicated review process. This helps clarify how public budgets support climate-neutrality strategies. Proposals are classified into three types, including projects with quantifiable emission reductions and more qualitative or research-oriented initiatives. GHG reduction is defined as the difference between ex ante and ex post GHG emissions.
In 2024, around 1.5% of the total budget was allocated to GHG reduction projects, of which about half were research and development (R&D) activities (out of 294 projects).
For Kosovo, a similar approach could help align SME support policies with climate objectives by systematically identifying, prioritising, and tracking budget measures that promote energy efficiency, low-carbon technologies, and innovation among SMEs.
Sources: OECD (2024[25]) and Korea Environment Corporation.
Beyond the economic shock triggered by the COVID-19 pandemic, recent environmental shocks, particularly recurrent flooding, have exposed the heightened vulnerability of SMEs in Kosovo to crises. In 2023 alone, flooding caused an estimated EUR 12 million in damage to physical assets and infrastructure in a single municipality, while flood events in 2024 led to widespread disruptions of critical infrastructure (World Bank, 2024[26]). These disruptions placed additional strain on business operations that depend on reliable transport networks and essential utilities such as electricity and water.
Against the backdrop of structural weaknesses, including limited economic diversification, constrained access to finance, and insufficient capacity to invest in disaster risk prevention and post-crisis recovery, the government faces an urgent need to strengthen its policy response. This section aims to assess frameworks that enable business continuity and support during financial distress following economic or environmental crises. It highlights both preventive measures to reduce exposure and increase preparedness for shocks, as well as recovery mechanisms to enhance SME resilience in post-disaster contexts.
3.2.1. Enhancing crisis-resilient strategies to prevent SME bankruptcies
During the COVID-19 crisis, many businesses in Kosovo faced severe operational and financial pressures, heightening the risk of default. A 2020 UNDP survey shows that around 37% of SMEs reported a lack of customers, reduced productivity, and declining sales, factors that significantly eroded profitability. Despite these challenges, business activity in Kosovo remained comparatively stable over time, as illustrated in Figure 3.2. This stability was likely supported by government interventions, particularly the measures introduced under the 2020 Provisional Law on Economic Recovery, which provided financial relief to struggling firms and helped cushion the economic shock.
Total number of companies
Source: Kosovo Agency of Statistics (2025[27]).
The data in Figure 3.2 show that business closures in Kosovo have remained stable since 2019 and even declined by 33%, from 1 637 cases in 2023 to 1 104 in 2024. However, new business creation has also stalled, reversing the upward trend seen between 2020 and 2023 and falling by 7% in 2024 compared with 2023. Overall, this points to a relatively steady but not expanding business environment.
While comprehensive data on court efficiency in insolvency proceedings remain unavailable, the establishment of the Commercial Court in 2022 marks an important step forward. However, its capacities still need to be strengthened to address backlogs and streamline judicial procedures (see Dimension 2). Critically, preventive restructuring options are not available, and Kosovo’s industrial policy does not yet prioritise measures to support businesses in distress, enable voluntary out-of-court settlements, or reduce default risks in the face of economic or environmental shocks.
A major barrier remains in the absence of an early warning system to identify patterns of financial distress among SMEs. No such mechanism is foreseen under the existing industrial policy; however, it is recognised as a key activity under Kosovo’s Reform Agenda. As a result, SMEs must proactively seek advisory support from KIESA, private consultants, or donor-funded programmes, such as those of the European Bank for Reconstruction and Development (EBRD),3 an added burden at a time when default risks are already mounting. Missing early detection mechanisms also hinder the better tailoring of financial support services. If relevant data were available, structured assistance could be provided before problems escalate into more costly insolvency proceedings.
Given this situation, it is difficult to ascertain the current state of SME distress and gauge the effectiveness of existing support programmes rather than targeted prevention-focussed measures. This gap is particularly concerning as climate-related risks intensify. On average, 10 000 people and around USD 50 million of Kosovo’s GDP are affected by flooding each year (World Bank, 2016[28]), with the most recent major event in 2023 impacting households and businesses across 11 out of its 38 municipalities. Such shocks place additional pressure on SME finances and operations, underscoring the need for a more co-ordinated, preventive and data-driven resilience system.
Increasing business continuity amid environmental shocks remains insufficiently prioritised in Kosovo’s core strategic frameworks, including the Draft Climate Adaptation Strategy and the Strategy for Reducing the Risk from Natural Disasters and Other Disasters 2023-2028. While the adaptation strategy references businesses, mainly through plans to expand prosumer models to secure energy inputs, it does not outline concrete measures to help firms protect critical assets or adapt production processes to a changing climate.
Thus far, such measures have also been largely donor-driven. For example, the project “Supporting Climate-Smart Adaptation and Resilience in Kosovo,” funded by the US Agency for International Development, was initially planned for 2023-2028 (TetraTech, n.d.[29]). It aims to strengthen public-private dialogue, enhance disaster risk management capacity, and promote private-sector-led climate solutions through a Climate-Smart Innovation Fund. However, the continuity of these activities remains uncertain following the 2025 suspension of US foreign aid.
Finally, Kosovo’s multi-hazard early warning capacity, which is a critical risk information tool for businesses, remains limited. Currently, only the flood EWS is fully operational, while systems for other major risks, such as wildfires, are far less developed despite clear exposure (UNICEF, 2024[30]). The new disaster risk strategy acknowledges these gaps, signalling progress in strategic intent, but implementation has yet to follow. Strengthening EWS and building SME capacities to use hazard data and climate-risk information in operational planning would significantly enhance preventive action and help safeguard business continuity in the face of increasingly frequent and severe environmental events.
3.2.2. Increasing SME recovery capacity and second-chance opportunities
While prevention is essential to reducing insolvencies and easing pressure on institutions, strengthening SME resilience requires a broader approach, one that supports business continuity, survival and recovery throughout periods of disruption. Given SMEs’ central role in employment, value creation and domestic demand, their ability to rebound quickly from shocks is critical for maintaining economic momentum and long-term stability.
Kosovo’s bankruptcy framework sets relatively short timelines for debt discharge, including a maximum 1.5-year automatic stay under pre-packaged reorganisation and a 90-day simplified procedure for SMEs. However, the absence of performance data from the Commercial Court makes it difficult to assess how these procedures function in practice or to benchmark them against other economies that systematically track efficiency.
Experts expect that the establishment of the Commercial Court in 2022 will improve the speed and predictability of insolvency proceedings and further progress has been made through amendments to the Law on Bankruptcy in 2024, which bring operating standards closer to the EU acquis and, upon enforcement, could improve procedural outcomes (see Dimension 2). A notable legislative gap, however, remains the lack of clear criteria distinguishing honest from fraudulent bankruptcy. While courts can remove a debtor’s possession rights in suspected fraud cases, the absence of legal clarity may weaken recovery prospects for honest entrepreneurs and complicate the development of second-chance support mechanisms, as genuine business risk-taking is not clearly differentiated from misconduct.
Positively, Kosovo’s insolvency framework includes protections for new financing, which can be particularly valuable for SMEs needing to cover administrative costs during proceedings and maintain operations where viable. This provision supports business continuity and investment rather than forcing firms to exhaust internal resources to navigate insolvency. Nevertheless, despite this foundation, non-financial support would also be essential to support recovery, and Kosovo has not yet developed a dedicated second-chance programme within its broader enterprise development policies (see Dimension 2).
The only substantial relief effort to date was the EUR 180 million COVID-19 package, which provided liquidity support, wage subsidies, tax deferrals, and loan-repayment suspensions (European Commission, 2020[31]). With these measures now expired, Kosovo lacks mechanisms to scale up recovery assistance during future economic shocks. Similarly, no dedicated support exists to help businesses restart after environmental disaster, leaving climate-vulnerable and hazard-prone sectors without structured support amid escalating climate-related risks. In this respect, Kosovo’s Law on State Aid provides for the use of emergency funds to help compensate for damages and subsidise recovery measures of disaster-affected businesses. However, no data on its effective use have been reported.
