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 North Macedonia
Abstract
In North Macedonia, small and medium-sized enterprises (SMEs) make up 99.7% of all firms, generate about 67% of value added and account for 73% of employment, all of which has been more or less stable since 2020 (OECD, 2023[1]). As the backbone of economic activity, they are essential drivers of sustainable growth. Realising their full potential, however, requires that SME-specific considerations be systematically embedded across all policy domains that affect private-sector development. Despite their prominence, in North Macedonia, SME density remains significantly below that of well-functioning market economies, with only 39 active SMEs per 1 000 inhabitants, pointing to persistent structural challenges that continue to constrain the dynamism of the SME sector (Government of North Macedonia, 2024[2]).
Creating an enabling environment for SMEs to invest, innovate and expand requires clear, predictable legislation, well-targeted support measures and effective co-ordination across government institutions. In this context, this section assesses government initiatives to promote an enabling environment for SMEs, in line with OECD principles on regulatory quality, better regulation and SME policy (OECD, 2022[3]; 2025[4]). It examines measures to facilitate market entry and exit, and to ensure that legislative and policy frameworks are evidence-based, proportionate, and responsive to SME needs, minimising administrative and compliance burdens. The section also considers the effectiveness of consultation mechanisms and the extent to which structured stakeholder engagement supports transparent, accountable and predictable policymaking.
2.1.1. Reinforcing regulatory, institutional and policy frameworks for SME lifecycle support
A sound regulatory policy and institutional framework are essential to provide effective support for SMEs across all stages of their development, from business creation to growth and, where relevant, market exit. Compared with other Western Balkans and Türkiye (WBT) region economies, North Macedonia’s regulatory environment for private-sector development ranks as the strongest, closely followed by Montenegro (World Bank, 2024[5]; WIPO, 2025[6]).
In 2024, firms in North Macedonia were less likely than most regional peers to view regulations as a barrier to growth, except for minimum wage regulations, where perceived obstacles were notably higher than the regional average (RCC, 2024[7]). However, the overall quality of the framework is constrained by insufficient mechanisms to ensure effective compliance and quality control, while delays in adopting and revising SME-specific strategies weaken the basis for coherent policy design and reduce the effectiveness of implementation efforts (Figure 2.1).
Differential between North Macedonia and the WBT regional average in selected World Bank Worldwide Governance Indicators relevant to private-sector development
Notes: Each line displays the gap between North Macedonia’s score and the WBT regional average for one indicator. The two indicators together constitute one core aspect of the Worldwide Governance Indicators report: the government’s capacity to design and implement sound policies for the private sector. Regulatory quality, which captures the government’s ability to formulate and implement sound policies and regulations that enable private-sector development, remains consistently above the regional average over the period, with North Macedonia maintaining the strongest performance in the region. In contrast, government effectiveness, which reflects the quality of public services, the capacity of the civil service, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies as a whole, has shown comparatively weaker results and fell below the regional average in 2024.
Source: World Bank (2024[5]).
During this assessment cycle, this framework entered a phase of thorough renewal, with the foundations for a new institutional set-up and strategic vision being laid; however, there has been limited progress in operationalising it for effective implementation. The newly adopted Law on the National Development Strategy provides a basis for articulating and monitoring a 20-year policy vision for the economy, forming the foundation for all policies. For SME development, this provides an opportunity to embed measures within a unified, long-term framework, enabling improved co-ordination across institutions and a more consistent, results-oriented implementation of reforms. However, as noted by the European Commission (2024[8]), business policy remains fragmented across various strategies, and planned reforms to streamline administrative structures have yet to be implemented.
In defining its policy priorities for SME support, North Macedonia is among the economies that operate within a dedicated strategic framework that was recently renewed. The 2018-2023 SME Strategy, assessed under the two preceding editions of the SME Policy Index, closed its implementation cycle with limited success. Following the expiry of the 2018-2020 Action Plan, no subsequent plan was adopted to guide implementation during the second half of the strategy period. This discontinuity and lack of accountability, combined with limited human and financial resources, critically undermined the framework's effectiveness. In response, the new National SME Strategy 2025-2030 adopted in August 2025 with EU support, was prepared through a participatory process involving a multi-stakeholder working group1 led by the Ministry of Economy and Labor and informed by a comprehensive evaluation of its predecessor. This body provided structured input during the drafting process and will continue to oversee implementation, supported by a Task Force on Monitoring and Evaluation responsible for semi-annual performance reviews, reflecting the prioritisation of monitoring following its identification as a key weakness in the strength, weakness, opportunity and threat (SWOT) analysis. While such a governance structure aims to ensure continuity, accountability and better institutional co-ordination, its success will depend on stable engagement and participation throughout the policy cycle.
In terms of strategic orientation, the SME Strategy largely builds on the previous policy cycle, thereby ensuring continuity in the government’s approach to promoting SME competitiveness and growth in line with European and international standards. It is organised around three strategic priorities covering competitiveness of the national entrepreneurial ecosystem, access to finance, and the green and digital transitions, supported by a three-year Action Plan (2025-2027) that defines institutional responsibilities, timelines and indicative financial allocations. Implementation is further underpinned by semi-annual performance reviews, annual reporting by the Ministry of Economy and Labor, and a mid-term evaluation scheduled for 2028, to be followed by a second action plan covering 2028-2030. The first report, covering 2025, is currently pending government approval and has not yet been made publicly available.
While the framework is comprehensive and relatively advanced, its effectiveness will ultimately depend on addressing persistent implementation gaps. The strategy’s policy vision is further anchored within the broader strategic framework, with objectives aligned across horizontal and sectoral initiatives that support SME participation in global value chains and the twin transition. In this context, the adoption of the Smart Specialisation Strategy (S3) 2024-2027 and its Action Plan establishes a central platform for fostering an innovation-driven business ecosystem, mainly through support for start-ups and business-academia collaboration. This was complemented in January 2024 by the long-awaited Export Promotion Strategy, repeatedly encouraged by the European Commission, which seeks to address structural constraints in the SME sector, including the persistently low share of high-growth enterprises, estimated at 5-6% (European Commission, 2023[9]; Government of North Macedonia, 2024[2]).
Since the previous cycle, a significant institutional restructuring has reshaped the governance of SME policy implementation. The new Law on Innovation Activities, Scientific-Technological Development and Entrepreneurship established a single authority responsible for innovation and entrepreneurship support, operationalising a long-awaited reform aimed at streamlining the institutional architecture. Under this reform, the Agency for the Support of Entrepreneurship of the Republic of North Macedonia (APERM) was transformed into the Agency for Innovation, Scientific and Technological Development and Entrepreneurship (INOVA), retaining its legal identity while assuming an expanded mandate. INOVA has inherited the rights, obligations, and competencies of APERM, including responsibilities related to financial support for entrepreneurship, as well as APERM's staff, assets and operational resources. It has also absorbed the functions and liabilities of the Fund for Innovation and Technological Development (FITD), consolidating financial support instruments for innovation and entrepreneurship under one institutional structure.
This reorganisation is expected to streamline governance arrangements and enhance policy co‑ordination, although its effectiveness will depend on the agency’s operational capacity and the clarity of its implementation framework. Notably, the SME Strategy itself identified insufficient financial resources at APERM as the highest-rated risk, both in terms of likelihood and potential impact. Ensuring that this constraint is not carried over into INOVA will be critical to safeguarding the agency’s operational capacity and supporting effective implementation of the reform. Moreover, effective design and implementation will also depend on improving the data systems, which are currently rather weak. Limited collaboration between the Ministry of Economy and Labor, SME support agencies, and statistical offices constrains the availability of policy-relevant data, highlighting the need for stronger inter-institutional co-ordination to align the format of evidence collection with national SME priorities.
In parallel, North Macedonia continues to pursue efforts to improve the overall business environment through legislative simplification and the reduction of administrative burdens. Over the last two assessment cycles, North Macedonia has been recognised as a regional frontrunner in legislative simplification, following significant efforts since 2019. More than 700 administrative services have been digitalised via a centralised portal, while a preliminary review of para-fiscal charges identified 377 fees affecting SMEs, with the government committing to optimise 28 of them (OECD, 2022[10]; Government of North Macedonia, 2024[11]). Nevertheless, progress has slowed in recent years. Firms in North Macedonia continue to face higher administrative and regulatory burdens than most regional peers, and the momentum for simplification reforms appears to have weakened. Only two standalone simplification measures have been adopted and fully implemented since 2023, and the para-fiscal fees optimisation reform, while advancing methodologically, is yet to be completed, despite the deadline set by the Reform Agenda being June 2025 (European Commission, 2025[12]).
