SMEs depend on a supportive business environment to start, operate and grow, making sound policies, fair competition, access to finance and effective support services essential to their development. This cluster examines whether the policy, regulatory and institutional environment enables SMEs to start, operate, grow and exit the market under clear, predictable and proportionate conditions. It assesses how effectively SME considerations are embedded in policy design, as well as whether SMEs operate on a level playing field, including efforts to reduce informality, protect competition, ensure fair access to public procurement, and provide timely access to justice.
SME Policy Index for Western Balkans and Türkiye 2026 – Economy Profile for Montenegro
Abstract
Small and medium-sized enterprises (SMEs) constitute the foundation of Montenegro’s economy, accounting for 99.9% of registered firms and generating 76% of total value added, both figures exceeding the EU average (MONSTAT, 2024[1]). This centrality implies that SME-specific considerations should be systematically embedded across all policy domains affecting private-sector development. Although SME value added has increased by 6% since 2021, this growth has been accompanied by a much stronger expansion in the number of active firms, which rose by 48% and was almost entirely concentrated among small enterprises. This imbalance points to a decline in average firm size and indicates that productivity gains over the period have remained limited, in part reflecting the weak operational viability of a significant share of newly established firms.1 This suggests that while entrepreneurial activity is expanding, the scale-up and competitiveness potential of SMEs could be further improved.
Creating conditions for SMEs to invest, innovate, and expand requires clear, predictable legislation, well-targeted support measures, and effective co-ordination across government institutions. In this context, this section assesses government initiatives to promote an enabling environment for SMEs, in line with OECD principles on regulatory quality, better regulation and SME policy (OECD, 2022[2]; 2025[3]). It examines measures to facilitate market entry and exit, ensure that legislative and policy frameworks are evidence-based, proportionate, and responsive to SME needs, and minimise administrative and compliance burdens. The section also considers the effectiveness of consultation mechanisms and the extent to which structured stakeholder engagement supports transparent, accountable and predictable policymaking.
2.1.1. Reinforcing regulatory, institutional and policy frameworks for SME lifecycle support
A sound regulatory and institutional framework is essential to provide effective support for SMEs across all stages of their development, from business creation to growth and, where relevant, market exit. International benchmark indicators place Montenegro among the region’s top performers, ranking third on measures of regulatory quality and first on government effectiveness related to private-sector development among Western Balkan and Türkiye (WBT) economies (World Bank, 2024[4]; WIPO, 2025[5]).
In recent years, Montenegro has made progress in reforming and modernising this framework, reflected in the adoption of new strategic documents and the revision of key legislative provisions. Developments clearly point to increased alignment with EU regulations and standards, leading to the provisional closure of the negotiation chapter on enterprise and industrial policy in December 2024 (European Commission, 2025[6]). However, further efforts are needed to equip institutions with the necessary capacities for effective implementation on the ground and to enhance the availability and analytical depth of official business statistics to enable systematic monitoring of policy outcomes and support evidence-based decision making (OECD, 2023[7]). As noted in the European Commission’s latest enlargement report, Montenegro has also shown slow progress in reducing regulatory barriers and addressing informality, pointing to more structural constraints that continue to limit productivity and competitiveness (European Commission, 2025[6]).
Montenegro defines its SME policy priorities within a dedicated strategic framework, currently guided by the Micro, Small and Medium-sized Enterprise (MSME) Development Strategy 2023-2026. The strategy builds on the structure, orientation and objectives of the previous framework, whose solid implementation performance and timely restructuring following a mid-term evaluation were noted in the 2022 SME Policy Index report. The strategy’s overarching goals are again structured around three main pillars, consistent with the recommendations of the 2020 monitoring report: an improved regulatory and business environment, more competitive and innovative MSMEs, and greater integration into value chains, business networks and new markets. Although the SME policy framework does not explicitly address the informal economy, Montenegro has introduced a dedicated programme for the period 2024-2026, whose effectiveness will largely depend on the government’s ability to ensure continuity beyond this timeframe (see Section 2.2).
The strategy was developed under the co-ordination of the Ministry of Economic Development through an ad hoc working group established within the Competitiveness Council, bringing together representatives from line ministries, public agencies, business organisations and civil society associations (Ministry of Economic Development, 2023[8]). However, experience suggests that such coordination arrangements have not been translated into sustained institutional mechanisms after the adoption of the strategy. Previous working groups established to support SME policy implementation and monitoring did not become fully operational and were eventually dissolved, largely due to frequent changes in ministerial mandates (OECD, 2022[9]). While the mandate of the newly established working group has reportedly been extended beyond the development phase to include implementation coordination and monitoring functions, evidence on its effective functioning and continuity remains limited.
Montenegro does not have a single dedicated national agency responsible for the delivery of SME support programmes, with the institutional framework remaining relatively fragmented between multiple institutions operating within their respective mandates. At present, responsibility for implementation of the SME policy strategy lies with the Directorate for Competitiveness Improvement within the Ministry of Economic Development, which plans and designs support measures and coordinates with other institutions involved in improving the business environment and supporting entrepreneurship. As of 2025, the Directorate continues to operate under administrative and financial capacity constraints, employing only nine staff members and operating with a budget of approximately EUR 3.8 million. These limitations are further compounded by its broad mandate, including oversight of other policy strategies, such as those for women’s entrepreneurship and lifelong learning.
At the same time, SME policy measures are carried out by a range of sectoral institutions. The Innovation Fund, fully operational since 2022, implements innovation measures and financial support to SMEs, while other bodies, including the Development Bank, the Employment Agency, and the Central Registry of Business Entities (CRPS), contribute to programme delivery within their respective mandate. At the local level, this ecosystem is complemented by technology parks, business centres, incubators, and other service providers for entrepreneurs and SMEs. In this regard, a key priority under the 2023-2026 strategic cycle is to move towards a more integrated network of institutions to ensure coherent organisation and delivery of SME programmes from the national to the local level.
Progress in improving the business environment has also involved modernising the legislative landscape, marked by the adoption of a new Company Law in 2025. The reform was designed to further harmonise national legislation with EU standards, especially with the 2022 Directive on improving gender balance among company boards, while also addressing conceptual inconsistencies and implementation challenges identified in the previous law (Official Journal of the European Union, 2022[10]). While commendable, this remains a targeted and isolated exercise. The absence of a systematic approach to reviewing and simplifying business-related legislation continues to constrain the coherence and predictability of the regulatory environment, with stronger implications for SMEs, which are more exposed to regulatory complexity and compliance costs.
Further efforts are showcased in a dedicated Action Plan adopted in 2024 by the Competitiveness Council Secretariat, which foresees the elimination of 11 key barriers to doing business by the end of 2026 (Government of Montenegro, 2024[11]). While individual cases of regulatory simplification exist, no state institution is clearly assigned the responsibility for steering it (OECD, 2025[12]). Preventing new burdens from arising is mainly achieved through regulatory impact assessment (RIA), which is well established and regularly applied to government draft laws. This helps promote SME-friendly policymaking by including business impact analysis specifically targeting SMEs, whose quality has improved over the years (see Dimension 3). However, integrating assessments early in policy development and ensuring easy access to relevant documentation remain persistent challenges, contributing to businesses' low perception of the clarity and predictability of the government’s policymaking (OECD, 2025[12]).
Complementing this, Montenegro has strengthened its approach to digital government through the Digital Transformation Strategy 2022-2026, which places the development of e-services and open data at the core of national digital reform. The establishment of a Coordination Body for Digital Transformation further supports a whole-of-government approach by bringing together public institutions, municipalities and the private sector. Simultaneously, a central business portal for SMEs (biznis.gov.me) and the eGovernment portal (eUprava) now provide companies with access to more than 330 online services in areas such as business registration, taxation and urban planning, improving transparency and administrative efficiency (Biznis.gov.me, 2025[13]; eUprava, 2025[14]). While the establishment of these platforms indicates strong progress in digitising administrative interactions, services remain largely generic rather than SME-specific, and the degree of end-to-end digitalisation varies across institutions. Moreover, there is limited evidence that services are structured around business life events or that they systematically reduce administrative burdens for SMEs. In this context, ongoing efforts led by the Ministry of Public Administration to ensure continuity in digital transformation reforms signal a shift towards a more sustained, long-term approach to digitalisation.
In Montenegro, business registration procedures have traditionally lagged behind regional standards in digitalisation, with reforms to introduce fully electronic company registration facing persistent delays and remaining in the planning stage for several years (OECD, 2022[9]). In 2025, a leap forward was made with the adoption of Montenegro’s first Law on the Registration of Business Organisations, establishing the legal foundation for fully digitalised company registration and aligning the national framework with EU standards (Government of Montenegro, 2025[15]). The government is currently amending related national legislation to operationalise the new system, with full functionality expected by the end of 2026 (Ministry of Economic Development, 2025[16]). As of early 2026, electronic registration is available through the eFirma portal, although in practice its use is most clearly supported for simpler cases, such as single-member limited liability companies, reflecting the current scope of guidance and implementation (see Dimension 4). In parallel, the Integrated Information System (IRMS), launched in January 2026, represents a further step towards full digitalisation, although some technical issues persist and full functionality is expected to be achieved gradually. Despite reform commitments, there has been limited progress in simplifying business start-up procedures since 2020, while gaps in monitoring and data collection continue to constrain the assessment of efficiency and reform impact (see Dimension 4).
Beyond company registration, the process of regulatory reform in Montenegro also includes efforts to introduce a simplified and transparent business licensing system, representing an important step towards improving the overall business environment, especially given that enterprises in Montenegro are the most likely in the region to perceive licensing and permit procedures as a major obstacle to business growth (RCC, 2024[17]). The current system remains fragmented, with licences and permits issued independently by line ministries under different regulations and fees. In addition to higher compliance barriers, this lack of co-ordination undermines the effective implementation of the once-only principle, as firms are required to resubmit information already held by public authorities, such as proof of land ownership, when applying for construction permits. To reduce compliance burdens, the Ministry of Public Administration (MPA), in co‑operation with the Ministry of Finance, has introduced an informational one-stop-shop for licences and permits through eUprava. While the portal formally groups licences by sector, it is not yet operational in practice, as categories currently return no results. Beyond informational purposes, the one-stop-shop concept has the potential to also pave the way for a future centralised application system and for monitoring regulatory performance. However, at this stage, no monitoring and evaluation mechanisms have yet been established or planned.
In addition to administrative reforms, over this assessment cycle, Montenegro has made progress in advancing reforms to improve tax compliance and alleviate the fiscal burden on SMEs (see Dimension 4, Sub-dimension 4.4). The reform effort, undertaken in co-operation with the International Monetary Fund and informed by a 2024 analysis of the tax system, represents a key advancement in this assessment, although broader progress in this area has been constrained by the absence of a legal framework ensuring procedural justice in tax compliance rulings. In practice, while the labour tax wedge remains comparatively high and continues to pose a structural challenge, measures introduced under the 2024 Fiscal Strategy have lowered social security contributions and introduced more progressive personal and corporate income taxation. The threshold for lump-sum taxation of self-employment income was also increased in 2025, offering some relief to small entrepreneurs, although it remains below regional levels. The rollout of the fully digitalised fiscalisation system, operational since 2022, has further supported compliance by reducing value-added tax (VAT)-related administrative costs and improving reporting accuracy. However, the lack of systematic monitoring and evaluation limits a comprehensive understanding of the overall tax burden on SMEs and the actual impact of reforms on promoting firm growth and formalisation.