From a private-sector perspective, Figure 3.3 illustrates which government recovery support measures businesses affected by the January 2023 floods consider most useful. The top three preferred measures, direct cash transfers, wage subsidies, and fiscal exemptions or reductions, mirror the support tools deployed during the COVID-19 crisis. In practice, however, SMEs receive very little structured assistance following extreme weather events. Fewer than 2% of surveyed SMEs in 2023 reported receiving cash transfers or accessing new credit schemes, while the vast majority received no support at all (UNDP, 2023[32]). This points to a critical gap in the government’s capacity to respond effectively to natural and climate-change-induced hazards.
Notes: n = 95, of which 92 entities (97%) were SMEs with fewer than 50 employees. Multiple selection was possible. To improve readability, some response options were omitted from this display. Results are based only on the options shown here and are not directly comparable to the full original response set.
Source: UNDP (2023[32]).
Surveyed SMEs also identified power outages, damaged roads, and water supply disruptions as the top three barriers to post-flood recovery, highlighting the need for rapid restoration of critical infrastructure. Government co-ordination with local authorities and utility providers remains limited, constraining effective response and capacity-building to ensure wider access to critical infrastructure. Positively, donor-funded initiatives, such as Helvetas’ Decentralisation and Municipal Support (DEMOS) project, are helping municipalities implement flood mitigation infrastructure, reducing risk and supporting business continuity in vulnerable areas (Helvetas, 2024[33]).
Finally, catastrophe insurance remains uncommon among businesses in Kosovo, as the market is still at an early stage of development (UNDP, 2024[34]). Nonetheless, there is clear interest, particularly in agriculture, where subsidised insurance products are seen as highly valuable (UNDP, 2024[34]). With agriculture among the sectors most exposed to climate change and extreme weather, expanding subsidised insurance could significantly improve SMEs’ ability to secure financing for recovery and protect productive assets against increasingly frequent shocks.
The way forward
Integrate SME bankruptcy prevention into the industrial policy and action plans. Kosovo has yet to incorporate OECD recommendations on preventing rising SME insolvencies linked to economic and environmental shocks into its enterprise development framework. This requires, first, the legal establishment of out-of-court restructuring options; and second, the introduction of clear indicators to monitor SME financial distress, alongside the development of a fully-fledged EWS to identify at-risk firms and trigger timely support before insolvency occurs. In the interim, KIESA and chambers of commerce could expand technical assistance and mentoring for financially distressed but viable SMEs, while the Commercial Court could strengthen its capacity to collect and analyse data on SME bankruptcies and the use of available restructuring procedures.
Legally differentiate between honest and fraudulent bankruptcy and build second-chance frameworks. Kosovo is encouraged to reduce the cultural stigma surrounding business failure by clearly distinguishing honest and fraudulent insolvency and by embedding recovery-oriented support within enterprise development and industrial policy. Building on existing legal provisions that allow new financing for insolvent but viable firms, the Government of Kosovo could develop dedicated second-chance programmes that enable entrepreneurs to restructure, restart, or diversify their activities. This would help preserve jobs, support productive reallocation of resources, and strengthen SME resilience and growth.
Develop SME capacities to better manage growing climate-related disaster risks. Relevant ministries such as MIET and the Ministry of Environment, Spatial Planning and Infrastructure, building on its newly adopted climate adaptation framework, could improve co-ordination to systematically support SMEs in risk preparedness, response and recovery. This could include targeted training on the use of hazard data in business planning, advisory services on business continuity and disaster preparedness, and support for investments in climate adaptation measures that go beyond renewable energy, helping SMEs withstand and recover from climate-related shocks. The OECD’s Climate Adaptation Investment Framework could be particularly helpful in guiding investment criteria for business adaptation projects in Kosovo (Box 3.2).
The OECD Climate Adaptation Investment Framework (CAIF) aims to support governments’ efforts to unlock investment in adaptation to build resilience to climate change.
Building on the foundation of the OECD’s Policy Framework for Investment and the Foreign Direct Investment Qualities Policy Toolkit, it identifies the key domestic policies most relevant to enabling investment climate change adaptation. The scope of the CAIF includes both public and private investment, given that both sources will be critical for climate adaptation.
Broadly, the CAIF follows three key criteria for selecting adaptation investments, with a focus on impact. Investments are chosen based on whether they: 1) provide resilience benefits; 2) do no significant harm and 3) are compatible with existing adaptation plans.
Because adaptation investments are highly context-specific, the OECD identifies key investment categories relevant to sectors exposed to climate-related hazards. For the business and industrial sectors, examples include property-level flood barriers to mitigate flood risks or energy-efficient cooling solutions to address heatwaves.
Given Kosovo’s adoption of a climate change adaptation framework, the OECD CAIF could be particularly useful in guiding investment selection for priority activities that enhance the climate resilience of the SME sector, as well as in designing instruments to unlock private investments, including SMEs, in adaptation projects.
Source: OECD (2024[35]).
Kosovo’s sustainable finance framework remains at an early stage, with slow progress on developing a green taxonomy and momentum driven mainly by international donors through policy-based lending and technical assistance. Yet, accelerating industrial decarbonisation and enabling key sectors, especially manufacturing, to upgrade to higher-value-added, low-carbon production requires tailored financial instruments for SMEs, including not only debt but also alternative forms of finance that support green and efficiency-enhancing investments.
Addressing this challenge will require tackling structural barriers to access to finance, notably a shallow financial market in which only 11% of firms seek external financing, often due to collateral constraints and limited financial literacy (Ministry of Industry, Entrepreneurship and Trade, 2023[36]). Against the backdrop of investors increasingly integrating climate risk management and environmental, social and governance (ESG) criteria into lending decisions, this section examines to what extent Kosovo aligns with EU sustainable finance practices and what support is provided to SMEs to help them access sustainable finance instruments.
3.3.1. Supporting SMEs in an evolving sustainable finance framework
The development of a sustainable finance framework in Kosovo has progressed gradually since the last OECD assessment in 2022. The Central Bank of Kosovo (CBK) has placed strong emphasis on advancing regulation and supervision of financial institutions, reflected in both its Strategic Plan 2024-2028 and its Strategic Roadmap on the Management and Supervision of Climate-Related and Environmental Risk (2025-2027). Kosovo’s decision to join the Sustainable Banking and Finance Network (SBFN) in 2023 also demonstrates a sustained commitment to learning from international best practices and co-ordinating with domestic institutions, particularly in areas beyond the CBK’s direct mandate, such as taxonomy development and non-financial disclosure standards, to help align the financial sector with ESG principles.
The CBK has surveyed some financial institutions (FIs) on their integration of ESG factors into planning and risk management. However, in the absence of a unified, economy-wide taxonomy, banks’ approaches remain inconsistent, potentially creating barriers for SMEs through multiple and fragmented ESG data requests. While the industrial policy foresees the development of a Kosovo-wide green taxonomy, assigning responsibility to the Agency of Statistics, no progress has yet been reported, making it difficult to assess the pace of alignment across the financial system.
Sectoral progress has been largely driven by the Kosovo Banking Association (KBA), which established a Sustainable Banking Sub-Committee under its Risk Committee. This platform supports commercial banks in embedding ESG practices by providing guidance, strengthening institutional capacities, and raising awareness among both FIs and businesses on the strategic importance and practical application of sustainable banking.4
A major legislative step forward has been the entry into force of the Law on Sustainable Investments (2024), which for the first time legally encourages institutional investors, including investment funds, to apply ESG standards when assessing investment opportunities (Box 3.3). This marks a significant shift toward aligning capital allocation with Kosovo’s sustainability objectives.