One of the main challenges is the lack of a policy framework to guide and sustain simplification efforts. Current reforms rely heavily on ad hoc initiatives, which, while useful for addressing specific bottlenecks, do not provide the consistent, systematic approach needed to reduce the administrative burden on SMEs. Moreover, the inconsistent application of regulatory impact assessment (RIA) limits the government’s ability to prevent the creation of new administrative burdens. Although the SME Strategy and Action Plan envisage addressing this shortcoming by updating the legal and methodological framework for RIA and piloting an “SME Test”, these reforms remain at the planning stage.
In terms of digital governance, the government has strengthened the foundations of the business environment through the Smart/MK: Digital Macedonia 2030 Strategy, which aims to expand online service delivery, enhance interoperability and promote data-driven governance. The national e-services portal (uslugi.gov.mk) now provides more than 200 online services, including business registration, licensing, and tax procedures, marking a steady improvement in accessibility for both citizens and enterprises (MIA, 2024[13]; MDT, 2025[14]). To further facilitate uptake, a Practical Guide for Using Online Public Services was developed in 2025 under the Smart Balkans Project, providing step-by-step instructions for users navigating digital public services (Smart Balkans Project, 2025[15]).
The introduction of digital authentication and e-signature systems, aligned with the EU electronic Identification, Authentication and Trust Services (eIDAS) Regulation and provided by licensed entities such as Kartičen Interbankarski Sistem (KIBS) Skopje and New Ljubljana Bank (NLB), enables businesses to securely submit applications and sign documents electronically (KIBS, 2025[16]; MasterCard, 2021[17]). In parallel, the once-only principle has been implemented across several registries, including the Central Registry, the Public Revenue Office, and the Agency for Real Estate Cadastre, facilitating secure inter-institutional data exchange (EPI, 2025[18]). The government has also expanded its open data ecosystem, with over 280 datasets published by more than 50 public institutions on data.gov.mk. At the same time, the Open Government Partnership Action Plan 2024-2026 and the Transparency Strategy 2023-2026 aim to strengthen openness and accountability in digital governance.
North Macedonia complements its e-government ecosystem with one of the region’s longest-standing one-stop-shop systems for company registration, centrally managed by the Central Registry of the Republic of North Macedonia (CRRNM). Registration procedures with any of the 27 geographical one-stop-shops are now fully digitalised and accessible through the CRRNM’s e-registration portal, with the average cost and time required to start a business having also been optimised (World Bank, 2024[19]; Central Registry of North Macedonia, 2024[20]). The system is further reinforced by interoperable registries and the automatic assignment of a unique personal identification number for administrative interactions, reducing the need for repeated data submission. However, uptake of digital registration remains the lowest in the region, according to the 2024 Business Barometer survey, partly reflecting the continued requirement for a qualified electronic signature, which adds cost and procedural complexity for new entrepreneurs (RCC, 2024[7]).
Beyond market entry, the operational environment is also shaped by the efficiency of licensing and permit regimes, which ultimately determine firms’ ability to begin and sustain operations. In North Macedonia, licensing remains largely decentralised. Competent ministries and agencies continue to retain full responsibility for issuance, although applications and procedural information are increasingly accessible through the national e-services portal. Despite earlier commitments to streamline these procedures, no major reform has been implemented since the last assessment, and the number of requirements, associated costs and administrative steps have remained broadly unchanged, resulting in a notable share of firms continuing to view licences and permits as a significant obstacle to growth (RCC, 2024[7]).
In the area of tax compliance, firms in North Macedonia perceive regulatory requirements as comparatively less constraining for growth than their regional peers. Nevertheless, the Public Revenue Office’s 2025-2027 Strategic Plan sets out a vision to leverage digitalisation of invoicing, filing and payments, with the dual objective of further reducing compliance costs and improving transparency. At the same time, its parallel objectives of stricter enforcement and tax base broadening may increase pressures on SMEs with limited accounting capacity, partial reliance on informal income, or activity close to thresholds. Recent adjustments to the ceiling for social security contributions affect only the upper segment of taxpayers, with limited relevance for SMEs, whereas the contribution system continues to place a relatively heavier burden on lower-income taxpayers, potentially creating disincentives to formalisation (see Dimension 4). The foreseen progressive personal income tax (PIT) reform has been abandoned, while persistent imbalances in the tax exemption system continue to create tax incentives to remain small or to incorporate.
North Macedonia is still in the process of adopting a new Insolvency Act, which was initially planned for 2022. The postponement has delayed efforts to strengthen the insolvency framework. While the new legislation is set to introduce additional options for bankruptcy proceedings, it does not yet provide SME-specific provisions or expand the currently limited scope for simplified procedures, leaving many SMEs exposed to prolonged financial distress (see Dimension 2 and Cluster 2).
2.1.2. Securing systematic, comprehensive and transparent dialogue between policymakers and SMEs
Effective involvement of the private sector in policymaking is essential to ensure that the impacts of new regulations are properly assessed. When applied consistently, public-private consultations (PPCs) can improve the quality of legislation, strengthen the evidence base for decision making, and enhance the predictability of the regulatory environment, thereby contributing to a more transparent and supportive policy framework for SMEs. In North Macedonia, the regulatory framework and core instruments for public-private dialogue are formally in place and broadly aligned with EU standards, but their implementation remains weak and inconsistent. According to the 2025 OECD SIGMA (Support for Improvement in Governance and Management) Public Administration report, North Macedonia scores below the regional average in both RIA and PPC, with only Bosnia and Herzegovina performing lower in terms of quality and effectiveness of the process (OECD, 2025[21]).
North Macedonia applies one of the most comprehensive PPC regulations in the WBT region, requiring consultations on all primary and secondary legislation, as well as on sectoral strategic documents, a scope matched only by Kosovo*.2 Under the regular legislative procedure, draft laws and strategies must be published on the National Electronic Register of Regulations (ENER) by competent ministries, accompanied by all supporting materials. While a minimum consultation period of 30 days is mandatory for each draft law, no provision exists to extend this minimum in cases of exceptional complexity. Comprehensive guidance on conducting PPC is provided through detailed guidelines, methodological tools, and codes of conduct, all of which are publicly accessible online.
Yet, no government body is currently mandated to monitor compliance with these requirements, despite OECD recommendations to assign this responsibility to the former Ministry of Information Society and Administration. Now restructured as the Ministry for Public Administration, the institution continues to report on the use of the ENER platform but does not evaluate the extent to which ministries adhere to PCC quality standards. In this respect, there is no mechanism in place to verify whether stakeholder comments are reviewed, incorporated into the draft, or disregarded without justification by the responsible ministries, which undermines transparency and accountability in the consultation process.
According to the General Secretariat’s annual report on consultations with civil society organisations, in 2023, fewer than one-third of laws adopted by the government were published for consultation, with some line ministries publishing as few as one in five drafts. This can be partly explained by the extensive reliance on the shortened legislative procedure, under which RIAs are not required, applied to 68% of laws adopted over 2023-2024 (Assembly of North Macedonia, 2023[22]). As draft laws are typically published only when subject to RIA and consultation activities are reported exclusively within RIA supporting documents, the frequent use of shortened procedures constrains the implementation of PPC. The absence of a monitoring mechanism further limits the government’s capacity to identify and address the challenges faced by line ministries in applying consultation requirements (OECD, 2023[23]). While the General Secretariat’s reports provide general statistics on the use of ENER, they lack disaggregated information and feedback on private-sector participation, making it difficult to assess SME involvement in policy development. In addition, the absence of free, comprehensive public access to laws and regulations after adoption undermines transparency and limits stakeholders' ability to stay informed about the legal environment.
Since 2018, dialogue between the government and the private sector has been institutionalised through the Platform for Public-Private Dialogue, established under a memorandum of understanding with the four chambers of commerce. The platform serves as a formal forum for reviewing draft legislation and discussing issues raised by the business community. It is a good practice example in the region for enabling businesses to engage proactively with the government. In practice, meetings appear to take place monthly. Complementing the platform, the online portal BiznisRegulativa provides a channel for collecting feedback from firms and publishing information on ongoing consultations, thereby increasing accessibility for businesses that cannot participate directly in the meetings. However, the European Commission’s (2024[8]) report observed that the overall transparency and effectiveness of public-private dialogue in North Macedonia remain limited. National authorities continue to adopt measures and regulations without prior consultation or transition periods for companies, reducing the predictability and overall quality of the regulatory environment.
The way forward
Operationalise the new institutional framework to implement the SME Strategy. To avoid the implementation gaps observed in the previous strategic cycle, the Monitoring and Evaluation Task Force could be fully institutionalised, with a clear mandate and adequate resources to ensure the effective operation of the system. A dedicated budget line for monitoring and evaluation across implementing institutions would be essential to support formalised reporting processes, as defined in the government’s Methodology for Sectoral Strategies. Periodic assessments foreseen by the strategy, including a mid-term review in 2028 and external evaluations every two to three years, should be implemented as planned. Particular attention needs to be paid to ensuring that the SME Strategy and Action Plan, the Government’s four-year Programme, and the INOVA Annual Work Programme complement each other effectively in practice. This includes clarifying how strategic priorities are cascaded across instruments, preventing duplication or overlap, and ensuring that monitoring results systematically inform decision making across the policy cycle.