With respect to the framework governing insolvency procedures, amendments to the Bankruptcy Law and the Law on Preventing Illegal Business have enhanced transparency and accountability in insolvency processes, introduced restrictions on owners of insolvent firms, and strengthened enforcement measures, particularly in relation to tax debt. The framework also foresees stronger competencies and oversight of bankruptcy administrators, supported by mandatory training and performance evaluations managed by the Commercial Court (see Cluster 2). However, SMEs still do not have access to simplified or fully out-of-court restructuring options, and insolvency proceedings can be lengthy, as there is no maximum discharge period and judicial efficiency varies. Monitoring and evaluation remain underdeveloped, with available data not broken down by firm size or procedure type. Digitalisation has also progressed slowly: most processes remain paper-based, and a comprehensive e-auction system for selling assets has yet to be introduced, limiting efficiency and transparency in liquidation cases.
2.1.2. Securing systematic, comprehensive and transparent dialogue between policymakers and SMEs
Engaging the private sector meaningfully in policymaking is crucial for ensuring that new regulations are well-designed and reflect the realities faced by SMEs. When tools like consultations and RIAs are used consistently, they help policymakers understand potential effects early on and base decisions on stronger evidence. This, in turn, improves the clarity and predictability of the regulatory environment and supports a more transparent and SME-friendly policy framework. In this regard, Montenegro has a well-established framework for conducting public consultations, with a set of requirements that is widely harmonised with EU standards. In this assessment, as in previous OECD studies, however, Montenegro’s overall performance in using public dialogue and consultation in policy design continues to fall below the regional average, primarily due to inconsistent implementation and lack of adequate oversight (see Sub-dimension 3.3) (OECD, 2025[18]).
The legal architecture for consulting external stakeholders and the general public is set out in the Law on Public Administration, which, under Article 52, mandates public consultations for all draft laws and strategies. However, public discussion becomes optional when draft acts concern defence, security or budgetary matters, in situations deemed “extraordinary, urgent or unpredictable”, or in cases involving minor amendments that do not substantially alter the substance of existing legislation. Despite the obligation to provide the government with justification when consultations are not conducted, the exemption criteria remain vague and open to interpretation, leading to their frequent use in practice. In addition, there is no legal requirement to conduct public consultations for draft acts proposed by individual members of parliament (MPs) or for any type of secondary legislation. In 2023, across all exemptions, around 90% of adopted laws subject to the obligation to undergo public scrutiny were published for consultation, in contrast to the negative trend observed in 2020, 2021 and 2022 (Ministry of Public Administration, 2024[19]). However, the clarity and comprehensiveness of the annual report have partly deteriorated, with no indication of the number of legislative measures adopted that were exempted from consultation in line with the legal criteria.
Where consultations take place, ministries generally adhere to the procedural requirements defined in the Decree on Conducting Public Consultations, and the regular integration of RIAs into the process points to a relatively solid foundation for evidence-based policymaking. Although still applied to a minority of drafts, the use of early-stage consultations has improved, which is a positive development from a better regulation perspective, as it creates opportunities to shape policy design before drafting is finalised (Ministry of Public Administration, 2024[19]). Nonetheless, the lack of a formal obligation to include RIAs at preliminary stages, as the assessment is typically not yet completed at that point, constrains the potential for analytical evidence to guide early policy choices (Ministry of Public Administration, 2018[20]). Furthermore, the Government’s Rules of Procedure do not require consultation reports to be submitted as part of the documentation accompanying a draft law sent to parliament for approval, thereby limiting transparency and hindering full insight into the policymaking process (Parliament of Montenegro, 2024[21]).
The diversification of consultation methods is also considerable, with public meetings held regularly: in 2023, public round tables were held for 30 of the 45 draft acts consulted. The eUprava website includes an e-Participation portal where all consultations are obligatorily published and their outcomes reported (Ministry of Public Administration, 2018[20]). While the platform functions effectively as a central registry for consultations, its potential as an accessible channel for submitting comments or contributing to draft acts remains underutilised. In 2023, only one-third of consultations used the portal as a channel for engagement. Where used, citizen and stakeholder interactions remain limited, despite the availability of MPA-issued guidelines for both civil servants and the public (Ministry of Public Administration, 2021[22]). For nearly all consultations, comments can be submitted via e-mail as an alternative to traditional mail.
Despite punctual and consistent reporting on the individual hearings, Montenegro still lacks a systematic mechanism to assess and report on the quality of consultations or verify compliance with requirements. Lead ministries prepare reports on their consultation activities and outcomes and publish them on both their own websites and the eGovernment portal. The MPA, responsible for overseeing the process, compiles comprehensive annual reports that aggregate information provided by individual ministries but does not review or issue opinions on compliance with consultation standards, nor does it intend to introduce such a practice (OECD, 2025[18]). The annual reports track laws initiated within the calendar year rather than those adopted, which can create confusion, as some initiatives remain at an early stage of preparation by the end of the reporting period.
The way forward
Strengthen the integration of the institutional network that implements the Micro, Small and Medium-sized Enterprise (MSME) Policy. The existing MSME support infrastructure remains uneven across Montenegro and does not ensure equal access to services for entrepreneurs economy-wide. The government is encouraged to consolidate and network business support providers within a coherent national framework, building on the priority identified in the 2023-2026 strategy to ensure an integrated system of institutions for policy delivery. This would require strengthening and formalising the co-ordinating role of the Directorate for Competitiveness Improvement, or another clearly designated body, to oversee the design and implementation of MSME support programmes and guide the harmonisation of regional and local support structures.
Streamline company registration through digitalisation and data-driven oversight. The government could sustain the transition to a fully electronic registration system and ensure the timely completion of the testing phase by 2026. To improve efficiency and reduce administrative burden and costs, a robust monitoring and evaluation mechanism could be established to track the performance of the registration process, identify bottlenecks and measure compliance with legally defined timelines. This mechanism could include regular reporting by the Council for Electronic Government (or another clearly designated body) on the duration, cost and user experience of company registration. Over the medium term, strengthening the institutional backbone of the registration system through more centralised and interoperable registry functions with automated data exchange across relevant public databases could further enable effective data-driven oversight, enhance transparency and facilitate alignment with EU and regional practices.
Establish a clear institutional framework for the co-ordination and oversight of the licensing system. Montenegro may consider addressing persistent fragmentation in the licensing system by establishing a formal governance arrangement to assign responsibility for co-ordinating, monitoring and improving licensing practices across institutions. Building on existing structures, the Secretariat of the Competitiveness Council could be entrusted with this responsibility, leveraging its established role in business environment reforms and its links with key public and private stakeholders. In co-operation with the Council for Electronic Government and relevant line ministries, the secretariat could oversee a structured monitoring and reporting framework, thereby supporting more coherent governance, facilitating digitalisation and promoting greater transparency in the licensing process.
Improve the quality of public consultation practices. The legal framework could redefine narrower circumstances in which consultations may be omitted, complemented by centre-of-government oversight to ensure that such exceptions are applied consistently and appropriately across institutions. Systematic monitoring and evaluation of the overall consultation process could be introduced, with aggregate reporting across ministries – as for RIA reporting – to assess the quality of practices, track stakeholder engagement, and identify areas for improvement. Parliamentary scrutiny could be reinforced by amending the Rules of Procedure to require that a consultation report accompany any draft law subject to consultation.
For the business environment to effectively foster SME development and growth, it is essential to uphold a level playing field where the same rules and conditions apply to all market participants. When exceptions and irregular practices become widespread and gradually normalised, market competitiveness is eroded. In such circumstances, the business environment becomes unfavourable to SME growth, and compliance itself becomes a competitive disadvantage.
Montenegro’s SME business environment continues to face structural barriers that undermine a level playing field. In 2025, the European Commission again identified the informal economy as a major distorting factor, citing undeclared work and limited implementation of compliance measures as key constraints to SME growth (European Commission, 2025[6]). In parallel, implementation challenges persist in the enforcement of competition rules, despite gradual steps to strengthen competition regulation and improve state-owned enterprise (SOE) governance. Lastly, SMEs continue to face obstacles in accessing timely judicial remedies to protect themselves against anti-competitive or non-compliant practices, with a high case backlog in the commercial court and underused out-of-court mechanisms limiting the effectiveness of the existing alternative dispute resolution (ADR) framework. The following section assesses Montenegro’s efforts to increase transparency and efficiency in the business environment for SMEs by examining measures to reduce informality, promote fair competition, improve access to public procurement, and facilitate SME access to justice.
2.2.1. Reducing informal competition for SMEs
Informality, defined as economic activity performed outside of legal and formal arrangements, represents a major obstacle for SMEs in Montenegro. In 2024, the informal economy was estimated to range from 20% to 30% of GDP, equivalent to approximately EUR 1.8 billion (US Department of State, 2025[23]) (MOF, 2024[26]). This value has remained broadly unchanged since the previous assessment, with 2022 estimates placing the size of the informal economy between 26% and 31% of GDP (OECD, 2024[24]). The largest share of economic informality comes from informal activity within registered companies and entrepreneurs, such as under-reporting profits, undeclared transactions, and informal remuneration of employees, accounting for an estimated 20.6% of GDP (Ministry of Finance, 2024[25]). This high level of informality affects SMEs in particular, which may face incentives to adopt informal practices in order to remain competitive, especially in markets where informality is prevalent. In 2023, enterprise surveys showed that 44.3% of firms competed with informal operators, while 65% identified informality as an obstacle to business (World Bank, 2023[26]; RCC, 2024[17]).
Informal employment also remains substantial in Montenegro, accounting for approximately 14.6% of total employment in 20232, below the regional average of 19.2% and down from 22.3% in 2016 2023 (OECD, 2025[27]). This comparatively lower rate reflects Montenegro’s labour structure, with a high share of employees (around 82%) and a relatively low proportion of self-employed (15-17%), a category generally more prone to informality (MONSTAT, 2025[28]).Trade, tourism, and construction are the sectors most affected by informality, accounting for an estimated 35% to 40% of total informal employment (MONSTAT, 2025[29]). These sectors are largely SME‑driven, and this reflects a broader structural pattern across the service economy in Montenegro, where small enterprises generate 42.6% of turnover in trade and 67.1% in services overall, far surpassing medium and large firms (MONSTAT, 2025[29]) (MONSTAT, 2025[30]). Such sectors share features that increase vulnerability to informal employment, including seasonality and cash-based remuneration, which incentivise undeclared work among SMEs. Other SME-intensive sectors, notably agriculture and forestry, also display high levels of labour informality, although their overall contribution remains smaller, reflecting Montenegro’s predominantly service-oriented economy. The concentration of informal employment in SME-dominated service sectors indicates that formalisation efforts must be tailored to sector-specific labour dynamics rather than relying solely on broad enforcement measures.