Policy context
On 6 September 2024, Law No. 08/L-209 on Sustainable Investments came into effect, repealing the earlier Law No. 04/L-220 on Foreign Investment and Law No. 05/L-079 on Strategic Investments. By consolidating previous legislation into a single framework, the economy can simplify the regulatory landscape for investors.
Its objective is to promote, support, and protect sustainable investments and exports in Kosovo, including the determination of priority sectors for development.
Operational aspects
1. Economy objectives: Increase manufacturing and exports; promote the circular economy; increase competitiveness; empower youth, women, non-majority communities and marginalised groups; promote regional development and environmental sustainability. Investment proposals must demonstrate how they contribute to these goals. Projects that support regional development and environmental sustainability are prioritised in the selection process.
2. Defined priority sectors: Manufacturing, agriculture, ICT, education, health, tourism, transport, energy, and mining.
3. Investment facilitation: Any investment aligned with Kosovo’s objectives and priority sectors can benefit from support such as export duty exemptions, subsidies, R&D support, access to industrial/technology parks, and reduced administrative burden and costs. The threshold for obtaining “strategic investment” status was lowered from at least EUR 30 million to EUR 10 million, broadening eligibility.
4. Institutional structure: KIESA is dissolved, and two other agencies are created instead:
a. Agency of Investment and Exports (AIE), functioning as a one-stop-shop under the Prime Minister’s Office, responsible for investment and export promotion, facilitation, strategic investment evaluation and post-investment care.
b. Agency for Innovation and Support to Enterprises (AISE), under MIET, focussing on innovation and entrepreneurship support, including business formation, financial advisory, networking, and business ecosystems.
Policy impact
The AIE has been legally established and is moving towards operationalisation, while the AISE is still awaiting the adoption of its implementing regulation. As the new agencies become operational, businesses can benefit from improved support services and clearer pathways for investment. The integrated legal framework, targeted incentives, and strengthened institutional architecture are designed to create a more conducive environment for green growth.
Source: Government of Kosovo (2024[37]; 2026[38])
These developments, particularly the gradual alignment with EU taxonomy principles, are likely to influence SMEs indirectly through value-chain pressures from buyers and through banks increasingly embedding sustainability criteria into their governance and risk-management frameworks. This is expected to increase the demand for SMEs to provide data on their sustainability performance, even though many may lack the expertise or resources to collect and report such information in required formats. To address this, stronger institutional co-ordination will be needed. The two agencies, the AIE in the process of operationalisation, and the to-be-created AISE under the Law on Sustainable Investment, will need to work more closely with key bodies such as the Ministry of Finance, Labour and Transfers, as well as with commercial banks, to ensure SMEs receive adequate guidance and support in meeting emerging sustainable finance requirements. This could include, for example, raising awareness of existing financing opportunities, as well as capacity building support through training on simplified disclosure frameworks that are harmonised across banks and co-ordinated by government bodies or banking associations. Looking ahead, the planned establishment of a Development Bank under the new Financial Sector Development Project with the World Bank (2024[39]) presents a significant opportunity. Designed to finance projects aligned with government priorities, this institution could play a pivotal role in expanding sustainable finance for SMEs, including through dedicated green credit lines.
Although Kosovo’s private sector, particularly FIs, is increasingly open to adopting sustainable finance practices (RCC, 2024[40]), uptake is constrained by a major demand-side gap: SMEs generally have limited understanding of green financial instruments and low awareness of tailored sustainability-linked products. This knowledge barrier, combined with SMEs’ competing investment priorities and limited understanding of the specific benefits and complexities of green finance compared to traditional financing, reduces potential market size and slows the diffusion of sustainable finance.
Wider adoption of sustainable financing remains constrained by limited training and advisory support for businesses. Current financial literacy programmes do not cover green finance, leaving SMEs without the competencies needed to identify opportunities, prepare bankable proposals, or navigate emerging sustainability requirements. As a result, gaps in SME capabilities in this area continue to limit scaling of the market and the integration of sustainable finance as levers for enterprise growth and resilience.
3.3.2. Increasing SME access to sustainable (bank and alternative) financing
Given the diversity of SMEs in terms of size, sector, technological maturity and location, firms require different financial solutions depending on their business models and stage of development. Broadly, three groups can be distinguished within the green economy: early-stage green start-ups (“innovators”) developing new technologies or business models; more mature green firms (“enablers”) scaling up innovative solutions; and established SMEs seeking to adopt greener processes, products or technologies (“adopters”) (OECD, 2025[41]).
Sustainable finance is particularly relevant for SMEs in the context of the green transition. Conventional financing instruments typically prioritise the financial viability and risk-return profile of projects, while often overlooking externalities such as environmental costs. By contrast, financing approaches that integrate ESG criteria provide a more suitable framework for supporting green investments. These projects often involve longer payback periods, higher upfront capital needs and objectives that extend beyond immediate financial returns to include environmental performance. Green finance provided on concessional terms, such as with lower interest rates or extended repayment periods, can also help overcome key demand-side barriers and incentivise SMEs to invest in greener technologies and practices.
Green grants are a common form of sustainable finance for SMEs, particularly for supporting investments in renewable energy and energy efficiency that reduce costs and enable more sustainable operations (OECD, 2025[41]). In Kosovo, government grants remain one of the main intervention mechanisms for supporting SME investment and are beginning to create opportunities for the green transition.
The Kosovo Energy Efficiency Fund, largely donor-financed, supports improvements in energy-saving technologies and practices through green grants, though its activities remain focussed almost entirely on the public and residential sectors. Business uptake is minimal; for example, only eight SMEs benefitted from a 2024 programme subsidising solar photovoltaic (PV) systems, receiving a total of EUR 44 200, a delayed distribution planned for 2023 under the Energy Strategy Action Plan (Ministry of Economy, 2024[42]).
KIESA also plays a central role in expanding SME access to sustainable finance through its grant schemes. These prioritise projects that boost production and exports while aligning with green and circular economy principles, such as energy efficiency, product lifecycle extension and environmental compliance. In 2024, 129 SMEs were supported through this measure, allocating a total amount of EUR 7.3 million. In 2025, 167 SMEs benefitted from a total amount of EUR 4.5 million, up from a budget of just EUR 0.5 million in 2018. While this signals strong potential to modernise production and improve efficiency, there are still no data on the extent to which these projects contribute to Green Agenda objectives.
More greening-targeted grants are provided through the Clean Energy Grant Scheme, a EUR 1 million initiative supported by the Luxembourg Development Agency that KIESA launched in 2025 (2025[43]). The scheme aims to strengthen sustainable, resilient SME development and to contribute directly to Kosovo’s Energy Strategy 2022-2031. Under this scheme, SMEs can receive up to EUR 20 000 for single measures and EUR 25 000 for combined measures. Depending on the demand and success of this, such a programme could be institutionalised.
Aside from public grants, banks remain the primary source of SME financing in Kosovo, accounting for 67% of total financial sector assets. Lending to enterprises also expanded by 14.9% between 2018 and 2024 (Central Bank of Kosovo, 2025[44]). Yet long-standing constraints, such as high financing costs, stringent collateral requirements, and low availability of tailored products, continue to restrict SME access to bank financing for investments in sustainable growth (see Cluster 1).
To address this, international donor projects are increasingly active in Kosovo,5 seeking to mobilise private investment through commercial banks by leveraging development capital for sustainable SME projects. Most notably, the EBRD launched the SME Go Green Programme in 2024, targeting the agribusiness sector and women-led enterprises.6 This initiative builds on the earlier SME Competitiveness Programme (2018-2024), which provided EUR 29.4 million in financing and advisory services to 148 businesses (EEAS, 2024[45]). While full impact data for the new programme are not yet available, throughout 2024 and 2025, the EBRD has been establishing dedicated green credit lines with major commercial banks in Kosovo to expand the reach and uptake of SME green finance products.7 By incorporating concessional elements, such as an incentive payments of up to 15% of the loan, the programme also helps lower green financing costs for SMEs.