Strengthen quality control and broaden the analytical scope of regulatory impact assessment. Enhancing the consistency and credibility of RIA will require reinforcing the oversight function, particularly in light of the ongoing transition of responsibilities to the General Secretariat of the Government. Ensuring greater functional independence and transparency in the review process could help avoid perceptions of RIA as an internal administrative formality. In parallel, the analytical scope of RIAs should be expanded beyond a binary “implement vs. not implement” approach. Systematically incorporating multiple policy scenarios, cost-benefit analysis, and qualitative assessment tools would strengthen the evidence base for regulatory decision making and support more informed policy choices.
Strengthen SME data collection and co-ordination with statistical offices. Efforts need to focus on improving the availability and granularity of SME data and aligning national practices with EU regulations and Eurostat standards. To this end, a comprehensive gap analysis of SME-related data could be conducted to identify priority areas for harmonisation and capacity building across institutions. Co-ordination among institutions could be reinforced through a formalised structure for data collection and exchange, supported by the use of external sources.
Effective and transparent systems for RIA require robust institutional oversight to ensure both the quality of analysis and the credibility of the process. In the state of Victoria (Australia), this function is performed by the Victorian Competition and Efficiency Commission (VCEC), an independent body mandated to provide methodological guidance and quality assurance for RIA. The VCEC interacts with line ministries from the initial stages of policy development and throughout all key milestones, scrutinising the quality of analysis (e.g., problem definition, data use, and consideration of alternatives) while maintaining a strictly non-partisan role. It complements this role with regular training programmes for policy officials and the development of detailed methodological guidance.
This model has contributed to improving both the consistency and the analytical robustness of RIA across government, with available evidence suggesting that its benefits are likely to exceed associated administrative costs. Importantly, the clear separation between analytical oversight and policy decision-making strengthens the neutrality and credibility of the system, with international experience suggesting that such bodies are most effective when they are able to operate independently, with a clear mandate to challenge assumptions, methodologies, and evidence.
Policy relevance for North Macedonia
For North Macedonia, and particularly in light of the ongoing transition of institutional responsibilities, the Victorian model offers useful inspiration for strengthening the quality control of RIA. Albeit not directly transferable, given differences in administrative scale and capacity, the core principle of an independent, central oversight function remains highly relevant. In this context, while consolidating RIA oversight within the General Secretariat could improve coordination, it risks reinforcing the perception of RIA as an internal administrative requirement rather than an independent analytical tool. If such an approach is pursued, mitigating measures would be needed, including enhancing the transparency of RIA opinions and formalising early engagement with line ministries. As an alternative, North Macedonia could consider options to strengthen the functional independence of the oversight function.
Sources: Government of Australia (2012[24]), Council of Europe (2018[25]).
Assess and rebalance SME taxation under different fiscal regimes. The government is encouraged to conduct a comprehensive analysis of SME tax burdens across regimes to compare impacts and inform data-driven policy design. The assessment should examine the impact of the current simplified regime (1% tax on revenue up to MKD 6 million and its potential to create incentives for remaining small or incorporating. It would be useful to revisit options for a more balanced tax structure that supports SME growth and formalisation, building on evidence from the evaluation of recent reforms.
For SMEs to grow within their business environment, the playing field must be fair and transparent, ensuring that all firms compete under the same rules and conditions. When exceptions and irregular practices compromise the integrity of the business environment, the overall competitiveness of the market is undermined, limiting SMEs' ability to conduct and grow their activities.
Since the previous assessment, North Macedonia’s business environment has continued to present structural factors that create an uneven playing field for SMEs. Informality remains one of these challenges, with the European Commission highlighting in 2025 the low implementation of government strategies to counter the informal economy (European Commission, 2025[26]). In parallel, weaknesses in the competition framework, including persistent challenges in the enforcement of competition rules and the presence of loss-making state-owned enterprises (SOEs), have continued to distort market dynamics and constrain private-sector development (OECD, 2024[27]). Additionally, capacity constraints and limited use of alternative dispute resolution (ADR) in the economy pose a challenge for SMEs seeking judicial remedies, despite a solid legal framework for mediation.
The following section will assess the efforts undertaken by North Macedonia to level the playing field for SMEs by addressing the challenges resulting from informality, fostering fair competition in access to private and public contracts, and facilitating SME access to justice.
2.2.1. Tackling informality for a more competitive business environment
The informal economy refers to economic activities conducted outside of the formal arrangements mandated by law (OECD/ILO, 2019[28]). In North Macedonia, estimates from 2023 put the informal economy at approximately 30% of total gross domestic product (GDP), a share that has only slightly decreased over the past decade (35% of GDP in 2015) (Figure 2.2, Panel A) (World Bank, 2026[29]). Currently, it represents one of the highest shares among the WBT economies, above the regional average of 26.2%. This is compounded by recent OECD findings showing that over half of formally registered firms (56.6%) report competing with informal operators, with 32.8% identifying it as a major constraint (OECD, 2024[30]). Similarly, data from the Balkan Barometer reported that in 2024, 73% of businesses considered informal economic activities to have an impact on their business growth, with 52% defining them as a moderate to major obstacle (RCC, 2024[7]).
Informal employment remains a significant component of informality in North Macedonia, accounting for approximately 11.1% of total employment in 2024, up from 9.7% in 2023 (Figure 2.2), with the increase partially driven by developments in the agricultural sector (ILOSTAT, 2026[31]) (World Bank, 2025[32]). However, the economy records the lowest proportion of informal labour relative to the total employed population in the region, well below the regional average of 20% and in contrast with the high percentage of economic informality, suggesting that informality may be driven by non-declaration of revenue or firm non-compliance than by widespread undeclared employment. Three sectors alone account for 77% of total informal employment, with agriculture in first place at 51%, followed by construction at 15%, and trade at 10% (ILO, 2023[33]). All three are characterised by a dominant presence of SMEs, which account for approximately 99.9% of all operating companies within each of the three markets (MAKSTAT, 2024[34]). Additionally, agriculture is the third for number of active micro enterprises, behind technical activities and real estate, with micro firms accounting for as much as 94.7% of total market share (MAKSTAT, 2024[34]). This concentration of micro and small enterprises in sectors most affected by informality points to a structural imbalance. SMEs, which have limited financial and administrative capacity to comply with formal requirements, are most active in markets where non-compliance is most widespread. This creates a twofold problem, where compliant SMEs bear higher relative compliance costs while being under competitive disadvantage in the face of non-compliant rivals, weakening incentives to formalise. Government action should therefore prioritise markets where informal employment is at its highest and small and micro enterprises represent the largest share.
Percentage of total GDP and percentage of total employed population
Sources: World Bank (2026[29]), ILOSTAT (2026[31]), OECD (2025[35]; 2024[27]).
To tackle the high level of informality in its economy, North Macedonia adopted in 2023 the Strategy for the Formalisation of the Informal Economy for 2023 – 2027. Building on the previous Strategy for 2018-2022, it aims to tackle weak interinstitutional coordination, low inspection capacity, and insufficient digital tools. The previous strategy was only partially implemented, resulting in no significant reduction of economic informality and a rebound of informal employment in 2023 (Ministry of Finance, 2023[36]). The new strategy aims to reduce the informal economy to 26% in 2030 through several measures, including targeting SME-intensive sectors such as agriculture, construction, and commerce, through both the introduction of a new Law on Labour Engagement of Persons in 2025 and enhanced inspection in e-commerce. However, the Strategy lacks a detailed implementation budget, with an indicative financial plan noting approximately 68% of measures relying exclusively on donor support, and has, at present, no published annual implementation reports, complicating progress tracking (Ministry of Finance, 2023[36]).
Nonetheless, several actions suggest initial progress in its implementation. Namely, the enforcement capacity of North Macedonia’s monitoring institutions, the State Labour Inspectorate (DIT) and the State Market Inspectorate (GPI), significantly increased3, contributing to a more compliant business environment and helping to protect SMEs, which are particularly exposed to competitive disadvantages arising from non-compliant firms. Furthermore, the entry into force in 2026 of the 2025 Law on Labour Engagement of Persons introduced a simplified procedure for hiring and registering seasonal workers. This reform facilitates the formalisation of temporary contracts, which are common among SMEs, particularly in agriculture and construction, where seasonality and short-term employment often lead to undeclared work due to administrative costs and procedural complexity (Parliament of North Macedonia, 2025[37]).