To address the challenge of the informal economy, Montenegro adopted in 2024 the Programme for the Suppression of the Informal Economy 2024-2026, with the overarching goal of reducing with the objective of reducing the share of the informal economy in GDP, with target values set at around 15–17% by 2026 (Ministry of Finance, 2024[25]). This is the first programme to focus specifically on the informal economy, and includes measures to reduce administrative costs for small enterprises through subsidies, tax breaks and incentives for business and labour registration, particularly addressing informality linked to seasonal employment (Ministry of Finance, 2024[25]). Furthermore, several measures target sectors with high informality risk and strong SME presence, notably tourism and trade, through the establishment of a central tourist register, strengthened detection of fictitious VAT invoices, and intensified oversight over retail activity (Ministry of Finance, 2024[25]). If effectively implemented, the programme could lower the cost of formalisation for small enterprises while improving competitive neutrality in SME-dominated sectors, strengthening incentives for compliant firms to remain within the formal economy. While initial evidence points to progress in implementation, reflected in part in increased revenues from VAT (increase by 14.8% since 2024) and greater formalisation in the tourist sector following the creation of the central register, implementation remains uneven (Montenegro Business, 2025[31]; Government of Montenegro, 2026[32]). Several measures continue to rely on donor funding, and the absence of annual reporting limits effective evaluation (European Commission, 2025[6]). Beyond funding constraints, uneven implementation also reflects capacity and coordination challenges within enforcement bodies, suggesting that more systematic risk-based oversight and strengthened digital monitoring may be required to ensure sustained impact.
To further support formalisation among smaller firms, Montenegro applies a progressive corporate income tax (CIT) system, as sharp increases in marginal rates across revenue thresholds can otherwise create incentives for under‑reporting. The economy sets a 9% CIT for companies with revenues below EUR 100 000, a 12% rate on earnings between EUR 100 000 and EUR 1.5 million, and a 15% rate on revenues above EUR 1.5 million (OECD, 2024[24]).This represents a relatively favourable context for SMEs, as most businesses in Montenegro fall within the first two taxation brackets, which feature comparatively low rates and no abrupt tax increases. Additionally, personal income tax (PIT) and social security contributions (SSCs) play a central role in SME formalisation, as they directly influence the cost of formal labour, particularly for self-employed individuals and micro-enterprises. The current taxation regime is comparably light in this regard, with a progressive system of 0% for monthly income up to EUR 700, 9% between EUR 701 and EUR 1 000, and 15% above EUR 1 000, alongside reduced social security contributions (PwC, 2025[33]) (European Commission, 2023[34]). Under these conditions, SMEs face relatively low taxation related to formal employment, creating more favourable incentives to formally register workers. However, Montenegro has not introduced a simplified tax regime specifically designed for small businesses, compelling micro and small enterprises to operate under the same tax framework as larger firms and possibly placing them at a competitive disadvantage (OECD, 2024[24]).
To further promote formality through its tax system, Montenegro adopted the Europe Now reform in 2021, a package of fiscal amendments which entered into force in 2022, overhauling the economy’s taxation system by abolishing the 9% flat rate and introducing the three bracket progressive system (OECD, 2024[24]). This was followed in 2024 by the adoption of Europe Now 2, an economic programme aiming to reduce the tax burden on labour, potentially strengthening incentives for SMEs to formally register their workers. To do so, it lowers employees’ contributions from 15% to 10% and eliminates employers’ contributions, which previously amounted to 5.5%, while also increasing the minimum wage (Government of Montenegro, 2025[35]). By lowering labour-related costs and increasing wages in parallel, labour becomes less costly for employers while simultaneously increasing employees’ net income, reducing the overall labour tax burden and supporting formal hiring and employment. Despite the programme containing measures that may be beneficial for SMEs, the rise in minimum wages could offset some of these gains, particularly those operating with low margins or strong seasonality, limiting their capacity to expand employment or remain competitive.
Lastly, business registration remains a critical step toward formality for SMEs, as it plays a key role as the main entrance into the formal economy. In 2024, 13.5% of SMEs in Montenegro reported starting business operations without formal registration (World Bank, 2023[26]). The registration process is managed by the CRPS through the eFirma portal, with relatively low direct costs ranging from approximately EUR 20 to EUR 60, although additional administrative expenses such as notarial services may increase initial barriers for SMEs (OECD, 2024[24]; Ministry of Economic Development, 2025[36]). Albeit a significant part of registration continues to take place through in-person or paper-based procedures, the recent adoption of the Law on Registration of Business and Other Entities in 2025 aims to make digital registration mandatory in 2026, addressing the platform’s previous underuse and reduce reliance on informal or off‑system registrations (OECD, 2024[24]; Parliament of Montenegro, 2025[37]).
2.2.2. Protecting and monitoring fair market competition
To maintain the level playing field, governments need to ensure competitive neutrality through appropriate institutional settings and oversight mechanisms. This is particularly relevant in the context of public procurement and the management of SOEs, where the inefficient allocation or oversight of public funding may in turn deter private investment and distort the business environment. SMEs are particularly vulnerable to such distortions, as their smaller size and limited capital do not allow them to absorb prolonged losses or quickly adapt to unfair competition.
In Montenegro, competition protection is governed under the 2013 Law on Protection of Competition, which provides the general legal framework and establishes the Agency for Protection of Competition (AZK) for its implementation. Despite the institution having no targeted measure on SMEs, its oversight over state aid can be particularly relevant for SMEs, as transparent public support schemes help prevent disproportionate advantages for larger firms. Additionally, the AZK allows firms to report suspected breaches of competition law, enabling SMEs to report them without the financial and administrative burden of pursuing their own legal action (AZK, 2025[38]). The agency also conducts awareness raising activities on competition regulations, highly beneficial activities for SMEs, which often lack institutional expertise to stay informed on both existing and newly introduced standards.
Since 2022, the AZK has seen an increase in both budget and resources, improved digitalisation through the creation of a dedicated IT unit, and a rise in the number of binding decisions in the field of state aid control (AZK, 2025[39]; 2025[40]). However, this has not translated into the establishment of SME-specific measures, with no documented outreach, training, or guidance introduced for small and medium firms. In addition, 2024 data shows that the steady growth of the AZK’s workload has contributed to procedural delays, with several cases initiated in 2022 still pending in 2024, significantly slowing down enforcement (AZK, 2025[39]). For SMEs filing complaints, these delays can prolong exposure to unfair market conditions, limiting their capacity to respond or recover. Moreover, the absence of aggregated data on cases initiated by SMEs complicates any assessment on this mechanism’s uptake by smaller firms. Furthermore, monitoring by the AZK largely targets sectors with limited SME presence, including energy production and maritime transport, though 2023 saw a rise in decisions in tourism, a sector where SMEs are the main economic actors (AZK, 2023[41]; 2024[42]). Lastly, awareness-raising activities held by the AZK were mostly directed towards public officials, with little to no activity directed towards private actors or SMEs (AZK, 2024[42]).
Another essential factor for fair competition is public procurement, a sector accounting for 11.4% of GDP in Montenegro and representing a key business opportunity for SMEs. Since 2022, the size of public procurement in the economy has increased by 2.64 percentage points as share of GDP, representing approximately EUR 872 million in 2024, placing Montenegro slightly above the WBT average of 10% of GDP (Public Procurement Directorate 2024, 2025[43]). However, competitive dynamics for SMEs have not improved, and no aggregated data on SME participation in public tenders nor on their total share of the overall public procurement market is currently collected. Data from businesses outlines a similar picture, showing that in 2024 a majority of economic operators refrained from participating due to perceptions that procedures were tailor-made for specific bidders, highlighting a lack of competition (OECD, 2025[12]).
The Public Procurement Strategy 2021–2025 identifies SMEs as a key target group and aims to increase their participation by expanding low-value procedures through CEJN - the economy’s online procurement platform - and the use of framework agreements3 (Ministry of Finance, 2021[44]). Implementation remains ongoing, with reports indicating partial progress and approximately two thirds of activities completed (Ministry of Finance, 2023[45]). CEJN has been fully operationalised as the central e-procurement platform, publishing over 20 767 procedures between 2021 and 2023 ( (Ministry of Finance, 2023[45])]). Transparency has also improved, as reflected in the decline in negotiated procedures without prior publication from 11.1% in 2022 to 8.3% in 2024, indicating greater reliance on competitive tendering and improved access to procurement opportunities for SMEs. In parallel, the average duration of decisions by the Commission for the Protection of Rights in Public Procurement Procedures (RPRPPP) decreased from 28 days in 2022 to 24 days in 2024, providing SMEs with faster resolution of complaints, given their particular vulnerability to prolonged legal proceedings (RPRPPP, 2024[46]) Despite these improvements, the strategy shows limited effectiveness in delivering targeted support for SMEs. Measures directly targeting SMEs, such as training programmes and framework agreements, have either been postponed or partially implemented, with no systematic data collected on SME participation. Additionally, the strategy continues to rely mainly on measures such as training and guidance, but lacks SME‑specific targets or outcome indicators, leaving limited evidence that the framework has translated into tangible benefits for SMEs so far.
More fundamentally, structural barriers to SME participation persist, suggesting that recent improvements have not yet translated into stronger competitive conditions. Increased reliance on direct procurements below EUR 8 000 conducted outside CEJN – which now exceed the value of comparable low‑value procedures run through the platform – risks weakening transparency and competitive dynamics (World Bank, 2024[47]). Similarly, the substantial rise in single bid procedures since 2022 suggests weakening competitive pressure and reduced choice for contracting authorities (see Dimension 5b) (Public Procurement Directorate 2024, 2025[43]). The continued dominance of the lowest-price award criterion, combined with the lack of systematic data on the use of quality or innovation-based criteria, further limits opportunities for SMEs, which are more likely to compete on value-added rather than scale (OECD, 2025[12]).
Lastly, a solid institutional framework for fair competition requires balanced public support, avoiding undue advantages for any single entity – in particular SOEs – at the expense of private firms. In Montenegro, SMEs face difficulties in markets where SOEs benefit from extensive state subsidies and guarantees. Montenegro retained in 2024 a strategically important portfolio of 226 majority state owned firms, covering sectors such as energy, transport, tourism and agriculture (Institut Alternativa, 2021[48]). These enterprises employ over 12 000 people and operate with more than EUR 0.5 billion of state-guaranteed debt, with several SOEs featuring among the country’s largest tax debtors (Institut Alternativa, 2021[48]). Notably, despite the vast majority of SOEs being incorporated as joint-stock or limited liability companies, and thus formally subject to the same legal obligations as private firms, competitive distortions persist through informal and discretionary state support rather than explicit legal privilege. Evidence from recent assessments indicates that direct budget support to SOEs and municipally owned enterprises remains present, averaging around 1% of GDP in recent years and, while often linked to public service obligations, support in the form of tax arrears and contingent liabilities may still affect competitive neutrality (World Bank, 2025[49]). Despite ongoing efforts to strengthen governance through a central SOE register and new ownership policies, reforms have progressed slowly, and many enterprises continue to operate at a loss (OECD, 2024[24]). This weak performance risks limiting market entry and competition, as SMEs find it difficult to compete with state-backed firms whose operations are sustained through public transfers rather than market competitiveness.
2.2.3. Providing efficient judicial and out-of-court dispute resolution mechanisms
To ensure a fair business environment for SMEs, the judicial system needs to provide timely and efficient access to justice. SMEs face particular challenges when confronted with slow legal proceedings, as their limited size and capital do not allow them to absorb long resolution times and temporary financial losses. Legal disputes are often cited as a source of financial loss for SMEs and, in some cases, can even lead to business closure (OECD, 2025[50]). It is thus essential for legal systems to provide efficient out-of-court solutions, particularly through ADR mechanisms, and to design legal frameworks that take into account the specific realities and constraints faced by SMEs (OECD, 2025[50]).