However, the current emphasis on specific vulnerable groups, such as agricultural SMEs or women-led companies, while important, risks limiting broader economy-wide impact. This highlights the government’s still-limited capacity to scale public-private partnerships that could expand the availability and use of sustainable banking products for SMEs across all sectors.
Encouragingly, public risk-sharing mechanisms are already playing a role in SME access to green finance. Approaches like credit guarantees can help share potential losses and enhance the creditworthiness of SMEs. The Kosovo Credit Guarantee Fund (KCGF) is a key institution for supporting lending to SMEs. At the end of 2024, the fund guaranteed 23.4% of loans to non-financial corporations, increasing by 2.2. percentage points annually since 2014 (Central Bank of Kosovo, 2025[44]). A noteworthy recent step is the Fund’s Green Recovery and Opportunities Window (GROW). Initially piloted in 2022 and officially launched in 2023, GROW provides guarantees of up to 70% of the loan principal for investments in renewable energy and energy efficiency, delivered through six commercial banks.
In its first year, the window supported seven SMEs with loans totalling EUR 3.9 million, followed by another seven businesses with EUR 1.9 million in financing in 2024 (Kosovo Credit Guarantee Fund, 2023[46]). While the investments per firm are considerable, the overall scale of support remains modest, underscoring the need for a far broader reach if sustainable finance is to meaningfully expand across the economy. Still, by guaranteeing a portion of the repayment of loans directed at green projects, this scheme makes lending to green SMEs more attractive to both lenders but also SMEs as it could potentially reduce the need for high collateral. Beyond credit guarantees, however, government-led instruments, such as concessional credit lines for green investments, remain largely absent.
Other debt-based financing instruments, such as leasing, have slowed noticeably in recent years (see Cluster 1). In ongoing co-operation with the International Finance Corporation (IFC) and the International Monetary Fund (IMF) (2025[9]), the Government of Kosovo is drafting a new Law on Non-Bank Financial Institutions (NBFIs) to modernise the sector by strengthening rules for improved governance and enabling NBFIs to shift from non-profit to commercial status. These reforms could expand the use of leasing as a tool for SMEs to acquire modern, resource-efficient machinery. A notable example is the IFC’s EUR 5 million loan to Raiffeisen Kosovo L.L.C. to finance climate-related SME investments, specifically hybrid and electric vehicles and small PV installations (IFC, 2023[47]). Other institutional investors and public bodies could replicate this model.
Beyond debt financing instruments, many SMEs with high-growth potential and riskier sustainability projects, often SME innovators, seek equity financing. However, Kosovo’s capital market remains at a very early stage. The legal and regulatory framework for both stock exchanges and investment funds is still under development (see Cluster 1) and is unlikely to emerge in the near future. Similarly, no dedicated regulatory framework exists for private equity; instead, early-stage finance is provided mainly, if at all, through small business-angel networks operating as non-governmental organisations (NGOs) in the capital Pristina.8
Lastly, microfinance continues to play a meaningful role in supporting Kosovo’s most underserved sectors of the economy (see Dimension 6). In this sector, the IFC (2023[48]) has been expanding climate-focussed microfinance, providing EUR 23 million in senior loans in 2023 to Kosovo Enterprise Program (KEP) Trust, Kreditimi Rural i Kosovës, and Agjensioni për Financim në Kosovë. These investments target small agribusinesses to help expand their access to climate-smart technologies. In 2025, the IFC renewed its support through an additional EUR 6 million loan to KEP Trust (KEP Trust, 2025[49]). However, structural challenges persist. The maximum microloan ceiling of EUR 25 000 limits financing of more capital-intensive green investments and legal reforms for NBFIs to expand, and tailor offers of green microcredit are pending (European Microfinance Network, 2023[50]).
The way forward
Create a central sustainable finance platform, or a similar co-ordination mechanism, to drive the development of Kosovo’s sustainable finance frameworks and facilitate engagement with the private sector, particularly industry, banking, academia, and civil society. This platform could, among other priorities, work towards developing a taxonomy, continuing the standardisation of sustainable finance offerings and requirements, and advising the government on policies for strengthening SME access to sustainable finance, both through banks and alternative external financing mechanisms. For its taxonomy, Kosovo should consider the EU taxonomy as the reference framework and gradually transition to it to enable compliance in trade. For this purpose, the Government of Kosovo can draw on a series of OECD studies that assess taxonomy options used across OECD Members (OECD, 2022[51]; 2020[52]). The platform could also advance assistance to strengthen SMEs’ understanding and capacities for basic sustainability reporting, for example by offering practical advisory tools or developing simplified reporting frameworks, similar to the European Union’s voluntary standard for SME sustainability reporting (EFRAG, 2025[53]). Such assistance would help SMEs prepare investment-ready projects that meet the sustainability eligibility criteria of banks and other investors.
Broaden the reach and impact of the Kosovo Credit Guarantee Fund and the Energy Efficiency Fund’s green finance. While the KCGF’s green window shows progress towards enabling access to sustainable finance for SMEs, its impact remains constrained by the limited number of beneficiaries, despite relatively large loan sizes per firm. Greater impact could be achieved by diversifying eligible investments beyond renewable energy to include circular-economy business models and eco-efficient processes. For the Energy Efficiency Fund, the mandate of its largely donor-financed activities could be broadened to place greater emphasis on SMEs, beyond its current focus on public and residential projects. As many companies now operate in a liberalised electricity market, enhancing their resilience requires adopting energy-saving and mitigation measures, not only to support decarbonisation but also to improve cost competitiveness.
Institutionalise donor-supported grant schemes and credit lines for sustainable SME projects. Currently, government grant programmes rely heavily on donor funding, operate inconsistently, and often do not integrate green transition criteria. Building on the outcomes of the Clean Energy Grant Scheme launched in 2025, KIESA could consider institutionalising such initiatives to ensure continuity and alignment with sustainability goals. Grants should be used strategically, for example, by blending them with commercial instruments such as loans, to gradually reduce reliance on public funding, avoid crowding out private capital, and encourage SMEs to transition toward market-based financing. Additionally, with the planned establishment of Kosovo’s Development Bank, the Government of Kosovo should in the medium-term define its role in extending complementary or substitute credit lines to support sustainable SME projects alongside existing EBRD-run programmes. The focus should be on public–private partnerships that serve as anchor investments to catalyse additional private capital.
Beyond access to finance, SMEs in Kosovo require strong non-financial support. This includes mentoring, advisory and consulting services, to effectively seize opportunities in the green economy. As the transition toward climate neutrality remains at an early stage in Kosovo, firm-level support is becoming increasingly critical to scale green and circular practices and to guide technological upgrading toward more resource- and energy-efficient production.
The government is uniquely positioned to raise awareness and co-ordinate targeted support services that enable SME greening and resilience from the top down. At the same time, it must facilitate networks that connect SMEs with industry peers, academia and local communities, allowing firms to benefit from bottom-up shared knowledge and collaboration. Establishing a comprehensive non-financial support system, one that strengthens management capacity, supports firms throughout business lifecycles, and promotes sustainable business models and partnerships, will be essential to delivering a successful and inclusive green transition.
In this context, this section assesses the success of government support programmes in enabling SMEs’ green transition and putting in place business-to-business ecosystems that boost SME resilience.
3.4.1. Scaling up public non-financial support for SMEs in a green and resilient economy
The industrial policy of Kosovo outlines a range of activities intended to provide non-financial support and capacity building for SMEs in areas directly linked to the green economy, as well as broader entrepreneurial services that could indirectly strengthen sustainable and resilient business development. In practice, however, implementation has been limited.