Reducing informality and enabling SME growth also requires a fiscal framework that avoids overburdening small revenues and ensures regulatory simplicity, particularly for firms with limited administrative capacity. At present, North Macedonia operates a simplified tax regime for SMEs with an annual turnover of under MKD 3 million (approx. EUR 49 000), with a complete exemption from Corporate Income Tax (CIT) (OECD, 2024[27]). SMEs with revenues between MKD 3 million (approx. EUR 49 000) and MKD 6 million (approx. EUR 97 000) are instead subject to either a 10% CIT or a 1% tax on turnover, a system resulting in a low effective tax rate and consequently lowering SMEs’ access costs to the formal economy (OECD, 2024[27]). However, it is equally important to design a framework encouraging SMEs to grow without facing a disproportionate rise in effective taxation and compliance costs, two elements that SMEs are particularly vulnerable to. The current taxation regime establishes that revenues exceeding MKD 6 million are subject to a CIT of 10%, a considerable jump from a 1% tax on turnover applied to smaller firms and a possible disincentive for SMEs seeking to expand their business beyond this threshold. Personal income tax (PIT) also plays a central role in the formalisation of both the labour market and the wider economy, as high rates can discourage SMEs from declaring revenues or formally hiring workers. In this regard, North Macedonia has introduced a specific system exempting employers from withholding PIT on new hires for up to three years, reducing labour costs and easing the financial constraints that limit formal employment growth among SMEs (OECD, 2024[27]).
To further align its fiscal framework with efforts to counter the grey economy, North Macedonia adopted in 2025 the Fiscal Strategy for 2025 – 2029, in which one of the key objectives is the reduction of the grey economy. The strategy outlines several measures to curb the grey economy, including the introduction of e-invoicing and e-fiscalisation systems, which are expected to facilitate revenue reporting for SMEs by streamlining the declaration process (Ministry of Finance, 2025[38]). However, the positive effect of the strategy will depend on its implementation, which currently lacks a precise timeline and a detailed action plan.
In addition to a relatively light tax burden and promotion of labour market formalisation, the business registration framework plays a critical role in facilitating SME formalisation. Business registration in North Macedonia centres on the Central Registry one stop shop, which enables e-registration and automatic tax identification, allowing SMEs to register rapidly and free of charge (see section 2.1.1). In 2021 the system was further digitalised, with the beneficial ownership registry operationalised and registry data increasingly exchanged with the Public Revenue Office, banks and other agencies (Central Registry of North Macedonia, 2021[39]). These changes are intended to enable faster and cheaper registration for SMEs with a reduction of administrative steps, while facilitating monitoring and compliance oversight by authorities. This has translated into increased registration, with business registration numbers increasing by 5% since 2021, with 6 260 new enterprises registered in 2023 compared to 5 960 in 2021 (MAKSTAT, 2025[40]). However, this still represents a 19.6% decrease compared to 2019, when total enterprise creation reached 7 785 new firms, suggesting that recent improvements have not yet translated into a full restoration of pre-COVID levels (MAKSTAT, 2025[41]).
2.2.2. Protecting and monitoring fair market competition
To successfully maintain a level playing field, it is essential for governments to uphold competitive neutrality, ensuring that no firm unduly benefits through preferential treatment or public resources. This is especially true in the context of public procurement and SOEs, where public funds risk being misallocated, potentially crowding out private investment. Such distortions disproportionately affect SMEs, whose smaller size and capital make them particularly vulnerable to unfair competition.
In North Macedonia, competition rules are established under the Law on Protection of Competition No. 145/2010, which provides the legal framework for market competition and designates the Commission for Protection of Competition (CPC) as the independent enforcement authority. According to the European Commission, in 2025, the CPC continued to face significant challenges due to staff and funding shortages, with a total budget of MKD 30 million in 2024 (approx. EUR 490 000) (CPC, 2025[42]) (EC, 2025[43]). These resource constraints are compounded by the absence of SME-support mechanisms and SME-specific data collection. Most CPC decisions in 2023 concerned the telecommunications, energy, and automotive sectors – markets dominated by large firms – suggesting limited oversight of SME-intensive sectors such as agriculture or manufacturing (CPC, 2025[42]). Furthermore, approximately 85% of the Commission’s interventions in 2023 concerned merger control, a trend that was confirmed and reinforced in 2024 as merger control again represented by far the largest share of the Commission’s activity (CPC, 2025[42]). As in the previous year, merger control rarely involved SMEs given that only mergers exceeding a combined turnover of EUR 10 million fall under its scope, well above the average SME turnover in North Macedonia, which ranges from EUR 100 000 to EUR 600 0004 (MAKSTAT, 2025[44]) (CPC, 2025[42]). Despite the adoption of a 2023-2025 Strategic Plan aimed at improving CPC performance, no SME-specific measures or indicators are included. However, planned outreach activities to raise awareness of new and existing competition rules may still indirectly benefit SMEs, which often lack the legal expertise and institutional knowledge to stay informed and compliant with regulatory standards (CPC, 2023[45]).
One notable legislative advancement was the adoption of the 2024 Law on Prohibition of Unfair Trading Practices in the Supply Chain of Agricultural and Food Products (Box 2.2). The law strengthens safeguards against abusive practices in business-to-business relations in the agricultural and food supply chain. Given that this sector is largely composed of SMEs in North Macedonia, it represents an important step in protecting smaller firms from the disproportionate bargaining power of larger buyers. Its adoption is particularly relevant as the CPC issued no decisions concerning the agricultural sector in 2023, highlighting an oversight gap in a market dominated by SMEs (CPC, 2025[42]).
The Law on Unfair Trading Practices in the Supply Chain of Agricultural and Food Products represents a major step in strengthening North Macedonia’s competition framework and aligning it with Directive (EU) 2019/633 on unfair trading practices in business-to-business relations in the food supply chain. The law introduces rules and enforcement mechanisms to protect suppliers, particularly SMEs, from abusive conduct by larger buyers holding significant market power.
The law defines unfair trading practices as contractual and business behaviours unilaterally imposed by buyers that deviate from good commercial practice. It establishes the CPC as the competent authority for its implementation. To prevent abuse of market power, the law explicitly bans several trading practices, such as cancelling orders for perishable goods within 30 days, unilateral contract changes, or imposing unjustified payment requests or demands that suppliers finance marketing, promotions, or shelf placement. It further provides a definition of significant bargaining power, serving as a transparent benchmark for enforcement. Furthermore, the law protects suppliers from commercial retaliation for exercising their rights, including through the submission of complaints to the CPC. Lastly, it mandates written contracts and prohibits retrospective contract modifications, thus strengthening SMEs’ ability to plan production and manage cash flow.
Policy impact
The adoption of this law represents an important improvement for SMEs active in agriculture and food production, which are now more legally protected from damaging practices. However, the policy’s impact will depend on the CPC’s capacity to raise awareness among SMEs in the sector while in parallel strengthening market monitoring across smaller agricultural supply chains.
Sources: Assembly of North Macedonia (2024[46]), Chambers and Partners (2024[47]), EU Payment Observatory (2024[48]).
Fair competition is also essential in public procurement, which accounts for 9% of total GDP in North Macedonia, approximately MKD 83.2 billion (approx. EUR 1.4 billion) (PPB, 2024[49]). This is slightly lower than the WBT average of 10%, and marks a slight decrease from previous years, where public procurement had reached approximately 11% of GDP in 2021 (EC, 2022[50]). SME participation in public contracts has remained broadly stable since the previous assessment, with SMEs receiving 81.3% of contracts by number in 2024, compared to 81.2% in 2022, reflecting little to no change in their roles in public tenders (PPB, 2025[51]).
To guide reforms in public procurement, North Macedonia adopted in 2022 the Strategy for Improving the Public Procurement System for 2022–2026, setting out priorities for strengthening institutional capacity, improving access for SMEs through training activities, the introduction of dynamic purchasing system5 (DPS), and the establishment of a completely digital e-marketplace for tenders (PPB, 2022[52]). Such measures aim to raise awareness among SMEs of available public contracts while reducing the administrative burdens associated with tendering, which disproportionately affect smaller firms due to their limited administrative capacity. Albeit full implementation will not be completed until 2026, some measures have already been introduced, including the e-marketplace, adopted in 2022, which acts as a key enabler of SME market access, with SMEs accounting for 81.2% of tenders conducted through the platform in 2024 (PPB, 2025[53]) (ESPP, 2026[54]). However, the use of the platform is limited, with only 70 small value procurements taking place through it in 2022, and key SME-relevant measures such as DPS, which can lower entry barriers and expand market access for smaller firms, are still under development (MIA, 2023[55]).