In Montenegro, disputes between business entities, bankruptcy and liquidation procedures, and certain intellectual property rights (IPR) are handled by a single specialised institution, the Commercial Court of Montenegro (COE, 2015[51]). The presence of a specialised institution represents a positive development for SMEs, as they are generally more effective in addressing business-specific needs (OECD, 2025[50]). Montenegro is the only economy in the WBT region to have one singular commercial court in its entire territory. While maintaining a centralised commercial court may be cost‑efficient given Montenegro’s size, the absence of regional courts can create access constraints for SMEs outside the capital, as travel requirements and related costs may discourage smaller firms. Furthermore, concentrating all commercial cases within a single institution may increase the risk of case backlog and bottlenecks, which remain a major issue in Montenegro, especially in civil, commercial and administrative cases (CEPEJ, 2024[52]). Since 2022, Montenegro has faced an increasingly high commercial backlog, with disposition time for litigious business cases reaching 503 days in 2023, significantly higher than the regional average of 423 days (CEPEJ, 2024[52]). Judicial backlog poses a major challenge for SMEs, as unresolved disputes can stall investment, disrupt cash flow, and in extreme cases push firms into bankruptcy before their cases are resolved (OECD, 2025[50]).
Against this backdrop, developing accessible ADR options becomes essential for SMEs, both to ease the burden on commercial courts and increase the number of cases resolved. In Montenegro, ADR has been increasingly used thanks to the adoption of the Law on Alternative Dispute Resolution in 2020 and amended in 2025. The law automatically prescribes mediation for disputes below EUR 500, and requires disputing parties filing commercial lawsuits to notify the opposing party beforehand, potentially encouraging early settlement and improving access for SMEs. However, the framework does not cover arbitration - which is handled through a different law - and contains no SME-specific provisions (Parliament of Montenegro, 2020[53]).
To further strengthen its ADR framework, Montenegro adopted in 2023 the Alternative Dispute Resolution Development Programme 2023–2025, a strategy aiming at improving institutional capacities and increasing awareness on ADR. Nevertheless, the Programme places little emphasis on ADR as a means of resolving commercial disputes or supporting SMEs, prioritising instead the development of mediation in administrative and civil areas (Ministry of Justice, 2025[54]).
Mandatory mediation for claims under EUR 500 remains a positive measure to improve SMEs’ access to affordable and timely dispute resolution, particularly in cases where litigation costs would outweigh the value of the claim. In 2023, Montenegro had 1 certified mediator per 2 600 inhabitants (see Figure 2.1), significantly above the regional average of 1 mediator per 7 100 inhabitants (CEPEJ, 2024[52]). This comparatively high mediator density indicates strong institutional capacity, albeit its effectiveness for business disputes ultimately depends on uptake by firms. Furthermore, the number of cases successfully settled through mediation has climbed rapidly since the previous assessment, with 2 671 civil and commercial mediation procedures resulting in settlement agreements - 30% more than in 2022 - and the highest number in the region (CEPEJ, 2024[52]). However, there is still a lack of disaggregated data on mediation use in commercial disputes, and no available evidence on the extent to which SMEs make use of this mechanism, making it difficult to assess its practical relevance for the business sector.
Sources: CEPEJ (2023[55]); Ministry of Justice (2025[56]).
Arbitration represents another flexible option to court litigation for SMEs, particularly in the context of cross border disputes. In Montenegro, both domestic and international arbitration are administered through a specialised court attached to the Chamber of Commerce of Montenegro, namely the Arbitration Court of Montenegro. The legal framework is established by the Law on Arbitration of 2015, which includes several measures that may enhance the attractiveness of arbitration to SMEs, most notably the availability of interim measures and the limits on courts intervention during the process (Parliament of Montenegro, 2015[57]). The presence of interim measures can help protect SMEs’ cash flow and prevent financial losses during ongoing disputes, while the limit on court intervention can shorten proceedings and delays that would otherwise overburden smaller firms. However, despite a functioning legal framework, the use of arbitration remains minimal, and little to no data is collected by the Chamber of Commerce of Montenegro on the number of cases. Efforts in 2024 were made to raise awareness on arbitration, most notably through the organisation of the Second Montenegrin Arbitration Day and the Court’s participation in International Chamber of Commerce (ICC) meetings (Chamber of Commerce of Montenegro, 2025[58]). However, the impact on SMEs remains limited, and no monitoring and evaluation tools have been introduced to assess the effectiveness of its awareness-raising activities.
When it comes to legal disputes, SMEs are often involved in cases concerning the infringement of intellectual property rights (IPR), which are key assets for their competitiveness making access to affordable and efficient dispute-resolution mechanisms essential. In Montenegro, IPR-related cases were handled until 2023 exclusively by the Commercial Court of Montenegro, an institution subject to high backlog and limited specialisation in IPR disputes. In this regard, Montenegro has progressed in improving the conditions under which businesses can seek legal resolution, most notably through the amendment of the Law on Trademarks and the Law on Patents in 2023 and 2025 (WIPO, 2023[59]) (Government of Montenegro, 2025[60]). These reforms reduce legal costs and accelerate dispute resolution times, most notably by transferring certain IPR proceedings, such as cancellation4 and invalidation5, from the Commercial Court of Montenegro to the Directorate for Intellectual Property under the Ministry of Economic Development (WIPO, 2023[59]). As a result, these disputes are now handled through administrative proceedings before a specialised authority, rather than through court litigation, removing the need for mandatory legal representation and reducing procedural burdens for SMEs. Furthermore, the 2023 law shortens key procedural deadlines, including reducing the objection period from 60 to 30 days, contributing to faster case resolution, resulting in most IPR disputes being resolved within a few months and rarely extending beyond one year, an important benefit for SMEs, given their limited capacity to absorb lengthy and costly proceedings (WIPO, 2023[59]) (Government of Montenegro, 2023[61]). Despite these advancements, the amended framework does not provide SME-specific procedures or targeted support, leaving smaller firms to navigate IPR proceedings on the same terms as larger companies (Government of Montenegro, 2023[61]).
The way forward
Further enhance implementation of the Programme for the Suppression of the Informal Economy 2024–2026 through stronger enforcement capacity, digital monitoring, and simplified formalisation. Conducting a functional and capacity assessment of inspection services to identify gaps in staffing, workflows, sectoral coverage, and risk segmentation by sector, followed by a multi-year plan to operationalise a fully risk-based oversight model. The authorities could also enhance the enforcement toolbox by introducing digital reporting and evidence management systems for informality, including e-services that enable anonymous reporting. To address informality linked to seasonal activities, formalisation efforts should be complemented by simple end-to-end online procedures for business registration, tax or fee payment, and guidance, alongside clearer restrictions on advertising unregistered activities. Box 2.1 provides an example of how Estonia has strengthened the detection and monitoring of informality using digital tools.
Establish SME-specific mechanisms within the AZK to improve access to competition enforcement. The AZK has little to no SME-specific support tools at its disposal, making it difficult for SMEs to access competition enforcement, file complaints, and remain informed about standards. Further efforts should be made in creating SME-dedicated mechanisms, such as dedicated SME outreach sessions and systematic collection of data on SMEs-initiated cases.
Strengthen SME-specific data collection in public procurement. At present, Montenegro does not collect disaggregated data on SME participation to public procurement, limiting its ability to assess how procurement policies affect small firms. Introducing systematic data collection on SME participation, win rates and contract value would provide an evidence base to design future procurement measures that address more effectively SME needs.
Improve monitoring and evaluation of ADR mechanisms through systematic data collection. Montenegro has a relatively advanced ADR framework, particularly in the area of mediation, yet it remains affected by a lack of data on business-related cases and on the extent to which SMEs make use of these mechanisms. Conducting systematic data collection on business use of ADR is essential to enable evidence-based improvements to policy and ensure that out of court solutions effectively support the needs of smaller firms.
In Estonia, a universal digital identity ecosystem, centered on the national eID and complemented by solutions such as Mobile-ID and Smart-ID, enables secure authentication for firms and individuals across public services. This is supported by X-Road, a distributed data exchange layer that allows interoperable and secure connections between public registries and authorised private providers.
The integration of digital identity with interoperable registries supports data sharing across tax, labour, justice and business registries, facilitating cross-checks and anomaly detection. By ensuring that key compliance steps are captured electronically, the system enables risk-based monitoring of firm behaviour, strengthening evidence management for inspections. These features illustrate how digital reporting and interoperable databases can expand the enforcement toolkit without relying solely on additional inspections.
For Montenegro, Estonia’s experience highlights practical design choices to strengthen detection and monitoring of informality in SME-dominated sectors. Key elements include broad uptake of strong digital identity for entrepreneurs, interoperable registries linking tax and inspection authorities, pre-filled reporting based on shared data, and secure digital channels to facilitate whistleblowing. Implemented incrementally, such tools make inspections more targeted and coordinated, while lowering compliance costs for formal SMEs by reducing administrative burdens such as duplicate reporting, repeated document requests, and in-person procedures.
Sources: Estonian Business and Innovation Agency (2026[62]); Republic of Estonia (2026[63]).
Access to finance is a critical enabler of SME establishment, growth and resilience, allowing firms to invest, expand operations, and manage cash flow, while limited access can disproportionately constrain smaller businesses compared with larger firms. Overall, following recent policy rate cuts, SME borrowing costs have eased in most OECD Member countries, but they remain above pre-COVID levels: reflecting still-tight financing conditions, 25 of 39 countries recorded a lower share of outstanding SME loan stocks in 2024 than in 2023 (OECD, 2026[64]). Montenegro mirrors this pattern: the share of firms reporting that they are fully credit-constrained rose sharply to 14.4% in 2023-24, up from 3.8% in 2019 (World Bank, 2025[65]), signalling a marked deterioration in SMEs’ access to finance conditions.
Public authorities could help alleviate these constraints by improving SME access to debt finance, for example, through public credit guarantees and dedicated credit lines, while also broadening the range of non-bank and market-based instruments to diversify funding sources. This includes strengthening equity finance (e.g. venture capital [VC] and private equity [PE] and developing alternative debt and asset-based finance channels, notably corporate bonds, factoring and leasing. Complementary grant schemes in innovation, greening and digital transformation can strengthen SME capacity to invest and grow despite existing financial constraints.
In this context, this section assesses the success of policies in enabling SME access to bank finance and alternative financing avenues, as well as the direct financial support implemented to encourage SME establishment, operations and growth.
2.3.1. Facilitating bank lending to SMEs
For Montenegrin SMEs, access to bank finance remains crucial for sustaining business activity and growth. The banking sector largely dominates the financial system, accounting for 93.2% of total assets in 2023, followed by the insurance sector (4.2%) and microfinance institutions (1.2%) (Central Bank of Montenegro, 2025[66]). The Montenegrin banking sector is generally well-capitalised, therefore resilient to economic shocks: in June 2025, the core capital adequacy ratio6 was 18.8% (Central Bank of Montenegro, 2025[67]), surpassing the euro area (16.1%) (European Central Bank, 2025[68]). The banking sector is also broadly liquid and profitable, with high liquidity assets, and non-performing loans falling to 3.4% of total gross loans in 2025, the lowest level since 2008 (Central Bank of Montenegro, 2025[67]).