Only one measure, implemented through a UNDP-supported programme, was carried out, reaching 50 businesses with training on circular-economy concepts. Other highly relevant measures for building SMEs’ technical capacities, understanding and knowledge for the green transition, such as support for GPP, were not implemented. Similarly, progress on financially oriented measures that should provide SMEs across the economy with technical know-how has remained very limited.
Beyond the explicitly greening-related measures of the industrial policy, several other planned support mechanisms related to access to finance, technical legislation, product certification, and export promotion are also relevant for advancing the green transition. Yet, these measures are not strategically aligned to provide tailored services for SME greening efforts.
For example, plans to establish an access-to-finance advisory office or an export information centre have not been designed with a focus on green or resilience-related needs. More broadly, Kosovo’s SMEs still lack access to a vibrant ecosystem of business advisory services that would help boost capacities across key growth and sustainability areas. With KIESA’s restructuring ongoing, there is significant potential to expand SME support and develop more targeted greening and resilience-focussed mentoring services.
This need is even more pressing in light of major reforms that require early business preparation, such as the recent liberalisation of electricity markets (European Commission, 2025[13]), which demand greater regulatory transparency and institutional capacity. As regulated prices are phased out and market-based pricing is introduced, businesses face greater price volatility, more complex contracts, and new supplier choices. Ensuring that SMEs understand the expected impacts of such reforms and have practical guidance on mitigation and adaptation strategies will be essential for supporting a smooth transition and safeguarding competitiveness.
To ensure that business support services (BSSs) genuinely promote productivity, sustainable business practices, and SME resilience, key institutions, particularly the to-be established AISE, must regularly assess SME needs and monitor the outcomes of trainings, workshops, and technical assistance. This has not occurred in Kosovo since 2017. Assessments take place only on an ad hoc basis through isolated KIESA events, and beyond its grant schemes, there are no data on how many SMEs have benefitted from non-financial support since 2022, nor whether awareness and uptake of BSSs have improved.
Some emerging insights for greening-focussed BSS needs can be drawn from the Kosovo Chamber of Commerce, which recently assessed the needs of its members in the area of the circular economy. As shown in Figure 3.4, businesses consider the most valuable support services to be: 1) lobbying and advocacy for SME interests; 2) networking opportunities; and 3) training on relevant trends and topics. These findings underscore the importance of building a structured, demand-driven support ecosystem that not only informs but actively equips SMEs to adopt sustainable and resilient business models.
Note: n = 68 SMEs.
Source: Kosovo Chamber of Commerce (2023[54]).
Notably, KIESA has been creating networking opportunities through its export-promotion activities under the industrial policy, which are specifically important for SME enablers and adopters seeking new market and growth opportunities (OECD, 2025[41]). However, clear links to advancing green business practices or promoting circular production across manufacturing firms are not yet evident (see the next sub-section).
Donor-funded activities have begun to address this gap. For example, the Greening Private Enterprises in Kosovo project, implemented by the Swiss Agency for Development and Cooperation (Swiss Federal Department of Foreign Affairs FDFA, 2024[55]), was launched in 2024 to help SMEs in Kosovo comply with emerging green standards in European markets, particularly benefitting exporting businesses. Running until 2031, the project focuses on raising awareness of the green transition through knowledge sharing and peer networks for SME greening, developing and testing green business services, and improving innovation support for green enterprises (see more in Section 3.4.2).
Another avenue for strengthening targeted BSSs in support of SME green transition is Kosovo’s participation in the EU Single Market Programme since 2023. Although KIESA has expressed commitment to leveraging this mechanism, which provides SMEs with access to EU markets and funding, there is no indication that the agency has taken targeted steps to guide SMEs, particularly those pursuing sustainability upgrades, on how to engage with the programme, prepare competitive proposals, or register for relevant calls.
3.4.2. Exploiting the power of networks for the sustainable growth of SMEs
Experience from OECD Member countries shows that targeted policies can successfully integrate SMEs into business networks,9 enabling them to benefit from knowledge transfer, innovation, internationalisation and productivity gains (OECD, 2023[56]; 2019[57]; 2008[58]). In the context of the green economy, expanding and strengthening such networks is essential for SMEs to access key resources such as data, skills and technology, and to improve their adaptability and resilience (see Annex Figure 3.A.1).
While the concept of business networks is not explicitly recognised in Kosovo’s enterprise or industrial policies, several provisions of the Strategy for Industrial Development and Business Support 2023-2030 align with it. The strategy places strong emphasis on fostering strategic business partnerships, particularly to boost exports from manufacturing firms, and on promoting business-to-business collaboration through the development of industrial parks.
These forms of granting access to industrial networks are key business development support services for SME adopters (OECD, 2025[41]). However, explicit cluster development, which could encourage wider competition and co-operation in the green economy between firms (European Commission, n.d.[59]), is encouraged only within the manufacturing sector and a dedicated cluster approach or targeted incentives to drive expansion are lacking (European Cluster Collaboration Platform, 2024[60]).
Positively, the legal framework to support sustainable SME networks is now established by the 2023 Law on Industrial and Technological Parks. The law sets out provisions to attract sustainable investments, defines different types of parks (see Figure 3.5) and their objectives, and establishes clear rules for park management. Both general and specialised parks, such as the green industrial park in Drenas, would provide SMEs with opportunities to share knowledge, assets and materials, and to integrate into domestic or international value chains. This collaboration strengthens their market position and enhances resilience to external shocks. Innovation and technology-focussed parks that more strongly support innovator SMEs, with similar features, are discussed in the next sub-section.
Source: Based on German Economic Team (2025[61]), Figure 1.
MIET plans to establish four new industrial parks with eco-friendly features, including the green park in Drenas. These zones are intended to specialise in attracting investment and generating positive spillovers for the local economy but would not exclusively host firms specialising in environmental products and technologies. Industrial Park 2 in Drenas is still under construction and is expected to host around 50 manufacturing firms starting in 2027. However, there is no clarity on how industrial symbiosis will be facilitated in practice or whether SMEs will meaningfully benefit from networking services. Information on the remaining three parks is also limited.
Persistent challenges in operationalising industrial parks further underscore the need for a more strategic approach. Past zones have struggled to attract firms and deliver tangible economic outcomes, often becoming unused spaces with minimal contributions to employment or productivity (Demiri and Travers, 2021[62]). In an effort to address this, the government undertook a study in 2024 to assess their impact on job creation, exports and broader economic development. The conclusion shows that the main challenges revolved around complex administrative procedures, lack of a qualified workforce and insufficient infrastructure (KIESA, 2024[63]). Several recommendations are proposed for establishing new industrial parks, including for example simplified property offerings to attract FDI and to invest in undeveloped infrastructure.
However, beyond the collection of basic indicators in the aforementioned study (including employment levels and company sales in industrial zones), monitoring and evaluation need to be significantly strengthened to include more advanced measures, such as labour productivity and resource efficiency. Priority should also be given to improving existing areas rather than building new zones that replicate the same issues. Ensuring transparent procurement processes, reducing administrative burdens within the zones, for example assistance with permits or facility management, and providing targeted incentives, beyond basic infrastructure, will be essential to unlocking the economic and sustainability benefits these industrial areas are meant to deliver.
Finally, the government could strengthen collaboration with business associations and leverage structures such as the Enterprise Europe Network (EEN), launched in 2025. Co-ordinated by Pristina Regional Enterprise Agency (REA) which has over 20 years of experience in SME development, and strong partnerships with STIKK (Kosovo’s ICT Association) and the Kosovo Chamber of Commerce, the EEN consortium brings deep insights into SME networking needs and barriers. The EEN also centres sustainability in its advisory work, helping local SMEs with international ambitions access network resources, improve eco-efficiency, and develop resilient growth strategies.