Despite measures introduced to enhance the inclusion of SMEs in public procurement, obstacles limiting their access and undermining fair competition remain. In 2022, approximately 31% of procurement procedures were cancelled, representing a loss of time and resources for SMEs, which must devote proportionally greater effort to bid preparation than larger firms (PPB, 2023[56]). Additionally, in 2024 nearly 95% of public contracts were awarded based solely on price, reflecting a procurement system that prioritises cost over quality or innovation, disadvantaging SMEs that may be better positioned to compete on value rather than price (PPB, 2025[51]). While the Public Procurement Bureau (PPB) has introduced support tools that may be of help to SMEs, such as advisory services and a help desk, these efforts remain largely focused on contracting authorities, with no structured training available for firms. These trends outline limited competition in practice, with SMEs winning smaller contracts while larger firms dominate high-value tenders. This is evidenced by SMEs accounting for 57.1% by contract value in 2024, a decreasing number from 59.5% in 2022 (PPB, 2025[51]; 2023[56]).
Lastly, a solid institutional framework for fair competition requires balanced public support in the economy, avoiding undue advantages for any single entity, in particular SOEs, at the expense of private firms (OECD, 2024[27]). In North Macedonia, SMEs face difficulties accessing markets where SOEs benefit from extensive public subsidies and government guarantees. Additionally, SOEs may benefit from state-backed financial support even in the absence of adequate returns; in 2025, 15 out of 29 SOEs operated at a loss, a situation that may affect competitive neutrality by limiting their exposure to market discipline compared to SMEs, which must rely on commercial performance to remain active. In comparison, total government support for SMEs in 2022 stood at EUR 45 million (Invest North Macedonia, 2022[57]). Oversight and governance challenges compound these issues, with North Macedonia’s SOE portfolio being highly decentralised across several line ministries with no central ownership policy or co-ordination, leading to fragmented control (OECD, 2024[27]). These dynamics erode market efficiency and competitiveness by absorbing public resources that could otherwise support private investment and by constraining SMEs’ access to finance and growth opportunities.
2.2.3. Providing efficient judicial and out-of-court dispute resolution mechanisms
A fundamental aspect of a fair business environment is access to timely and efficient justice. SMEs are particularly vulnerable to prolonged litigation, as their small size limits their ability to absorb long waiting times and temporary losses. This in turn discourages SMEs from seeking legal remedies, leaving them subject to unfair trading practices and non-compliance. The legal system should therefore strengthen its alternative dispute resolution (ADR) framework to provide more cost-effective and accessible procedures. However, North Macedonia’s judicial system continues to face barriers related to growing backlog and underused ADR mechanisms.
For quick and efficient resolution of SME-related cases, the judicial system should provide specialised commercial courts where cases can be handled with the appropriate expertise and understanding of business to business relations (OECD, 2023[58]). North Macedonia has no specialised commercial courts, opting instead for a system of specialised commercial divisions within first instance courts (COE, 2019[59]). At present, 11 of these court divisions exist, and the cases they handle range from bankruptcy, contract issues, international trade disputes, and intellectual and industrial property rights (COE, 2019[59]). Together with Albania and the Federation of Bosnia and Herzegovina, it is the only economy of the WBT region to not have separated specialised commercial jurisdictions. This acts as a barrier for SMEs seeking judicial remedies, as commercial disputes are processed within general civil courts that lack business specialisation and face heavier caseloads, resulting in longer processing times, with first instance civil and commercial cases taking an average of 312 days to reach resolution in 2022 (CEPEJ, 2024[60]). Despite the adoption of the Strategy for Justice Sector Development 2024-2028 in 2023 aimed at improving its legal system through increased digitalisation, no measures relating to commercial dispute mechanisms or SMEs were planned (Ministry of Justice, 2023[61]). Albeit increased digitalisation may speed up processes and consequently benefit firms seeking legal solutions, a lack of SME focus risks overlooking their specific needs and vulnerabilities in accessing justice.
To address lengthy judicial procedures, to which SMEs are particularly vulnerable to, governments need to promote ADR options to complement the work of the courts, particularly where traditional justice systems face inefficiencies and case backlogs. Out of court options such as mediation and arbitration are allowed within the legal framework of North Macedonia, however are seldom used or encouraged by legal personnel.
Mediation in North Macedonia has a solid legal framework in place, established by the Law on Mediation of 2021, which recognises it as a legally viable alternative (Assembly of North Macedonia, 2021[62]). Prior to its introduction, the Law on Civil Procedure of 2015 established mandatory mediation in commercial disputes for monetary claims for up to MKD 1 million (approx. EUR 16 000), a measure well suited to SMEs, whose disputes generally concern similar amounts (Assembly of North Macedonia, 2015[63]). In practice, however, mediation sees little to no application, with a total of 362 civil and commercial cases resolved through it in 2022, accounting for less than 1% of all litigious civil and commercial cases handled by courts (COE, 2024[64]). North Macedonia had a total of 46 mediators in 2023, with an average of 2.5 mediators per 100 000 inhabitants, placing it substantially lower than the WB6 average of 17.8 (COE, 2024[64]). Despite these challenges however, the ADR tool proved to be successful, with 339 out of the 362 cases managing to either conclude the mediation or find a settlement agreement in 2022, highlighting it as an effective ADR mechanism (COE, 2024[64]). Recognising this, the Justice Sector Development Strategy 2024–2028 prioritises strengthening mediation through the ratification of the Singapore Convention on Mediation, its integration into the free legal aid scheme, and the assessment of cases where mediation could become mandatory, potentially increasing its accessibility to SMEs (Ministry of Justice, 2024[65]).
Arbitration is another option providing a flexible alternative to court litigation, albeit remaining a very underused ADR mechanism in North Macedonia. Both domestic and international arbitration is conducted through the Permanent Court of Arbitration at the Economic Chamber of North Macedonia (Economic Chamber of North Macedonia, 2021[66]). In practice, however, arbitration remains underused by SMEs due to high costs and limited awareness. For instance, seizing the chamber for arbitration costs approximately 90 000 MKD (approx. EUR 1 505), a sum which SMEs may be discouraged from paying, especially when more affordable alternatives exist (Economic Chamber of North Macedonia, 2022[67]). Furthermore, given that arbitration is centralised in a single institution in Skopje, access for firms located outside the capital remains limited, with little regional outreach. Despite the adoption in 2021 of the Skopje Arbitration Rules, a law aiming to further align its framework with international standards, no public financial relief or targeted outreach for SMEs was introduced, pointing to a low prioritisation of SME access to arbitration (Economic Chamber of North Macedonia, 2021[66]).
Lastly, SMEs are often involved in cases regarding the infringement of intellectual property rights (IPR). In North Macedonia, the IPR legal framework has been noted to lag behind on several aspects, presenting several gaps in policy setting and enforcement. North Macedonia’s domestic IP enforcement framework allows rights holders, including SMEs, to pursue infringement through the State Office for Industrial Property (SOIP). In practice however, these mechanisms are often cumbersome and inconsistently applied, with the SOIP being unable to implement decisions and coordinate enforcement in IPR infringement (EC, 2025[43]). To address these challenges, North Macedonia planned in 2021 to adopt the Strategy for Intellectual Property for 2022 – 2026 (SOIP, 2021[68]). Positively, the Strategy directly targets SMEs and considers them as key stakeholders, planning to support their business growth by facilitating patenting and raising awareness on procedures (SOIP, 2021[68]). However, as of 2025, the Strategy was still pending adoption, with no clear timeline for its approval.
The way forward
Adjust SME taxation thresholds and incentives to support formalisation. While North Macedonia’s simplified tax regime offers low barriers to enter the formal economy, the sharp increase in effective taxation for revenues exceeding MKD 6 million (approx. EUR 97 000) risks discouraging SME expansion and encouraging under-declaration of income. Policymakers should therefore examine whether adjustments to the current threshold structure could better support SME growth without undermining public revenues.
Strengthen SME participation and competition in public procurement. North Macedonia’s public procurement system has seen increased SME participation by number of contracts, partially thanks to greater digitalisation. However, competition remains weak, with many procedures attracting few bids and limited engagement on the digital procurement portal. Further efforts should focus on expanding the use of the portal, improving tender design, and raising awareness among SMEs on how to participate in public tenders.
Enhance competition neutrality and oversight of SOEs. Extensive public financial support and weak oversight of SOEs continue to distort competition in North Macedonia, limiting SMEs’ access to market sectors and private investment. Government action should establish a centralised SOE ownership coordination framework to improve transparency on public financial support, ensuring that SOE activities do not distort the level playing field for SMEs.
Strengthen the accessibility and use of alternative dispute resolution (ADR) mechanisms for SMEs. While mediation and arbitration are legally recognised in North Macedonia, their use remains limited due to the low number of mediators and the high cost of arbitration. It is thus key for North Macedonia to strengthen ADR mechanisms, increase the number of accredited mediators, and promote wider use of both mediation and arbitration among SMEs.