Despite a well-developed banking system, access to bank finance in Montenegro remains constrained. Outstanding loans represented 46.4% of GDP in 2024, below their 2019 level (49.0%) and significantly below the EU average of 74.6% (Figure 2.2) (World Bank, 2025[69]). Within the corporate loan portfolio, SMEs represented 73% of total corporate lending, a share considerably higher than in Serbia (28%)7, Albania (46%)8, and North Macedonia (62%)9, which, despite Montenegro’s smaller economic size, indicates that SMEs’ access to credit is comparatively more favourable within the region.
Source: World Bank (2025[69]).
One of Montenegro’s key strengths in facilitating SME access to bank finance lies in its comprehensive asset registration system, which provides a broad collateral base for secured lending. Montenegro’s cadastre covers the entire national territory, with about 90% of land registered in the Real Estate Cadastre and the remainder recorded in the Land Cadastre or Cadastral Survey Register. Moreover, movable assets are recorded in the Central Register of Pledges on Movable Property and Rights, which is fully digitalised and publicly accessible online,10 and intangible assets are registered through Montenegro’s dedicated Intellectual Property Office, which maintains publicly accessible online registers for patents, trademarks and industrial designs, each searchable through dedicated e-register interfaces.11 It should also be noted that Montenegro’s legal framework explicitly allows banks to secure loans with intangible assets, as provided for in the Law on Pledge over Movable Property and Rights, which supports the capacity of innovative companies, such as start-ups, to access bank finance.
Another structural strength of Montenegro is that its liquidation procedures are relatively short and cost-effective. Liquidation processes take around 24 months on average, a figure comparable to the EU average and shorter than in North Macedonia (30 months) (World Bank, 2024[70]), Serbia (around 36 months) (Government of Serbia, 2025[71]), and Türkiye, where proceedings are even lengthier (Government of Türkiye, 2025[72]). Moreover, the cost of liquidation procedures does not exceed 2% of the estate (World Bank, 2025[73]). significantly lower than in WBT economies such as Bosnia and Herzegovina (5-7%), providing banks with incentives to use less stringent collateral requirements (see Cluster 2 for more details).
Another key strength of Montenegro’s access-to-finance policies is the continued role of credit lines, which have provided important support for SME financing amid rising borrowing costs,12 tighter monetary conditions, and increased macroeconomic uncertainty. The Development Bank of Montenegro (DBM), a successor of the Investment and Development Fund (IDF) until December 2024, has provided substantial support since 2022. Its annual loan portfolio has slightly increased from EUR 185 million in 2022 (3.1% of GDP) (OECD, 2024[24]) to EUR 212 million in 2025, offering a portfolio of 16 credit and financial-support programmes, for which 90% are allocated for SMEs (Montenegro Business, 2025[31]). It should be noted that early concerns, particularly regarding potential deposit-taking and payment services outside the standard commercial bank framework, have been addressed through amendments adopted by Parliament in 2025, which exclude both activities from the DBM’s mandate and clarify its role as a development bank. Oversight has also been strengthened: the CBCG supervises the DBM’s compliance with the law and, in August 2025, issued a dedicated prudential rulebook on capital adequacy, asset classification and provisioning, risk-management standards, large exposures and reporting. However, one caveat is that no publicly available impact assessments have been conducted to date to demonstrate the DBM’s additionality in SME finance, leaving its overall impact on SMEs’ borrowing conditions unknown.
Despite being in its operationalisation phase, the absence of a centralised operational credit guarantee scheme (CGS) continues to constrain the expansion of corporate lending. With the technical assistance of the European Bank for Reconstruction and Development (EBRD), Montenegro adopted the Law About the Credit Guarantee Fund of Montenegro in August 2025 and finalised the selection of independent board members in February 2026. While the Fund’s operational date has yet to be confirmed, it has already been allocated EUR 10 million in capital, funded by the State Budget, and is designed to cover 50% of partner commercial banks' loans on a risk-weighted basis. In tandem with the two donor-led initiatives further complementing Montenegro’s scheme- the EBRD’s Portfolio Risk Sharing and the EIF’s Guarantee Facility 4 SME Resilience (Table 2.1), the Credit Guarantee Fund of Montenegro is expected to further stimulate corporate credit growth.
Notes:
* The initial funds for the Credit Guarantee Fund will be provided from the Current Budget Reserve and allocated to the Ministry of Economic Development’s budget line upon submission of the relevant specification. The Ministry will then transfer the allocated amount to the Credit Guarantee Fund’s bank account once the account has been opened. At the time of writing, the Credit Guarantee Fund and the Portfolio Risk Sharing programmes have not started their operations.
Sources: Montenegro Business (2025[74]); EIF (2024[75]; 2025[76]); EBRD (2025[77]).
2.3.2. Providing alternatives to bank finance
In addition to maintaining an adequate supply of bank credit, governments need to facilitate SME access to a broader range of external financing options to support their growth. Despite ongoing reforms, alternative financing channels remain underdeveloped, largely due to the limited government programmes to support their development and limited knowledge among business owners.
Capital markets remain an underused source of finance for established SMEs in Montenegro. Although the market capitalisation of the Montenegro Stock Exchange (MNSE) is relatively aligned with the EU average, liquidity remains very low, with a turnover ratio below 1% since 2019, compared to slightly more than 40% in the European Union in 2023 (see Figure 2.3). This points to very limited trading activity, illustrated by only 1 612 transactions recorded in 2024, (Montenegro Stock Exchange, 2025[78]), and concentrated in a small number of large companies. Registered activity is even lower for the dedicated segments of smaller companies: Multilateral Trading Platform (MTP) GROW, with lighter regulatory requirements than prime listing, and MTP ME Market, a general platform for instruments that do not meet regulated-market criteria.13 In August 2025, the MTP ME market recorded only four transactions, while the MTP GROW segment registered none (Montenegro Stock Exchange, 2025[79]), suggesting that lighter listing requirements alone may be insufficient to stimulate SME participation. To develop its capital markets, Montenegro has primarily focused on harmonising its legal framework to broaden the country’s narrow domestic investor base, including the adoption of the Law on Voluntary Pension Funds in February 2025, which provides a legal framework for establishing companies to manage pension funds.14 However, as of February 2026, no proactive policy measures or incentives have been introduced to encourage equity listings or corporate bond issuance on the MNSE.
In parallel to the limited depth of capital markets, other non-bank financing channels have also remained relatively underdeveloped.
Notes: Turnover ratio data for the European Union are unavailable for 2018 and 2024. The EU average for the turnover ratio only includes data from Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic and Slovenia. The market capitalisation data for the European Union are not available for 2024.
Sources: Market capitalisation: CEIC (2025[80]) and OECD calculations based on Montenegro Stock Exchange (2025[78]) and European Commission (2025[6]). Turnover ratio: World Bank (2025[81]) and OECD calculations based on Montenegro Stock Exchange (2025[78]).
Early-stage businesses still have very few alternatives to bank financing, as available data indicate that VC is limited. No activity was recorded in 2023 and 2024, after a peak of EUR 1.03 million in 2022 (Dealroom, 2025[82]). A key barrier to further development of PE and VC has been the absence of a dedicated legal framework, but Montenegro has recently taken steps in that direction. In February 2025, parliament adopted the Law on Alternative Investment Funds and the Law on Open Investment Funds with Public Offering, aligning national legislation with the EU acquis on the establishment and operation of investment funds and their management companies. These developments represent a key step toward enabling the creation of specialised investment funds and facilitating cross-border participation in Montenegro’s market. In terms of policies supporting the development of PE and VC, Montenegro currently lacks domestic instruments providing direct equity financing, such as a public fund or fund-of-funds (OECD, 2025[83]), apart from a few donor-funded initiatives (see Table 2.2). While it does not offer equity investment, the Innovation Fund of Montenegro serves as the main public mechanism for early-stage financing through its Support Early-Stage Startup Development programme, which combines grants with business development services, thereby indirectly supporting the growth of early-stage financing. Finally, Montenegro also hosts a business angel network (BAN), which provides potential for the future development of PE and VC activities in the economy. However, in the absence of a dedicated legal and policy framework, its activity has been declining in recent years, raising only raising only EUR 500 000 in 2023, compared to EUR 2.1 million in 2019 (European Business Angels Network, 2026[84]).
Notes: The data for the private capital raised and the number of private investors refer to the end of 2024. While the Western Balkans Enterprise Development and Innovation Facility provides equity investment, no transaction was registered in Montenegro for the year 2023 (EIF, 2024[75]) or 2024 (EIF, 2025[76]).
Sources: SEAF (2025[85]); Enterprise Innovation Fund (2026[86]); EBRD (2025[87]; 2025[88]); Western Balkans Investment Framework (2026[89]).
Factoring is also marginally used by Montenegrin SMEs. In relative terms, factoring volumes have been slightly decreasing from 2.1% of GDP in 2019 (EUR 102 million) to 1.6% of GDP in 2024 (EUR 123 million),15 a level seven times below the EU average of 11.9% in 2023 (FCI, 2024[90]). Despite a legal framework broadly aligned with the acquis, the absence of active policy measures, such as tax incentives, promotional programmes, and dedicated training opportunities, constrains the further development of factoring, reflecting the lack of initiatives that encourage businesses to use this alternative financing avenue.
Crowdfunding is another underused financing channel that could support early-stage businesses by mobilising small-scale investments from individuals and the diaspora. This is particularly relevant given that remittances represented 10.6% of Montenegro’s GDP in 2024, the third-highest level among the WBT economies after Kosovo (17.3%) and Bosnia and Herzegovina (11.0%) (World Bank, 2025[91]). Overall, Montenegrin SMEs cannot fully benefit from crowdfunding to finance their investments, as there is no systematic, government-backed approach or legal framework regulating such activities. As of February 2026, no concrete steps have been taken to establish a legal framework for crowdfunding in Montenegro, and the Reform Agenda 2024-2027 does not address this matter.
Leasing is the leading form of alternative finance in Montenegro, although it is used only to a limited extent. Leasing volumes accounted for 0.7% of GDP in 2022 (EUR 44 million) (OECD, 2024[24]), a level three times below the EU average of 2.05% in 2023 (Leaseurope, 2024[92]). Both commercial banks and a dedicated leasing company provide leasing in Montenegro. Available data from the operating leasing company show that its portfolio is heavily concentrated in passenger vehicles (EUR 28.8 million, or 81.9%) and commercial vehicles (EUR 6.4 million, or 18.1%) (Central Bank of Montenegro, 2024[93]). Overall, despite the absence of policies promoting its use, such as tax incentives, the comparatively stronger uptake of leasing in Montenegro may stem from higher awareness among the population and businesses. In 2022, 83% of SME managers reported being familiar with lease finance, compared with only 46% for public equity, 37% for factoring, 34% for venture capital, 25% for crowdfunding, and 20% for business angel investment (OECD, 2023[94]), underscoring the need to enhance financial literacy to expand SME access to alternative financing instruments.
2.3.3. Providing direct financial support to SMEs’ operations and growth
When SMEs continue to struggle to obtain affordable external financing, public support plays a vital role in maintaining entrepreneurship, stimulating investment and driving key structural transitions. Instruments such as grants, dedicated funds and co-financing schemes enable SMEs to mitigate the constraints posed by underdeveloped capital markets and a banking sector still reluctant to finance riskier ventures. Beyond providing temporary liquidity, these tools are crucial for promoting international expansion, supporting research and innovation, and advancing the digital transformation and the green transition.