The way forward
Scale up non-financial support to drive SME greening and competitiveness. Industrial policy measures need to be consistently implemented and expanded to provide SMEs with advisory and mentoring services that promote low-carbon production and help firms remain competitive amid evolving decarbonisation standards in domestic and international trade. For this, authorities such as KIESA, particularly upon finalisation of its restructuring, could leverage the EU Single Market Programme to guide SMEs in grant applications and in preparing investable project proposals, facilitating deeper integration into EU business value chains.
Develop indicators to track how SME network development contributes to the green transition. KIESA has implemented numerous matchmaking and networking initiatives, particularly for supplier and production networks, but the extent of their contribution to green transition objectives remains unclear. Establishing a targeted set of indicators would enable the government to monitor the effectiveness of these networks and assess how they support progress toward the Green Agenda commitments within the private sector. Kosovo could consider tracking indicators such as the share of green SMEs using public matchmaking services, or the share of SMEs that identify green business partners through networking services provided by KIESA. Additional metrics could include revenue growth from green products or investments generated following connections made through these services. More advanced indicators could assess reductions in material use, emissions, energy consumption or waste intensity among firms participating in business networks or firms using publicly supported networking platforms.
Start regularly assessing and aligning greening support services with SME needs. Kosovo should introduce regular monitoring and evaluation of greening-related business support services to assess their effectiveness and relevance for SMEs. As a first step toward measuring policy effectiveness, Kosovo could leverage existing self-diagnostic tools used across OECD countries and promote their uptake among SMEs participating in support programmes. These tools can help generate initial data on environmental performance before and after programme participation, creating baseline estimates for policy indicators. One such example is presented in Box 3.4. Over time, more systematic and robust data collection should be prioritised, particularly for energy-intensive, medium-sized firms. In this regard, Kosovo could draw inspiration from Portugal’s energy audit system, which provides firm-level data and enables tracking of improvements in energy efficiency and savings in line with policy objectives (OECD, 2025[64]). This should be complemented by market research to better understand SME demand for aligning business practices with EU Green Deal requirements. Building on the Chamber of Commerce’s past experience with circular-economy needs, authorities could collaborate with business networks, while KIESA could integrate surveys and focus groups into its grant schemes and broader outreach to ensure support instruments are demand-driven and impact-oriented.
Accelerate the delivery of green industrial parks and adopt a structured approach to SME networks. MIET should fast-track the completion of environmentally friendly industrial parks and clearly articulate how these investments support green transition objectives and SME development. This includes defining how SMEs will access infrastructure, shared services and innovation resources, and how parks will facilitate meaningful linkages with other market actors. In parallel, KIESA or its successor agencies should leverage existing expertise in connecting SMEs with international partners, including re- and near-shoring opportunities. Engagement could prioritise key export markets, enabling knowledge exchange, joint participation in green projects, and integration into green value chains, thereby supporting scalable investments and generating spillover effects in the local economy.
The Carbon Trust has developed a digital Carbon Footprint Calculator to help SMEs in the United Kingdom measure their emissions in line with guidance from the Greenhouse Gas Protocol. The tool captures direct emissions from fuel use and industrial processes (Scope 1) as well as emissions from purchased electricity (Scope 2) linked to the assets companies operate. It follows an operational control approach and focuses on emission sources that are common to most SMEs.
SMEs in Kosovo could benefit from similar tools, or from a version tailored to the economy’s SME structure and key sectors, such as manufacturing, ICT and energy. Access to such a tool would help firms better monitor their environmental performance, benchmark against peers and identify priority areas for investment and operational improvements. It would also support government programmes by enabling SMEs to report baseline and post-support data, strengthening the evidence base for policy design and evaluation.
Sources: The Carbon Trust (n.d.[65]) and OECD (2021[66]).
To strengthen competitiveness, build resilience, access new markets, and reduce long-term costs through higher productivity, SMEs must be able to invest in strategic R&D that drives product and process innovation. In the context of the green transition, eco-innovation in the private sector is essential to advancing low-carbon development and ensuring that firms remain competitive as sustainability requirements intensify.
In Kosovo, however, innovation capacity lags behind that of other Western Balkan and European economies, and the institutional framework does not yet effectively encourage private R&D in priority sectors. Key constraints include insufficient funding for strategic innovation and limited capacity of the research sector to engage in co-operative initiatives, both domestically and internationally (Riinvest Institute, 2023[67]).
As Kosovo recognises the need to transition toward a knowledge-based economy, this section examines the alignment of innovation support with greening objectives and government programmes that aim to enable R&D infrastructure and networks to support SME green innovation.
3.5.1. Advancing strategic innovation for a green and resilient economy
Kosovo’s innovation policy framework currently lacks an effective strategic foundation. The Strategy for Innovation and Entrepreneurship 2019-2023 has expired and did not set objectives related to green innovation or environmental technologies. Although the drafting of a new Innovation Strategy 2030+10 and a Smart Specialisation Strategy is underway, and both acknowledge the importance of clean energy and the circular economy, these frameworks remain unfinished, delaying strategic direction and co-ordinated action.
While the previous strategy aimed to strengthen SME innovation capacities, no implementation or monitoring reports have been published for its 2019-2021 action plan, limiting evidence-based revision of innovation policy. Progress on the broader innovation framework is further constrained by the continued delay in adopting the Law on Innovation and Entrepreneurship, which is intended to stimulate innovation activity and enable the establishment of the Innovation Fund. Its pending approval by the Assembly represents a critical bottleneck in operationalising innovation support (European Commission, 2025[13]).
The Strategy for Industrial Development and Business Support 2023-2030 includes a specific objective to promote product innovation and higher value-added manufacturing. However, implementation has lagged significantly: 75% of planned activities had not been implemented by 2024. Most notably, income tax reductions for large manufacturing companies investing in innovative entities were not introduced and are now expected to be removed entirely from the strategic action plan. Overall, innovation support measures remain underdeveloped, and participation in EU research and innovation programmes continues to be low,11 despite government efforts to promote opportunities, e.g. under Horizon Europe.
Support for innovation aligned with the green transition has been particularly limited. Plans to establish a circular-economy funding window within the Innovation Fund, expected to benefit 40 businesses, were not realised due to the Fund’s absence.12 In its place, the government reports that 49 SMEs received innovation support through a scheme co-funded by Luxembourg, targeting SMEs and start-ups in the information technology (IT) sector and circular-economy-related activities. While this provides a partial substitute, it does not replace the systemic, long-term support envisaged under economy-wide innovation policies.
Kosovo hosts a number of incubators within its innovation ecosystem; however, their focus is predominantly on ICT, digitalisation, and creative industries, with only ad hoc, and limited support for green innovation. Most notably, the Innovation and Training Park in Prizren is the only organisation that explicitly prioritises green energy and environmental technologies as a key target sector. Despite this strategic positioning, dedicated green innovation training programmes are not yet available, and government co-financing mechanisms to support their development are absent. Positively, the Reform Agenda of Kosovo includes plans to define a framework that guides support to incubators in assisting innovative start-ups in the green and circular economy as well as the ICT sector by June 2026. Yet, progress on this is unknown. Advancements, however, have been registered through a donor-funded accelerator programme focussing on enabling green recovery through innovation (Box 3.5).
Policy context
In the aftermath of the COVID-19 recession, compounded by the war in Ukraine, the energy crisis, and intensifying climate change impacts, SMEs have been facing mounting environmental, economic, social, and health challenges. To recover and build resilience, SMEs require targeted support to access knowledge and finance that enables the adoption of innovative, sustainable solutions.