Strengthen the protection and enforcement of IPR for SMEs. Weak enforcement and coordination of intellectual property rights continue to undermine legal certainty for SMEs in North Macedonia. While the Strategy for Intellectual Property 2022–2026 demonstrated a willingness to support SMEs through improved patenting and awareness measures, it is pending adoption. Government action should thus focus on strengthening the SOIP’s capacity while developing SME-specific programmes to support IPR utilisation (See Box 2.3).
Implemented by the French Intellectual Property Office (INPI), the Pass PI scheme reimburses up to 50% of eligible expenses related to IP consulting and protection, for a maximum total of EUR 5 000 per company. The measure covers patentability studies, trademark and design protection, contract assistance, and IP advice by external experts. The programme specifically targets SMEs registered in France and reduces financial barriers to IP protection by supporting firms with limited capital register and obtain their patents without excessive financial loss.
This financial support also extends to certain legal aspects related to IP disputes, with activities such as drafting or negotiating IP-related contracts, licensing agreements, and settlement preparations considered eligible for reimbursement. This allows SMEs to seek professional legal advice on IP matters without being discouraged by legal services’ high costs.
France’s experience shows that targeted IP support can make a measurable difference for SMEs, with data from the INPI showing that between 2019 and 2023, 80% of applications came from start-ups and small enterprises (INPI, 2025[69]). This shows that financial incentives for patent registration can effectively stimulate SME participation in IPR, an area where SMEs continue to face challenges in North Macedonia.
Sources: INPI (2025[70]; 2025[69]).
Access to finance is a critical enabler of SME establishment, growth, and resilience, allowing firms to invest in innovation, expand operations, and manage cash flow. Limited access can disproportionately constrain smaller businesses compared with larger, better-capitalised 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 economies recorded a lower share of outstanding SME loan stocks in 2024 than in 2023 (OECD, 2026[71]). Consistent with this broader pattern of financing constraints, firm perceptions in North Macedonia also point to persistent barriers: 26% of businesses in North Macedonia indicated that access to finance is a significant obstacle for their growth in 2024, a figure higher than the Western Balkan average of 17% (RCC, 2024[7]).
Several factors contribute to this outcome, notably limited access to corporate credit and the absence of viable alternatives to bank financing, particularly for SMEs. Public authorities could play a central role in easing these constraints by improving lending conditions, for instance, through credit guarantee schemes and policies easing asset collateralisation, interest rate subsidies, or simplified application processes, to lower banks’ perceived risk and stimulate SME lending. In parallel, fostering the development of alternative financing channels would help diversify funding options for smaller firms, particularly through capital markets, private equity and venture capital. Complementary direct support measures, such as grants for investment in innovation, greening and digital transformation, could further strengthen SMEs’ resilience, competitiveness, and capacity to pursue growth-oriented initiatives.
In this context, this section assesses the success of policies in enabling SMEs’ access to bank finance and alternative financing avenues, as well as the direct financial support implemented to encourage SME establishment, operations and growth.
2.3.1. Facilitating bank lending to SMEs
For SMEs in North Macedonia, access to bank finance remains crucial for sustaining business activity and growth. The banking sector still dominates the financial system, though its share of total assets declined marginally from 79.2% in 2022 to 76.2% in 2024. (National Bank of North Macedonia, 2025[72]). The banking sector of North Macedonia is generally well-capitalised, therefore resilient to economic shocks: in June 2025, the core capital adequacy ratio6 was 19.6%, surpassing the euro area (16.1%) (European Central Bank, 2025[73]). The banking sector is also broadly liquid, profitable and compounded by high liquidity assets, with non-performing loans falling to 2.3% of total gross loans in 2025, the lowest level since 2008 (National Bank of North Macedonia, 2025[72]).
Banks in North Macedonia operate within a relatively robust credit infrastructure that provides reliable information to creditors, underpinned by a comprehensive asset registration system. The National Bank of the Republic of North Macedonia establishes and maintains an electronic public Credit Registry, to which banks are required to report credit-risk exposures, and individuals can access their own Credit Registry report via the National e-Services Portal. In parallel, the Credit Bureau of North Macedonia (MKB) complements public reporting by integrating a broader set of liabilities, including bank and non-bank products, as well as selected utility and service-payment obligations (e.g. telecommunications, energy, and communal charges).
Regarding asset registration, the Real Estate Cadastre Agency manages cadastral data covering the entire territory of North Macedonia, while the CRRNM administers the Pledge Registry for security interests over movable property and rights, including securities and monetary claims, as well as certain intangible assets such as trademarks, industrial designs and patents.
While the credit infrastructure and asset registration systems generally support access to bank finance, costly liquidation procedures in North Macedonia remain a significant barrier. Liquidation processes take around 30 months on average, comparable to regional and EU averages, but incur costs of about 10% of the estate, significantly higher than in Bosnia and Herzegovina (5-7%) and Montenegro (2%) (World Bank, 2024[19]), providing incentives to banks to use stringent collateral requirements to cover these potential costs (see Cluster 2 for more details). In 2024, 98.6% of firms in North Macedonia were required to provide collateral for a new loan, whereas this figure was much lower in most EU economies, such as Croatia (53.6%) or Ireland (40%) (OECD, 2026[71]).
Amid rising borrowing costs driven by tighter monetary policy and heightened macroeconomic uncertainty,7 credit guarantee schemes and credit lines are providing greater support for access to bank finance in North Macedonia. Launched in 2021, the Development Bank of North Macedonia (DBNM)’s Credit Guarantee Fund portfolio is continuously increasing, reaching commitments of EUR 15.2 million for EUR 46 million of approved loans at the time of writing (Development Bank of North Macedonia, 2025[74]) while only EUR 5.3 million and EUR 9.4 million, respectively, in the fourth quarter of 2022 (Development Bank of North Macedonia, 2025[75]). Two donor-led initiatives further complement North Macedonia’s scheme, the European Bank for Reconstruction and Development (EBRD)’s Risk Sharing Framework and the European Investment Fund (EIF)’s Guarantee Facility 4 SME Resilience, whose financial sizes are modest in comparison (Table 2.1).
Notes: Active credit guarantee schemes also include the EBRD’s HI-BAR program, the EBRD’s Risk sharing for ESG projects program, the EBRD’s Credit Enhancement of Green Bonds, the EBRD’s Growth for All program, KfW’s MSME Guarantee Platform, the EBRD’s Digital Transformation Platform Guarantee, For more details, see Western Balkans Investment Framework (2026[76]).
Sources: 1. Development Bank of North Macedonia (2025[74]); 2. EBRD (2025[77]); 3. EIF (2024[78]; 2024[78]).
Despite recent declines, credit lines remain relevant for supporting access to bank finance in North Macedonia. In 2024, the DBNM introduced EUR 62 million of credit lines (Development Bank of North Macedonia, 2025[74]), down from EUR 93 million in 2022 (Development Bank of North Macedonia, 2023[79]), and EUR 107 million in 2023 (Development Bank of North Macedonia, 2024[80]). However, this trend may reverse in the coming years, as the government’s Loans for Investments and Development Programme, launched in 2025 with a planned envelope of EUR 250 million,8 substantially expanded the Development Bank’s lending capacity. By December 2025, more than EUR 200 million had already been disbursed to firms under the programme, with the Ministry of Finance reporting EUR 220 million made available to companies. This was complemented by additional external financing, including the Council of Europe Development Bank’s credit line to the DBNM, approved at EUR 50 million, although only a smaller share appears to have been deployed in 2025. However, despite their substantial financial volume, not all programmes are exclusively targeted at SMEs and are not subject to any evaluation of effectiveness, which may limit their potential to enhance SME access to bank finance. In particular, the Individual Guarantee window under the Credit Guarantee Fund is not specifically SME-focused, while the DBNM’s own capital-funded Guarantees for Securing Customs Debt in Inward Processing scheme mainly serves export-oriented firms (Development Bank of North Macedonia, 2025[81]). Similarly, the Loans for Investments and Development Programme do not. Strengthening the SME focus of this initiative would be particularly relevant for North Macedonia, as SMEs’ share of total outstanding commercial bank loans has declined from 30.2% in 2019 to 26.9% in 2024, remaining well below the Western Balkan average of 35.5% (International Monetary Fund, 2025[82]) (Figure 2.3). Finally, despite consistent portfolio monitoring and data disclosure published on the DBNM’s website,9 running programmes have not been subject to impact evaluation, resulting in limited evidence on their effectiveness in expanding SME financing opportunities.
Notes: The WBT average excludes Montenegro due to insufficient data. The EU-27 average has not been reported due to insufficient data coverage across economies.
Source: International Monetary Fund (2025[82]).