In addition to existing donor-funded initiatives (Table 2.3), Montenegro supports the establishment of SMEs by targeting underserved groups, with a focus on women entrepreneurs (see Cluster 4). Introduced in 2024 as the successor of the Investment and Development Fund (IRF)’s Basic Support Program for Women in Business, the DBM’s investment loans for the promotion of female entrepreneurship provide financing of up to EUR 300 000 at a standard annual interest rate of 4%, with the aim of financing investments in tangible and intangible assets and working capital (Development Bank of Montenegro, 2025[95]).16 Beyond the DBM’s credit lines, the Ministry of Economic Development implements the Programme for Improving the Competitiveness of the Economy since 2022, which has provided EUR 897 000 of non-repayable grants to women-owned enterprises in 2025.17 However, as no information is available on the programmes’ outcomes, their effectiveness cannot yet be assessed.
Regarding SME growth, Montenegro implements several schemes that provide targeted financial support for innovation, complemented by two additional programmes that support internationalisation. These are further reinforced by initiatives promoting the green transition, while programmes supporting digital transformation are relatively small in scale (Table 2.3).
The Innovation Fund of Montenegro (IFM) is a pillar of the economy’s Smart Specialisation Strategy (2019-2024) and is the leading public institution financing SME innovation. Since its creation in 2021, the IFM has allocated EUR 5.2 million to 86 SMEs, including EUR 2.25 million for start-ups (Innovation Fund of Montenegro, 2025[96]). The IFM’s resources have grown steadily, with its annual budget rising from EUR 700 000 in 2022 to EUR 3.2 million in 2024, across three major grant schemes promoting early-stage innovation, technological development of established firms and business-academia co-operation. However, despite the Fund’s growing portfolio, no impact evaluation has yet been conducted to assess the effectiveness of its programmes, leaving the overall contribution of public innovation finance to SME performance and innovation capacity unknown. While recent data on business research and development (BERD) are unavailable after 2020 (Eurostat, 2025[97]), existing evidence suggests a positive trend in SME innovation activity. The development of the IFM appears to coincide with Montenegrin SMEs becoming increasingly innovative, with the economy ranking first among EU and neighbouring economies in product innovation and fourth in business process innovation (European Commission, 2025[98]) (Figure 2.4).
Notes: “SME product innovation” measures the frequency of SMEs that introduced at least one product innovation, either new to the enterprise or new to their market.
“SME process innovation” measures the frequency with which SMEs introduce at least one business process innovation, either new to the enterprise or new to their market. For more information, see European Commission (2025[99]).
Source: European Commission (2025[98]).
Regarding support for SMEs’ internationalisation, the DBM manages two financial schemes aimed at strengthening firms’ export capacity (Table 2.3). While not directly targeted to SMEs, the Investment Loans to Support Service and Trade Activities programme provides substantial credit lines of up to EUR 7 million for investments in tangible and intangible assets, alongside working capital, to firms involved in trade activities, thereby supporting the competitiveness of Montenegrin exporting firms. In parallel, the DBM’s Factoring programme supports exporters by improving their cash flow, enabling them to bridge the gap between shipment and payment and to better manage receivables from international clients. However, no data are available on their uptake, and no evaluation has been carried out to assess their effectiveness.
Regarding green transformation efforts, Montenegro continues to rely mainly on donor-funded initiatives for financial support, such as credit lines from the EIB, EIF, and EBRD (see Cluster 2 for more details). Nonetheless, the Innovation Fund of Montenegro (IFM) has launched two calls in 2023 and 2024 to promote eco-efficiency investments in industry, with a combined budget of around EUR 3.5 million (Table 2.3). While modest in scale, these measures represent initial steps toward developing national financing instruments to support SMEs’ investments in the green transition.
Finally, digital transformation remains the weakest area of Montenegro’s direct financial support for SME growth. The only domestic scheme, implemented by the IFM, primarily targets start-ups, leaving established SMEs without dedicated support for digital upgrading (Table 2.3).
Notes: The non-listed credit lines include the EBRD’s Western Balkans Women in Business and Youth in Business programmes, the Italian Deposits and Loans Fund’s Sustainable Access to Finance for Entrepreneurship program, the EIF’s and the German development bank KfW’s European Fund for Southeast Europe S.A. SICAV-SIF fund, KfW’s EU Market Creation Facility, the EBRD’s Green Economy Financing Facility, the EBRD’s Risk sharing for ESG projects, the EBRD’s Credit Enhancement of Green Bonds, the EBRD’s Global Green Bond Initiative, the KfW’s MSME Guarantee Platform, the EBRD’s Enterprise Expansion Fund, the EBRD’s Single Market Ready program, the EBRD’s Growth for All program, the EBRD’s Direct Financial Framework -Rec Kos, the EBRD HI-BAR program, the EIF and KfW Green for Growth Fund and the International Finance Corporation (IFC) Western Balkans Climate Programme. More details are provided by Western Balkans Investment Framework (2026[89]).
Sources: Austrian Development Agency (2025[100]); Ministry of Economic Development (2024[101]); Development Bank of Montenegro (2025[95]); Innovation Fund of Montenegro (2025[102]); Innovation Fund of Montenegro (2025[96]); European Commission (2024[103]); Western Balkans Investment Framework (2026[89]); Development Bank of Montenegro (2025[104]); Eko Fond (2025[105]) and information provided by the Government of Montenegro; EBRD (2025[106]); Development Bank of Montenegro (2025[107]); Development Bank of Montenegro (2025[108]); Development Bank of Montenegro (2025[109]); Development Bank of Montenegro (2025[110]).
The way forward
Implement targeted incentives to develop alternative avenues to access finance. Montenegro has already established dedicated legal frameworks for alternative financing avenues, such as capital markets, private equity, factoring and leasing, but further support, such as the development of tax incentives and the promotion of digital tools, is needed to further incentivise SMEs to use the alternative avenues to access finance (see Box 2.2).
Poland’s legal and fiscal framework for lease finance
Building on a comprehensive legal framework introduced in 2000, Poland has developed a set of tax and regulatory measures that actively encourage SMEs to use leasing. Operating-lease payments are fully tax-deductible, allowing firms to deduct each instalment from taxable income, while VAT is paid gradually rather than upfront on the full asset value, easing liquidity constraints and providing a substantial incentive for SMEs (Getsix, 2025[111]). Furthermore, since July 2025, Poland has enabled the remote signing of lease agreements, helping firms reduce administrative and operational costs related to document handling, customer service, and printing, and thereby further facilitating SME uptake of leasing (Ailleron, 2025[112]).
Policy outcomes
Available data indicate that leasing market penetration in Poland reached 4.0% of GDP in 2023 (EUR 25.7 billion), a level twice the EU average of 2.05% (Leaseurope, 2024[92]). Moreover, according to the European Commission’s Survey on Access to Finance of Enterprises (SAFE), leasing is the most important source of financing for some two-thirds of SMEs in Poland, ahead of bank credit (35%) and subsidies (39%). This is well above the EU average of 50% and ranks among the highest figures for leasing across the EU, except for Finland (69%) (Leasinglife, 2025[113]).
Policy relevance for Montenegro
Poland’s experience demonstrates that a coherent policy framework, combining clear legislation, targeted incentives for SMEs, and the integration of digital tools, can effectively support the development and uptake of leasing. Given that Montenegro has already established a comprehensive legal framework for leasing, further progress could be made by introducing tax incentives and modernising the framework to facilitate digital processes, thereby strengthening leasing's role as a financing instrument for SMEs.
Establish a comprehensive legal framework for early-stage financing and complement it with targeted policy instruments to foster its development. Despite adopting dedicated legislation for alternative investment funds, Montenegro has yet to adopt specific legislation governing crowdfunding and business angel activities, which would support young, innovative SMEs in addressing early-stage financing gaps In parallel, to help crowd in private investors where the domestic early-stage financing market is thin, Montenegro could consider public participation in VC markets through (1) direct vehicles (public co-investment funds or co-investment alongside private venture capital and angel investors) and (2) indirect vehicles (public fund-of-funds or cornerstone commitments into privately managed VC funds.
Develop targeted financial education initiatives on digital financial services, with a focus on vulnerable groups. Given the increasing digitalisation of traditional financial services and the emergence of new avenues for finance relying on digital tools, Montenegro should prioritise improving digital financial literacy, as recently, 2% of SME managers and owners have already signed a financing contract completely online, five times lower than the Southeast Europe average of 10% (OECD, 2023[94]).
Support services for SMEs are a common policy tool for supporting business productivity, growth and survival typically including “business advice, consultancy, coaching, mentoring and management training to start-up entrepreneurs and SME managers” and, in many OECD Member countries, are combined with financial measures “in the expectation of positive synergies” (OECD, 2021[114]). Evidence shows that such services, when systematically designed and targeted, help SMEs overcome information gaps and capability constraints that limit innovation, competitiveness, and internationalisation.
Montenegro’s ecosystem for business support services (BSSs) has undergone consolidation and systematisation since 2022, building on earlier strategic efforts while introducing clearer implementation structures, stronger evidence-based planning, and steps toward a more integrated approach to SME competitiveness. However, gaps remain in regional outreach, the integration of private service providers, and the alignment of SME, innovation, and investment policies, underscoring the need for stronger institutional co-ordination, clearer progression pathways and multi-annual planning.
Against this backdrop, this section assesses the overall quality, efficiency and effectiveness of BSSs in Montenegro, distinguishing between foundational services aimed at entrepreneurship and early-stage capacity building, and more advanced instruments designed to support SME expansion, upgrading, internationalisation and integration into global and regional value chains.
2.4.1. Foundational SME business support services
The policy framework for BSSs in Montenegro has entered a new phase of strategic coherence, with the SME Development Strategy 2023-2026 (Government of Montenegro, 2023[115]) and the Industrial Policy 2024-2028 (Government of Montenegro, 2024[116]) providing a solid foundation that links advisory, training and innovation support to national competitiveness goals. Together, the two strategies operate at complementary levels: the SME Strategy focuses on firm-level enablement through horizontal support measures, while the Industrial Policy provides a sectoral and value-chain framework for industrial upgrading and competitiveness. Compared to the previous period — characterised by fragmented, donor-driven interventions — the new framework institutionalises non-financial BSSs within the national budget and embeds them in a results-oriented policy cycle.18 The accompanying Action Plans for 2023-2024 and 2025-2026 introduce assigned responsibilities, indicative budgets and performance targets, strengthening the basis for results-based implementation.19
Implementation of foundational BSS in Montenegro has continued to consolidate since 2022, with delivery increasingly focused around fewer, higher-value instruments and greater the depth of firm-level support. The Ministry of Economic Development remains the central implementing actor, with operational delivery shared with the Innovation Fund, the Science and Technology Park and the Innovation and Entrepreneurship Centre (IPC) Tehnopolis, signalling a move toward a more coordinated, ecosystem-based delivery model. The Programme for Improving the Competitiveness of the Economy (PICE) remains the flagship mechanism (Government of Montenegro, 2025[117]) translating the horizontal objectives of the SME Strategy into operational support for competitiveness upgrading. Access to PICE and related support instruments is further supported by an EU-backed BDS Helpdesk and the upgraded Single Access Point (biznis.gov.me), strengthening centralised entry points to SME support services (see Dimension 5a). Budget allocations increased to EUR 3 million in 2024 and to EUR 3.5 million in 2025 (Government of Montenegro, 2025[117]), pointing to a stronger political and fiscal commitment to competitiveness upgrading. This expansion has been accompanied by a sharp increase in average grant size of around EUR 20 000, quadruple the level typical in 2020-2022, reflecting a deliberate shift from small, fragmented subsidies toward fewer, more capital-intensive interventions focused on production capacity, digitalisation and investment upgrading. At the same time, reliance on annual budget cycles and still-maturing inter-agency coordination mechanisms continues to limit predictability and constrain the system’s capacity to plan multi-year support trajectories, moderating the effectiveness of an otherwise more focused and higher-intensity implementation model.