In response, in 2021, UNDP Kosovo launched the local chapter of the BOOST acceleration programme to scale social impact innovation. In partnership with the Government of Japan, the EBRD, and the Innovation Centre Kosovo (ICK), the UNDP introduced the Kosovo Green Challenge, designed to support green recovery in the private sector by fostering an enabling, people-centred innovation ecosystem.
Operational aspects
The acceleration programme selected SMEs based on innovations that promote sustainability, resource efficiency, circular-economy practices, and, introduced in the second edition in 2023, digitalisation. Eligibility was open to SMEs operating for at least one year and implementing their projects in Kosovo.
Selection criteria were structured around four pillars: 1) Innovation potential, demonstrated through cutting-edge technologies or novel approaches to products, services, or processes; 2) Scalability and visibility, ensuring innovations could be developed, tested and implemented within one month of programme completion; 3) Impact orientation, with clearly defined key performance indicators; and 4) Implementation capacity, reflected in clear team roles and responsibilities.
At the end of the programme, selected SMEs were awarded grants subject to a 20% co-financing requirement.
Policy impact
The programme was implemented in two editions (2021/22 and 2023/24), supporting a total of 80 SMEs through acceleration services. In 2021, 15 SMEs received grants of approximately EUR 20 000 each. In 2023, a total budget of EUR 70 000 was distributed among ten SMEs. The programme represents the first structured initiative in Kosovo to provide crisis-recovery business support explicitly linked to climate-resilient innovation and sustainable development, demonstrating the role of targeted acceleration programmes in strengthening SME resilience.
Source: UNDP (2021[68]).
At present, the government reports that no grant schemes are dedicated specifically to green or climate-related innovation technologies; instead, environmental considerations are typically included as secondary criteria in general grant programmes. Some donor-funded initiatives help address this gap, for example, the Luxembourg Development Agency’s (2025[69]) Demonstration Fund supports viable green innovations. Through its 2024 call, it awarded up to EUR 350 000, depending on the maturity of the solution (covering 50% of project costs), to three projects. Still, to date, there are no concrete government measures linking innovation support to SMEs’ capacity to absorb economic and environmental shocks, and current strategies show limited alignment with resilience-building objectives. This raises concerns about the effectiveness of existing instruments in supporting business continuity.
More indirect forms of innovation support for SMEs, such as tax incentives, are largely absent. The Ministry of Education, Science and Technology provides limited support under a 2016 Administrative Instruction on small scientific projects, but this instrument primarily targets higher education institutions rather than businesses. This highlights significant potential to embed ESG considerations into future incentive mechanisms, with differentiated support based on firm size, sector and structural constraints. In parallel, public procurement of innovation remains entirely undeveloped in Kosovo, and no concrete steps have been identified to advance its implementation.
In the field of intellectual property rights, Kosovo adopted a new Law on Copyright and Related Rights, which has been in force since 2023, and is currently developing the relevant sub-legal acts. Nonetheless, enforcement remains weak, largely due to lengthy procedures and insufficient human resources. On a positive note, the Agency for Industrial Property has stepped up awareness-raising efforts, delivering 17 workshops, information sessions and educational activities between January and May 2025. However, tailored advisory services for SMEs on intellectual asset management remain limited, and there are no targeted incentives to encourage the development of green innovations and technologies.
Reliable data on innovation performance and R&D uptake among businesses in Kosovo are still limited. As a result, there is no clear understanding of how innovation support contributes to productivity growth or business resilience. A positive development is that, in the context of drafting the Innovation Strategy 2030+, the government has launched ecosystem-wide surveys covering businesses, the public sector, academia and civil society. The business survey explores the role of innovation in firm operations, investment in R&D, collaboration with other entities, and use of incubator services. These efforts represent an important step toward building an evidence base for future innovation support. However, more targeted insights into firms’ needs and the demand for eco-innovation will be essential for designing effective interventions that accelerate the adoption of sustainable business practices.
3.5.2. Capitalising on knowledge networks for driving SME innovation
To respond effectively to the global megatrends outlined in Section 2.1, SMEs need to be embedded in knowledge and innovation networks that foster adaptability and long-term value creation. Strengthening their participation in resilient ecosystems is essential for sustaining growth amid disruption as it enables SMEs to tap into critical resources, such as university research and public R&D, facilitating technology transfer and accelerating the adoption of sustainable solutions.
Kosovo’s Science Programme 2023-2028 identifies natural resources, energy, environment, and climate change as priority impact areas. However, its relevance for SME development remains unclear, as there are no available data on concrete measures targeting SMEs, such as financing for green start-ups, spin-offs or applied research partnerships.
At the operational level, Kosovo lacks dedicated technology-extension services tailored to supporting SMEs in adopting sustainable technologies. In parallel, technology transfer offices are neither systematically supported nor co-ordinated by the Ministry of Education, Science and Technology, pointing to limited government engagement in enabling collaborative innovation ecosystems. As a result, pathways for transferring research outputs and green technologies from academia to the private sector remain fragmented, and data on SME engagement with existing technology transfer structures are unavailable.
Critical instruments for stimulating SME innovation are also missing. R&D voucher schemes, which could incentivise business-academia collaboration, have not been introduced, nor do public institutions offer competitive co-operative grants for joint innovation projects. This represents a missed opportunity to build cluster-based and sector-specific support, particularly in green and climate-relevant sectors where SME innovation could deliver both economic and environmental returns. In this context, industrial and technological parks are emerging as important intermediaries, helping SMEs access research resources, infrastructure and financing, and supporting the adoption of innovations that enhance climate resilience and growth potential.
As mentioned before, under its industrial policy, the government plans to develop three specialised industrial parks with environmentally friendly features in Rahovec, Mitrovica, and Lipjan, with substantial capital investments initiated in 2024. While these investments signal growing recognition of sustainable industrial development, there is limited transparency on their implementation status, the extent to which green innovation infrastructure is integrated on site, or how research institutions are embedded within these ecosystems. Without clear links to academia and targeted SME greening services, the potential impact of these parks on innovation-driven resilience remains uncertain.
Although the lack of structured academia-business collaboration was already acknowledged in the now-expired Strategy for Innovation and Entrepreneurship, no overarching government framework has yet been established to address this challenge. Inter-ministerial co-ordination remains weak, and the academic sector is still in the early stages of providing applied services to the private sector, particularly in developing solutions tailored to SME needs.
A positive development, however, is the active involvement of academic institutions in drafting the new Innovation Strategy 2030+, creating an opportunity to address structural barriers through targeted measures, stronger co-ordination mechanisms, and robust monitoring and impact assessment frameworks. These reforms will be essential to evaluate whether public support instruments effectively stimulate industry-research co-operation and strengthen SME capacity to innovate, adapt and withstand economic and environmental shocks.
Encouragingly, donor-funded initiatives, such as the University of Prizren project highlighted in Box 3.6, demonstrate how universities can successfully engage with local communities and SMEs to accelerate the uptake of green innovations. Scaling such models through overarching policy frameworks could significantly enhance Kosovo’s innovation ecosystem and support SMEs in driving sustainable, resilient growth.
Policy context
Under the EU Green Horizons project in Kosovo, CARE International Kosovo has partnered with NGOs EC Ma Ndryshe (Prizren) and Syri i Vizionit (Pejë/Peć) to empower youth and local communities to drive the circular economy and green transition. The project is being implemented across Gjakovë/Đakovica, Mitrovica, Pejë/Peć, and Prizren, targeting local-level action as a catalyst for sustainable transformation.
A flagship component of the initiative is the establishment of a Green Innovation Lab at the University of Prizren, designed to strengthen the university’s role as a hub for environmental innovation, applied research, and green skills development.
Operational aspects
The Green Innovation Lab is conceived as a hands-on, practice-oriented and research-driven platform where students, youth, and the wider community can test ideas, conduct applied research and co-create innovative solutions that support the green transition and sustainable development.