2.3.2. Providing alternatives to bank finance
In addition to maintaining an adequate supply of bank credit, governments should facilitate SMEs access to a wider range of external financing options to support their growth. Despite ongoing reforms, alternative financing channels remain underdeveloped, largely due to the absence of dedicated legal frameworks, limited government programmes to support their development, and limited awareness among business owners.
Capital markets remain an underused source of finance for established SMEs in North Macedonia. The market capitalisation of the Stock Exchange of North Macedonia (MSE) remains relatively low, standing at 25.8% of GDP in 2023, well below the EU average of 61.3% (CEIC, 2025[83]). The bulk of listed companies are former SOEs rather than newly listed growth firms, with the most recent listing dating back to 2013.10 Despite the existence of a dedicated segment for small joint-stock companies, requiring a minimum capital of EUR 250 000 and one year of audited financial statements (compared to EUR 10 million and three years for the top-tier listing), no SMEs have been listed on the exchange as of February 2026, and SME bond issuance via the market has not materialised, suggesting that these requirements might still remain too restrictive.
To develop its capital markets, North Macedonia has primarily focused on harmonising its legal framework to broaden the country’s narrow domestic investor base by adopting and bringing into the Law on Financial Instruments and the Law on Prospectus and Transparency Obligations for Issuers of Securities in 2025. These laws align key aspects of the national securities market framework with the EU acquis and aim to introduce new financial products and markets, strengthen supervision and transparency, and enhance investor protection to attract investment from the EU market. However, with regard to encouraging SMEs to access capital markets, the only initiative launched during the current assessment cycle was the publication of the Initial Public Offer Handbook in July 2022 by the Securities and Exchange Commission of North Macedonia, with support from the United States Agency for International Development, to help businesses understand and navigate the process of going public and issuing shares for the first time on the MSE. As of February 2026, no new listings have occurred, suggesting that additional, more proactive policy measures are needed to stimulate SME participation in North Macedonia’s capital markets.
While capital markets remain underdeveloped, alternative sources of finance are slowly gaining traction, but innovative SMEs and start-ups still have few alternatives to bank financing. Expressed in purchasing power parity in 2021 prices, venture capital (VC) activity has recently increased in North Macedonia (Figure 2.4) with investment volumes rising from USD 1.3 million (~EUR 1.1 million) in 2019 to USD 18 million (~EUR 16.6 million) in 2024. The amounts remain modest, however, compared to neighbouring economies such as Bulgaria (EUR 111.7 million) (Dealroom, 2025[84]).
Notes: For comparability, data for Türkiye have not been included in the figure. In 2024, private equity volumes are estimated to be EUR 2.5 billion (2021 PPP).
Source: OECD calculations based on Dealroom (2025[84]).
A key barrier to further development of private equity (PE) and VC is the absence of a dedicated legal framework, alongside proactive policies such as public fund-of-funds. PE and VC continue to fall under the Law on Investment Funds, which regulates collective investment vehicles but does not provide a specific regime for alternative investment funds (AIFs) or their managers. While the government has prepared a draft Law on Alternative Investment Funds to transpose the acquis,11 the law has not yet been adopted, limiting the emergence of specialised funds and cross-border participation in North Macedonia’s market. In tandem with plans to develop a dedicated legal framework for AIFs, North Macedonia approved the 2022-2026 Accelerated Economic Growth Plan, which aims to launch the EUR 27 million Hybrid Investment Fund to channel equity investments into start-ups and innovative SMEs and to complement the existing donor-funded programmes; however, implementation details remain outstanding. Finally, it should be mentioned that North Macedonia stands out among Western Balkan economies with the highest number of business angel networks, nine in 2023, compared with no more than one or two in other economies in the region (European Business Angels Network, 2024[85]), which provides potential for the future development of PE and VC activities in the economy. While this signals a strengthening entrepreneurial support ecosystem, the capacity and investment reach of these networks remain modest, as the total business angel investments had not exceeded EUR 400 000 in 2022 (European Business Angels Network, 2024[85]), suggesting the need to develop targeted programmes supporting business angel syndicate formation12 (OECD, 2025[86]).
Note: 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 has was registered in North Macedonia for the year 2023.
Sources: 1. SEAF (2025[87]); 2. Enterprise Innovation Fund (2026[88]); 3. EBRD (2025[77]; 2025[89]); 4. Western Balkans Investment Framework (2026[76]).
Among alternative financing instruments in North Macedonia, leasing is the most widely used. Leasing volumes have increased significantly, reaching 1.2% of GDP in 2023 (around EUR 168 million), up from 0.62% in 2017 (EUR 62.3 million) (National Bank of the Republic of North Macedonia, 2024[90]), though this level remains below the EU average of 2.05% in 2023 (Leaseurope, 2024[91]). The legal framework is generally more advanced, and the amendments to the Law on Leasing, implemented in August 2022, addressed essential gaps, including the regulation of offences and penalties under leasing contracts. Despite the lack of specific policies to develop this market, such as tax incentives to promote its use, the comparatively stronger uptake of leasing may stem from higher awareness among businesses: in 2022, 80% of SME managers in North Macedonia reported being familiar with lease finance, compared with only 47% for public equity, 36% for VC, 33% for crowdfunding, 23% for factoring, and 21% for business angel investment (OECD, 2023[92]), underscoring the need to enhance financial literacy to expand SME access to alternative financing instruments.
Factoring is marginally used by SMEs in North Macedonia. Market volumes remain modest, at EUR 62 million in 2024 (0.4% of GDP), well below the EU average of 11.9% in 2023 (FCI, 2024[93]). As with most alternative financing instruments, factoring in North Macedonia still lacks a dedicated legal framework. The July 2023 amendments to the Law on Financial Companies strengthened the regulation of non-bank financial institutions, including factoring providers, by introducing higher capital requirements, clearer governance standards, and transparency rules, while formally recognising factoring as a financial activity. However, the law still falls short of providing a comprehensive definition of factoring and omits specific provisions on dispute resolution, late payments, and the assignment of future receivables. This continued regulatory uncertainty remains a significant obstacle to the broader development of the factoring market.
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 2.7% of North Macedonia’s GDP in 2024, a level significantly higher than the EU average of 0.8% (World Bank, 2024[94]). Overall, SMEs in North Macedonia cannot fully benefit from crowdfunding to finance their investments because there is no systematic, government-backed approach or legal framework governing such activities. Despite the economy’s Fintech Strategy for Financial Regulators 2023-2027 expressing an intention to modernise the legal framework of new financial technologies, no concrete steps have been taken to do so.
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 twin transitions.
In addition to existing donor-funded initiatives (Table 2.3), North Macedonia supports the establishment of SMEs by targeting underserved groups, such as women entrepreneurs and long-term unemployed individuals (see Cluster 4). The main active initiative is the Self-Employment Programme, with a 2024 budget of MKD 815 million (~EUR 13.2 million) and a target of establishing 1 475 new businesses by registered unemployed persons. Since its launch in 2007, the programme has supported more than 11 000 entrepreneurs; however, despite competitive selection and conditionality linked to business-plan approval, its overall effectiveness appears limited, as only a relatively small share of supported firms have survived over the longer term (European Commission, 2019[95]).
Regarding the growth phase of SMEs, North Macedonia implements several schemes that provide targeted financial support for innovation, complemented by two additional programmes that support internationalisation. These are further reinforced by nascent initiatives promoting the digital transformation and the green transition, although their scope and financial scale remain limited (Table 2.3).
INOVA serves as a pillar of North Macedonia’s Growth Acceleration Plan 2022–2026 and remains the leading public institution financing SME innovation. Before it transitioned to INOVA in August 2025, FITD’s direct financial support reached EUR 10.6 million in 2024, up from EUR 7.2 million in 2022, delivered through seven active grant schemes supporting early-stage innovation, commercialisation and technological development in established firms (Table 2.3). Despite its expanding financial capacity, the Fund’s M&E framework has recently weakened because it has not published annual work programmes, financial reports, or impact assessments since 2021. This decline in transparency coincides with a downward trend in SME innovation activity: SMEs’ business expenditure on research and development (BERD) fell from EUR 5.0 million in 2019 to EUR 3.5 million in 2023, while their share in total national BERD dropped markedly, from 43.8% in 2019 to 26.7% in 2022 (Eurostat, 2025[96]) (Figure 2.5).
Note: No data on BERD are available for 2021, and no data on SME BERD are available for 2023.
Source: Eurostat (2025[96]).
Regarding support for SME internationalisation, the DBNM manages two financial schemes aimed at strengthening firms’ export capacity (Table 2.3). The Export Loan window,13 financed from the DBNM’s own resources, provides working capital for both the preparation of production intended for export and post-export operations, supporting the competitiveness of exporting firms of North Macedonia. In parallel, the Export Recourse Factoring programme supports exporters by improving their cash flow, enabling them to bridge the gap between shipment and payment and better manage receivables from international clients. However, in the absence of any evaluation of these programmes, their overall effectiveness remains unknown.