Uptake patterns reflect the strategic reorientation toward competitiveness upgrading, with demand increasingly concentrated in digitalisation, resource efficiency and inclusive entrepreneurship. Under PICE 2024, SMEs have shown strong demand for digitalisation vouchers and investment grants for modern equipment and energy-efficiency upgrades, indicating that uptake is driven less by generic business support and more by tangible cost-saving and productivity gains (see Section 2.3.3 for an overview of direct financial support instruments). Complementing this thematic focus, the 2024 Gender Analysis of the Competitiveness Programme introduced differentiated co-financing rates, most notably of up to 80% for women- and youth-owned firms (Secretariat of the Competitiveness Council, 2024[118]), resulting in contributions to women-led enterprises accounting for roughly one-quarter of all beneficiaries in 2024. While accessibility has improved through the programme-specific central digital application portal20 and economy-wide information days, uptake remains uneven: micro-enterprises and firms in rural and less developed municipalities continue to face administrative, informational and absorptive constraints. As a result, improved execution capacity, reflected in the implementation of 83% of planned activities in 2024, compared to 68% in 2020 (Government of Montenegro, 2025[119]), has not yet translated into more balanced regional participation, underscoring persistent structural disparities in access to foundational business support.
While foundational BSS provision in Montenegro remains predominantly publicly steered, delivery has increasingly relied on private providers,21 indicating a gradual transition toward a mixed-market model. In practice, this shift is most visible under PICE, where SMEs independently select service providers – usually private consultants – for mentoring, information and communication technology (ICT), and investment-readiness support, with the government reimbursing 50-80 % of eligible costs, depending on ownership and region. As a result, private advisory services have become functionally embedded within public programmes rather than operating as a parallel market. While licensing frameworks exist for adult education providers, no dedicated accreditation or quality-assurance system governs business support service providers, which continue to operate primarily through programme-based selection mechanisms. Incremental quality controls have nonetheless been introduced through the use of standardised consultant calls, post-service satisfaction surveys, and gender-sensitive monitoring represents incremental progress toward a more transparent, performance-based delivery. Private BSS provision therefore remains programme-dependent rather than systemic, with public instruments continuing to serve as the primary gateway for SME access to non-financial support, particularly outside core economic centres.
A major qualitative step in this assessment cycle has been the institutionalisation of training needs assessment (TNA) (Box 2.3), developed with donor and EU assistance, including a recently completed EU-supported follow-up cycle extending TNA coverage to BDS providers and local administrations. (WEglobal, 2026[120]) The TNA introduced Montenegro’s first fully structured mechanism for diagnosing SME skills gaps and linking them to programme design, strengthening the evidence base for non-financial support within an otherwise grant-dominated BSS system. By identifying priority needs in management, digitalisation and the green transition, and feeding these directly into the design of 2024 PICE and related mentoring schemes (Government of Montenegro, 2023[115]), the TNA has improved internal policy learning and coordination across implementing institutions. However, its influence remains partial: while skills diagnostics shape programme content, they are not yet embedded as a mandatory input into annual budgeting or programme approval cycles. As a result, TNA findings inform how support is delivered, but have limited impact on the scale, continuity or sequencing of non-financial support, reinforcing a predominantly short-term, instrument-driven approach.
Established in 2023 under the EU-funded Single Access Point (SAP) project, Montenegro’s new TNA represents a significant step toward developing a co-ordinated, evidence-based approach to understanding the skills needs of MSMEs. The initiative aims to overcome the long-standing fragmentation in the country’s training landscape and provide a national mechanism for regular, comparable and policy-relevant skills analysis.
Building on the 2020 pilot TNA carried out by the Ministry of Economic Development and the National Partnership for Lifelong Entrepreneurial Learning (NP), this new tool is coordinated through the NP platform and grounded in existing national evidence. Rather than launching a new survey, the approach consolidates the 2020 pilot findings, the Chamber of Economy of Montenegro’s annual training data and 2023 career-development study, the 2023 evaluation of MSME support programmes involving 202 firms. Its methodology rests on three building blocks: a shared questionnaire structure; common definitions and demographic variables; and a co-ordinated NP review cycle for interpreting needs and planning training offers.
The coordinated TNA provides Montenegro with its most complete and coherent picture of MSME skill needs to date, highlighting recurring priorities such as customer relations, marketing and sales, digitalisation and project management. It also anchors policy priorities, such as circular economy and export readiness, within the skills agenda and informs the design of training-of-trainers programmes. Although not yet formally linked to a new SME Strategy, the TNA establishes the foundation for more aligned, data-driven and forward-looking SME skills policies.
Source: Government of Montenegro (2025[121]).
Building on this evidence base, monitoring and evaluation arrangements have become more structured and operationally embedded, particularly for financial support instruments. Programme implementation is monitored through a combination of digital application tracking, field inspections prior to reimbursement, beneficiary surveys, and independent evaluations commissioned by the Ministry of Economic Development. Results from the 2023 evaluation22 directly informed programme redesign, particularly the increase in grant intensity and the introduction of new eligibility criteria favouring women- and youth-owned firms. The continued digitalisation of application and reimbursement processes through programi.gov.me has improved transparency and efficiency. However, monitoring remains largely output-focused, with limited outcome indicators and no systematic performance assessment of private BSS providers, resulting in weak evidence on longer-term impacts of non-financial support.
2.4.2. Support services for SMEs’ expansion and growth
A comprehensive mix of BSSs is necessary to help SMEs access strategic resources such as knowledge, technology, finance and skills, and to support progression beyond basic firm survival toward sustained growth and competitiveness. Effective growth-oriented support requires complementary, mutually reinforcing instruments to be combined into comprehensive SME support packages, involving financing, technical assistance, training, capacity building and infrastructure (OECD, 2022[122]). In Montenegro, while the overall framework for SME support has become moderately more coherent since 2022, this coherence has yet to translate into a structured system that consistently supports firm progression from innovation and upgrading toward scale-up, internationalisation and value-chain integration. Although the SME Strategy 2023-2026 introduced a specific objective on SME internationalisation, complementing competitiveness, digitalisation, and innovation priorities (Government of Montenegro, 2023[115]), the delivery of growth-oriented support remains fragmented and largely project-based, limiting its ability to generate sustained expansion outcomes.
Within this landscape, innovation support represents the main entry point for more advanced SME growth trajectories, particularly for firms seeking to upgrade capabilities, adopt new technologies or develop new products. Institutional delivery relies primarily on the Innovation Fund of Montenegro, alongside a small but growing innovation infrastructure, including Tehnopolis and the Science and Technology Park opened in 2024, which together provide incubation, prototyping, advisory services and support for business-academia collaboration. Recent EU-supported benchmarking efforts23 have further strengthened these institutions by aligning them with European Business and Innovation Centre standards and preparing them for EU|BIC accreditation, reinforcing their credibility and integration into European innovation networks. Implementation has expanded in recent years, with a marked increase and diversification of programme lines supporting innovation by 2023–2024 (Government of Montenegro, 2023[123]). Over 100 SMEs have received grants for the early commercialisation of new products and services, and participation in Horizon Europe, EUREKA and the Enterprise Europe Network has been actively promoted (Government of Montenegro, 2023[123]) (see Cluster 2). However, innovation support remains largely programme-driven, with limited linkage to subsequent upgrading stages, resulting in weak continuity between early innovation support and later digital, green and scale-up-oriented measures.
Digitalisation and the green transition are primarily addressed through horizontal competitiveness and investment schemes rather than dedicated digital or green transition programmes. Programmes such as PICE provide co-financing for production upgrades, certification, digital tools and energy-efficiency investments, while donor-supported initiatives, notably the EBRD-EU SME Go Green programme (EBRD, 2025[124]), add a sustainability dimension by promoting resource-efficient technologies and capacity-building for green supply chains (see Clusters 2 and 3). In practice, these interventions remain largely project-based, with eligibility criteria and co-financing requirements that implicitly favour firms already demonstrating a certain level of operational or export readiness. As a result, support for innovation, digitalisation and green upgrading remains weakly coordinated, limiting the number of SMEs that progress beyond basic adoption toward more advanced, scale-up- and export-ready business models.
For SMEs that reach a higher level of commercial readiness, internationalisation represents the most advanced layer of support currently operationalised within Montenegro’s SME support framework. Internationalisation objectives are embedded in the MSME Strategy and reinforced through Montenegro’s accession to the EU Single Market Programme (SMP) in 2023, which strengthened alignment with EU priorities and reactivated the 1_Creating1_Creatingbroadening SME access to EU partnerships, advisory services, and funding for innovation and sustainability (Support4Partnership, 2023[125]). In practice, rather than operating through dedicated export-promotion framework, internationalisation support is embedded within the horizontal competitiveness instruments, most notably PICE, and complemented by a broader set of institutional non-financial support instruments for export promotion, market access and investment facilitation (Table 2.4). Between 2023 and 2024, the PICE programme supported over 470 SMEs, disbursing more than EUR 5 million in grants and technical assistance (Government of Montenegro, 2025[117]). Despite this relatively dense support architecture, delivery remains project-based and dependent on external partnerships (the EU Instrument for Pre-Accession Assistance [IPA], the EBRD, and the United Nations Industrial Development Organization [UNIDO]), with limited integration between innovation, investment, and export-support measures. The absence of a dedicated export-promotion agency, outcome-based performance indicators, and multi-annual funding frameworks constrains strategic steering and weakens the sustainability of support beyond individual project cycles.
These institutional and delivery constraints are also reflected in Montenegro’s export outcomes, which show limited improvement in SME performance and diversification. Montenegro’s export structure remains highly concentrated and reliant on a narrow set of sectors, metals, energy, and food processing, while SME participation has declined sharply. The SME export performance index fell by 15 points relative to the EU average between 2019 and 2023 (OECD, 2025[27]), and the SME share of total exports of goods dropped from 45.7% in 2020 to 22.5% in 2022. This trend underscores structural weaknesses in competitiveness and the limited penetration of SME support measures among exporters.
Notes: * While export‑related information and market intelligence are provided through digital portals and platforms such as the Single Access Point (biznis.gov.me), the Point of Single Contact (psc.gov.me) and the Chamber of Economy of Montenegro, Montenegro does not operate a dedicated, structured and widely used SME‑facing export market intelligence service.
** Institutional mandates for investment facilitation and aftercare exist through the Montenegrin Investment Agency and the Ministry of Economic Development; however, no structured SME-MNE linkage or supplier‑development programme is currently in place.