To translate this vision into measurable impact, the lab focuses on three core pillars:
Skills and entrepreneurship: Equipping students and youth with advanced competencies in environmental practices, green entrepreneurship, and innovation.
Collaboration and co-creation: Fostering strong links between academia, local communities, civil society, and municipal actors to develop locally relevant solutions.
Policy and practice impact: Promoting environmental awareness and sustainable practices that inform policymaking and lead to concrete environmental protection actions.
The European Union supports the initiative through both financial assistance and knowledge transfer, reinforcing its long-term sustainability and relevance.
Policy impact
The Green Innovation Lab is currently under development and conceptualisation. Anchored in the principle of an enabling innovation ecosystem, it will be housed within the Faculty of Life and Environmental Sciences at Ukshin Hoti University of Prizren. Once operational, the lab is expected to serve as a key institutional anchor for green innovation at the local and economy level, strengthening Kosovo’s capacity to translate climate policy ambition into action.
Sources: European Union Office in Kosovo (2025[70]) and University of Prizren (2025[71]).
The way forward
Establish a comprehensive incentive system for green research and development and innovation. Because the green transition involves multiple market failures, it requires a comprehensive approach combining complementary policies, supportive framework conditions, and effective coordination among stakeholders at local, national, and international levels (Tagliapietra and Veugelers, 2020[72]; Anderson, 2021[73]). In line with the forthcoming Law on Innovation and Entrepreneurship, which will provide a legal basis for financial, tax, and technical incentives to support innovative activities, the Government of Kosovo should develop a balanced policy mix addressing both supply- and demand-side measures in close collaboration with relevant institutions. This mix would need to target strategic sectors, such as green energy, and other areas that foster low-carbon, resilient SME development, while balancing support for sectoral growth with the needs of a complex innovation system. To strengthen co-ordination between government institutions and support organisations, such as the planned Innovation Fund, Kosovo could draw on good practices from OECD Member countries. For example, Portugal has established multi-stakeholder consortia for green innovation under its “Mobilising Agendas”, which bring together industry and universities across 13 programmes focussed on greening (OECD, 2025[64]).
Conduct systematic evaluations and impact assessments of SME innovation support measures. The government should strengthen monitoring and evaluation mechanisms for innovation support schemes aimed at enhancing SME greening and resilience. In particular, the link between such measures and productivity gains should be analysed to inform evidence-based policymaking. This would help demonstrate the benefits for SMEs, for example, through the planned innovation support activities in green industrial parks, administered by KIESA.
Strengthen inter-ministerial co-ordination to scale green, collaborative research-business innovation. The Government of Kosovo should enhance co-ordination, particularly between MIET and the Ministry of Education, Science and Technology, to align and implement strategies that effectively link academia with SMEs. This includes considering the development of technology-extension services, green R&D voucher schemes, and co-operative grants that build knowledge networks and support green and resilient SME development. A key opportunity is to systematically mainstream sustainability criteria across R&D incentives, including future grant schemes that could be planned by the upcoming Innovation Fund and procurement of R&D to ensure public support accelerates sustainable, market-relevant innovations.
Networks play a major role in increasing resilience as a certain degree of redundancy and diversification across nodes helps to reduce interdependence, promote risk management culture, reduce the cost of shock mitigation and allow for easier recovery and adaptation (Brende and Sternfels, 2022[74]; OECD, 2004[75]; OECD, 2023[76]). SME networks can take different forms comprising various actors that exchange products, services, knowledge, and other resources. They can be divided into four main types, with the according typology illustrated in Figure 3.A.1 below.
Source: Based on OECD (2023[2]), drawing on EC/OECD (2023), Unleashing SME Potential to Scale Up, https://www.oecd.org/cfe/smes/sme-scale-up.html, Phase II on Network expansion; EC/OECD (2023), Fostering FDI-SME Ecosystems to Boost Productivity and Innovation, https://www.oecd.org/industry/smes/fdi sme.html, Phase II on FDI-SME linkages and ecosystems.
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← 1. In 2024, the Ministry of Environment, Spatial Planning and Infrastructure established the Green Task Force to enhance the enforcement of environmental legislation. The task force’s investigations led to over 200 court rulings against illegal construction, along with cease-and-desist orders, administrative fines and referrals to the Prosecutor’s Office for environmental violations. However, the task force’s mandate ended on 31 December 2024, leaving uncertainty over how environmental enforcement and liability will be sustained on a permanent basis (European Commission, 2025[13]).
← 2. Kosovo’s Circular Economy Roadmap includes plans to align with the European Union’s ESPR and highlights the importance of strengthening institutional knowledge to develop legislation in line with EU standards. The ESPR entered into force on 18 July 2024 and aims to improve the sustainability of products placed on the EU market by enhancing circularity, energy performance, recyclability and durability. Priority product groups targeted by upcoming ecodesign requirements include clothing and footwear, iron and steel, and chemicals, with the first implementing measures expected from 2026. Delegated and implementing acts on the destruction of unsold consumer goods were adopted in February 2026. The regulation applies to all products placed on the EU market, regardless of whether they are produced within or outside the European Union.
← 3. This includes the EBRD’s Sustainable Reboot SME Programme aiming to help Kosovo’s SMEs recover from recent macroeconomic challenges. In 2024, the EBRD extended a EUR 5 million loan to Raiffeisen Leasing Kosovo as well as EUR 8 million to ProCredit Bank Kosovo for on-lending to SMEs (EBRD, 2024[77]).
← 4. In October 2023, the CBK, the KBA and the SBFN, in collaboration with the IFC and the Swiss State Secretariat for Economic Affairs (SECO), co-hosted a Sustainable Finance Forum, promoting sustainable banking and ESG integration in Kosovo's financial sector. It provided a platform for stakeholders to discuss strategies and initiatives to advance sustainable finance practices (SBFN Update, 2023[78]). In 2024, the KBA collaborated with the IFC to host an Inter-Institutional Workshop on Exploring Opportunities for Adopting ESG Voluntary Guidelines in the Banking Sector (Kosovo Banking Association, 2024[79]).
← 5. A range of existing financing opportunities for SMEs as of February 2023 are identified in Kosovo’s Circular Economy Roadmap (Ministry of Environment, Spatial Planning and Infrastructure, 2023[80]).
← 6. At least one-third of supported investments are dedicated to more sustainable and climate-resilient agribusinesses, while at least one fourth are allocated towards women-led entities.
← 7. The EBRD financing packages have been extended to Raiffeisen Bank Kosovo, ProCredit Bank Kosovo, NLB Banka Prishtina, Kosovo’s Banka për Biznes, and Kreditimi Rural i Kosoves through the SME Go Green and Go Digital Programmes, the Green Economy Financing Facility, as well as a first risk-sharing product with Raiffeisen Bank for on-lending to sustainable practices in micro, small and medium-sized enterprises (EBRD, 2025[81]).
← 8. For more information, see https://universum-ks.org/en/kosban/.
← 9. Networks are systems of connected actors that enable the exchange of information, products, services, assets and/or resources. They may be supported by physical infrastructure, formal agreements, or remain informal relationships (OECD, 2023[2]).
← 10. As of March 2026, the Ministry of Industry, Entrepreneurship and Trade has been leading stakeholder consultations to advance the drafting of this strategy.
← 11. Since joining Horizon Europe in 2021, Kosovo has submitted 171 project applications, 15 of which were successful receiving EUR 1.59 million in funding, representing a success rate of 9.36% (European Commission, 2025[13]).
← 12. Formal legislation remains a critical bottleneck, as the Law on Innovation and Entrepreneurship has yet to be approved by the Assembly. According to the government, the operationalization of the Innovation Fund and launch of related support instruments are therefore likely to be delayed until late 2027 or 2028.