Sources: Chamber of Economy of Montenegro (2022[126]), Government of Montenegro (2025[121]); MontEENegro (2024[127]); Government of Montenegro (2026[128]; 2026[129]); Montenegrin Investment Agency (2025[130]), Government of Montenegro (2023[115]).
For the small subset of SMEs moving beyond basic upgrading, Montenegro’s integration into global and regional value chains remains limited. While the MSME Strategy 2023-2026 recognises clusters and value chain development, implementation relies on horizontal competitiveness instruments, most notably PICE, Investment Support Programme,24 and SME Go Green, which support basic upgrading in selected sectors such as agrifood, tourism, ICT and renewable energy (Government of Montenegro, 2025[117]) but do not constitute a supplier development framework. Although Enterprise Europe Network (EEN)-facilitated business-to-business events25 (Government of Montenegro, 2023[123]), has produced early partnership outcomes, the absence of a dedicated supplier-development mandate and structured linkage mechanisms limits the translation of these upgrades into sustained relationships with lead firms or investors. Certification and standards compliance (e.g. Hazard Analysis and Critical Control Points [HACCP] and International Organization for Standardization [ISO] standards) remain a key bottleneck, as support is embedded in general schemes rather than delivered through targeted instruments. Institutional fragmentation further weakens spillovers from foreign direct investments (FDI) and donor-led initiatives, leaving global value chain participation largely episodic rather than embedded.
These structural limitations in export performance and value-chain integration point not only to weaknesses in programme design and coordination, but also to gaps in monitoring and evaluation systems. As the SME support ecosystem has expanded, effective monitoring and evaluation have become increasingly important to assess whether firms progress from capacity building toward sustained competitiveness and internationalisation. However, monitoring arrangements remain fragmented and largely output-focused, tracking budgets and beneficiary numbers rather than firm-level outcomes such as productivity gains, export sustainability or integration into higher-value activities. While programme-level reporting is increasingly digitalised, there is no integrated system linking data across innovation, digitalisation, green transition and internationalisation measures. In addition, although the Statistical Office of Montenegro (MONSTAT) provides detailed trade data, these are not disaggregated by firm size or tied to policy beneficiaries, limiting the ability to assess the effectiveness, inclusiveness and long-term impact of SME growth support in Montenegro.
The way forward
Intensify efforts to systematise monitoring and evaluation across institutions delivering business support services, with a focus on SME progression. While monitoring has strengthened through digitalised applications, beneficiary surveys, field inspections, and public reporting under PICE, evaluation practices remain uneven across institutions and mostly output-oriented. Independent evaluations occur but are irregular and largely donor-driven (e.g. TNA, mentoring evaluation). Montenegro is encouraged to move toward a more unified, progression-oriented monitoring and evaluation framework, with shared indicators and consolidated annual reporting across the Ministry of Economic Development, the Innovation Fund, Tehnopolis, and the Science and Technology Park. Beyond tracking delivery and absorption, this framework could enable longitudinal tracking of SMEs across support stages – innovation, digital and green upgrading, internationalisation and value chain integration – to better link programme adjustments to evidence on firm growth trajectories.
Advance the development of a national quality assurance system for private consultants and advisory services. The government now works with a growing pool of private consultants through PICE, innovation vouchers and mentoring schemes, and has introduced feedback surveys and structured reporting. However, there is still no accreditation, minimum standards, or unified quality assurance mechanism, a gap already identified in 2022. Montenegro may consider intensifying efforts to establish accreditation criteria, service standards differentiated by SME needs and growth stages (e.g. early-stage upgrading, digital and green transformation, export readiness), complemented by routine beneficiary feedback loops, ensuring that private advisory services co-financed by the state are consistent, transparent and tailored to SMEs’ stage-specific needs (see Box 2.4).
Accelerate efforts to operationalise the Micro, Small and Medium-sized Enterprise Strategy’s cluster and value chain objectives through a dedicated pilot programme. While the MSME Strategy 2023-2026 explicitly references clusters, supply chains, and value chain development, these priorities have not yet been translated into concrete support instruments. Montenegro is encouraged to fast-track the design and piloting of a cluster/value chain development programme in one or two priority sectors, such as agrifood, ICT, or tourism suppliers, where SME upgrading potential is strongest. A targeted pilot could include supplier diagnostics, standards upgrading, collaboration with lead firms or foreign investors, and joint marketing. This would shift value chain ambitions from strategy to practice, reduce fragmentation and build the foundations for a longer-term supplier development approach.
Establish a targeted certification and standards upgrade scheme to improve SME access to EU and regional value chains. Certification requirements, such as HACCP, ISO standards, and others, remain among the most persistent barriers preventing SMEs from accessing procurement, exports and supplier networks. Yet, Montenegro currently lacks a dedicated national certification support instrument. The government could introduce a co-financed certification and standards upgrade scheme, aligned with EU requirements and complemented by advisory services through the SMP and EEN. This would directly address a well-identified bottleneck and significantly improve SME readiness for supplier integration, especially in agrifood, manufacturing and emerging green-economy sectors.
Policy approach
To address fragmentation and uneven quality in SME advisory services, Poland introduced a national accreditation and quality assurance system co-ordinated by the Polish Agency for Enterprise Development (PARP). The system is anchored in the Database of Development Services (Baza Usług Rozwojowych, BUR), a central digital platform that standardises the registration, monitoring and evaluation of advisory and training services delivered by private providers. Providers must meet defined eligibility criteria, undergo verification and periodic audits, and comply with standardised reporting, while SMEs can rate services after completion (PARP, 2026[131]).
Policy outcomes
Administrative monitoring data from the PARP indicate that BUR has reached substantial scale since becoming fully operational. The platform recorded several million page views, more than 100 000 registered users and over 1 400 registered service providers, including more than 500 providers meeting accreditation requirements. The system listed over 13 000 advisory and training services, contributing to greater transparency, comparability and user choice in the SME advisory market (PARP, 2022[132]). While available evidence primarily reflects uptake and system coverage rather than firm-level impact, BUR has played a clear market-shaping role by standardising service provision, strengthening accountability of private providers and embedding user feedback as a routine quality control mechanism.
Policy relevance for Montenegro
Poland’s experience shows how combining accreditation, digital service registries and user feedback can strengthen the quality and consistency of private advisory services co-financed by the state. For Montenegro, where private consultants increasingly deliver BSS through programmes such as PICE, but quality assurance remains limited, a similar model could support the introduction of minimum standards, improve transparency and better align advisory services with SME needs.
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← 1. OECD calculation based on MONSTAT data for 2021-2024. Value added per enterprise was computed as total gross value added divided by the number of active enterprises in each size category. While the total share of SME value added increased, growth was entirely driven by the rise in the number of small firms, as value added per enterprise grew by 76% for large firms but only 18% for small ones.
← 2. Data on informal employment published by MONSTAT in 2025 is not directly comparable to previous years, as it is based on the 2023 Population Census. This methodological change introduces a break in the time series, preventing comparison with previous quarters or years.
← 3. An agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given time limit, in particular with regard to price and, where appropriate, the quantity envisaged (OECD, 2011[137]).
← 4. The removal of an international trademark registration (partial or total) from the International Register. It is permanent and applies to goods and services designated under the Madrid System, a framework allowing firms and individuals to trademark applications in several countries through one application (WIPO, 2025[136]).
← 5. The decision by a competent authority revoking or cancelling the effects of an international registration (e.g., designs) in a designated territory (WIPO, 2025[135]).
← 6. This refers to the Common Equity Tier 1 (CET1) ratio, the most loss-absorbing type of capital. A strong CET1 ratio indicates that the bank can withstand shocks by utilising its most reliable capital. Regulators focus heavily on CET1 because it’s the most credible safeguard against insolvency.
← 7. This data point refers to 2022. For more details, see (OECD, 2024[134]).
← 8. The Government of Albania has provided this data as part of the SMEPI 2026 assessment.
← 9. The Government of North Macedonia has provided this data as part of the SMEPI 2026 assessment.
← 10. The register is accessible via the Commercial Court portal. For more details, see: https://rzcg.sudovi.me/.
← 11. For more details, see: https://registri-is.gov.me/.
← 12. Average effective interest rates of commercial banks for non-financial corporations have increased from less than 4.3% in January 2022 to 5.3% in September 2025, with a peak of 5.6% in June 2024 (Central Bank of Montenegro, 2025[133]).
← 13. The segment is for financial instruments which do not meet the conditions for admission to any of the regulated market segments. Admission approval is made by the Executive Director of MNSE (rather than the full board) based on a written application.
← 14. In June 2025, the Parliament adopted amendments to the Law on Capital Markets, further aligning it with the acquis. For more details, see: https://zakoni.skupstina.me/zakoni/web/dokumenta/zakoni-i-drugi-akti/549/3712-21340-04-1-25-5.pdf.
← 15. Data provided by the Government of Montenegro for this assessment.
← 16. The financing of investments in working capital is capped at 30% of the loan amount.
← 17. Information provided by the government of Montenegro for this assessment. It should also be mentioned that, since 2022, a total of EUR 3.4 million has been allocated.
← 18. The Strategy strengthens MSME support by defining measurable objectives (e.g. OC1.1–OC3.2) across regulatory reform, finance, digitalisation, green transition, skills, innovation, clustering, and export readiness, while the Action Plan embeds these objectives into budgeted, time-bound activities with clear institutional responsibilities, enabling continuity and reducing donor dependence.
← 19. Each measure of the Action Plans for 2023-2024 and 2025-2026 now has assigned institutions, indicative budgets, and performance targets such as the number of SMEs receiving advisory support, women- and youth-owned firms reached, and private consultants engaged.
← 20. The portal has been increasingly integrated into the delivery of public support services—offering downloadable forms, instructions, and links to the programi.gov.me application system—which has contributed to improved transparency and easier navigation for SMEs, although uptake remains uneven among micro-enterprises and rural businesses.
← 21. Measure 2.3 of the SME Strategy formalises the role of private consultants, training centres and innovation-support organisations as delivery partners in advisory, mentoring and capacity-building programmes. It states that SMEs will access specialised services provided by external experts and private consulting companies, with the state co-financing part of the cost and institutions such as Tehnopolis and the Science and Technology Park acting as intermediaries that connect firms with accredited providers. The corresponding Action Plan 2023-2024 operationalises this by assigning joint implementation responsibilities to the Ministry of Economic Development, the Innovation Fund, STP and Tehnopolis together with selected private service providers for consultancy vouchers, training delivery and sector-specific mentoring schemes.
← 22. The evaluation refers to the external review of the 2023 Competitiveness Programme commissioned by the Ministry of Economic Development and conducted with EU/EBRD technical support, summarised in the Programme for Improving the Competitiveness of the Economy 2024.
← 23. Implemented under the EU-funded project “Advanced Business Development Services for Improving the Capacities of SMEs”.
← 24. The Investment Support Programme (ISP), implemented annually since 2018, provides co-financing for fixed-capital investments, production expansion, and job creation, with higher support intensities for projects in the Northern region. Although not SME-specific, it plays an important complementary role to PICE by helping firms upgrade machinery and production processes, thereby strengthening the broader industrial base and indirectly enhancing conditions for SME participation in regional and EU value chains.
← 25. EEN activities have strengthened cross-border SME networking, with regular B2B events and bilateral meetings organised since 2022. In 2023 alone, these efforts generated over 200 business meetings and five cooperation agreements, signalling early but tangible partnership outcomes.