Through the DBNM’s credit line and complementary programmes funded by the Agence Française de Développement (AFD) and the EBRD, North Macedonia offers targeted support for SMEs’ digital transformation (Table 2.3). However, while current schemes can support smaller upgrades or pilot initiatives, they are insufficient for comprehensive digital overhauls such as full enterprise resource planning deployment or cloud migration (see Cluster 3 for more details).
Regarding green transformation efforts, North Macedonia continues to rely largely on donor-funded initiatives for financial support, including those from the AFD and the European Investment Bank (see Cluster 2 for more details). Nonetheless, the DBNM operates two credit lines, one for energy efficiency and renewable energy and another under the Renewable Loan Fund/Agricultural Credit Discount Fund, with a combined value of around EUR 11 million (Table 2.3). While limited in scale, these instruments represent initial steps toward establishing national financing schemes to support SME investments in the green transition.
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, the International Finance Corporation (IFC) Western Balkans Climate Programme and the EBRD’s Digital Transformation Platform and the DBNM KfW (German development bank) credit line for financing fixed working capital. More details are provided by Western Balkans Investment Framework (2026[76]).
Sources: 1. European Commission (2025[97]); 2. Austrian Development Agency (2025[98]); 3. Development Bank of North Macedonia (2025[99]); 4. MIA (2023[100]); 5.Western Balkans Info Hub (2024[101]); 6. European Commission (2024[102]); 7.Western Balkans Investment Framework (2026[76]); 8. EBRD (2025[103]); 9. Development Bank of North Macedonia (2025[74]); 10. Development Bank of North Macedonia (2025[104]); 11. SeeNews (2025[105]).
The way forward
Establish a dedicated legal framework for private equity and venture capital, complemented by targeted public investment vehicles and policy instruments, to foster market development. North Macedonia has yet to adopt specific legislation governing private equity and venture capital, which would help reduce reliance on collateral-based lending and support innovative and young SMEs in addressing early-stage financing gaps. In parallel, the authorities could leverage digital tools to enhance the transparency and effectiveness of the planned Hybrid Investment Fund (see Box 2.4).
Implement targeted incentives to enhance SME access to capital markets. Beyond establishing an adequate legal framework, SMEs often face persistent capacity and information gaps in meeting listing and ongoing disclosure requirements, as well as high compliance and reporting costs. In addition, limited awareness of capital-market instruments and of when they may be appropriate relative to bank lending can further constrain uptake. North Macedonia could therefore combine fiscal incentives to encourage equity issuance with a system of pre-approved private advisers (“nominated advisers”) who guide firms through the admission process and support ongoing compliance post-listing. Complementary measures could include dedicated SME credit-rating services to improve risk assessment and strengthen investor confidence.
Strengthen the evaluation framework for public instruments supporting businesses’ access to bank finance. North Macedonia should introduce systematic impact evaluations of financial programmes managed by the Development Bank of North Macedonia to assess their effectiveness in expanding access to finance and to use the findings to inform future programme design and resource allocation.
Operational aspects of Croatia’s initiative
Since 2018, the Croatian Agency for SMEs, Innovation and Investments (HAMAG-BICRO) has operated the Croatian Venture Capital Initiative (CVCI), a digital platform enabling transparent management of public-private VC funds financed under the EU Competitiveness and Cohesion Programme 2014-2020 with an initial financial size of EUR 35 million (European Commission, 2018[106]), followed by another EUR 80 million under the 2021-2027 multiannual financial framework (SEE News, 2023[107]) . Through this system, fund managers and beneficiaries can submit applications, track investments, and report performance metrics online, improving transparency and administrative efficiency. The initiative also supports digital investor matchmaking via the StartUp Croatia portal, which maintains an open registry of start-ups and investors, integrated with the national e-Company Register.
Policy outcomes
The CVCI has been deployed in about 140 early-stage start-ups in the economy from 2018 to 2023, coinciding with the development of VC activity in Croatia. Available data indicate that VC investments in Croatia increased from USD 89 million (~ EUR 77 million) in 2019 to USD 134 million in 2024 (~EUR 116 million), with an exceptional peak at USD 720 million (~ EUR 622 million) in 2022 (Dealroom, 2025[84]).
Policy relevance for North Macedonia
Croatia’s experience shows how digital investment platforms can enhance the effectiveness of managing a public-private funded programme to develop VC. As North Macedonia plans to launch its EUR 27 million Hybrid Investment Fund, co-financed by the government, international financial institutions and the private sector, similar digital tools could help streamline fund administration, enhance investor confidence, and attract private co-investors.
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[108]). Evidence shows that such services, when systematically designed and targeted, help SMEs overcome information gaps and capability constraints that limit innovation, competitiveness, and internationalisation.
In North Macedonia, the ecosystem for business support services (BSSs) has evolved into a more structured and strategically oriented framework that encompasses both enterprise creation and SME growth. Recent strategic developments, including the new SME Strategy 2025–2030 and the Export Promotion Strategy 2024-2027, signal a shift toward supporting entrepreneurship, innovation, and competitiveness. Guided by the SME Strategy 2025–2030 and Action Plan 2025–2027 (Government of North Macedonia, 2025[109]), the policy framework has moved beyond standalone programme delivery toward a more integrated approach to service design, aiming to connect entrepreneurship support with competitiveness, innovation, and inclusive growth (Agency for Promotion of Entrepreneurship, 2023[110]). SMEs now benefit from a clearer institutional offer, more targeted training, and geographically broader access than in previous cycles. While this marks important progress toward a co-ordinated national framework for SME development, implementation capacity, funding continuity, and service quality as well as continued reliance on donor-supported delivery mechanisms remain key challenges to be addressed. Against this backdrop, this section assesses the overall quality, efficiency and effectiveness of BSS in North Macedonia, 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 value chains.
2.4.1. Foundational SME business support services
The policy framework for foundational BSSs in North Macedonia has strengthened in recent years, with clearer strategic direction and a more consolidated institutional set-up for entrepreneurship support. The SME Strategy 2025-2030 and Action Plan 2025-2027, provide a structured, multi-year framework guiding priorities such as entrepreneurship promotion, advisory and mentoring services, improved access to information, and strengthened governance and data systems for SME support (Government of North Macedonia, 2025[109]). These frameworks align foundational BSS provision with broader national priorities under the National Development Strategy 2024-2044 and the Smart Specialisation Strategy, signalling a shift from fragmented, ad hoc assistance toward a more structured, system-oriented approach.
Since the previous cycle, governance arrangements have been significantly reshaped through the adoption of the Law on Innovation, Scientific and Technological Development, and Entrepreneurship, which established INOVA as a single authority for innovation and entrepreneurship support. INOVA replaced the former Agency for Promotion of Entrepreneurship of the Republic of North Macedonia (APPRM) while retaining legal continuity and absorbing the functions of the FITD. It operates in co-operation with the Ministry of Education and Science and the Ministry of Economy and Labour. This consolidation is expected to improve policy coherence and reduce fragmentation; however, its effectiveness will depend on whether persistent constraints, particularly limited financial resources and weak co-ordination and data systems, previously identified as key risks, are addressed under the new institutional arrangement. Within this framework, the APPRM Programme 2025 (Agency for Promotion and Entrepreneurship, 2025[111]), now implemented within INOVA, defines five thematic pillars covering digitalisation, green economy, entrepreneurial skills, gender inclusion, and self-employment, which primarily serve as horizontal entry points for foundational BSS delivery. However, these pillars are implemented largely through project-based instruments, dependent on short-term budget cycles or donor funding. As a result, support remains concentrated on early-stage assistance, such as business planning or start-up grants, but lacks a systematic progression toward more advanced services related to scaling, export preparation, or technology adoption (Agency for Promotion of Entrepreneurship, 2023[110]). Although the Action Plan envisages linking annual work programmes to a rolling three-year budget framework, this mechanism has yet to materially influence delivery patterns.
Programme uptake reflects this early-stage orientation. The portfolio of non-financial instruments, including the Voucher Counselling Scheme, the Standardised Mentoring Programme, and modular training courses has expanded, but beneficiary profiles remain skewed toward unemployed individuals and first-time entrepreneurs (Agency for Promotion of Entrepreneurship, 2023[110]). In 2023, mentoring and voucher schemes reached 59 and 39 SMEs respectively, and while impactful at the business level, these numbers remain too small to influence competitiveness system-wide. The absence of tiered support models for growing and exporting SMEs limits progression beyond entry-level assistance and constrains the system’s ability to support productivity upgrading.
Outreach mechanisms have become more proactive, contributing to improved territorial access. The introduction of Mobile Info Points14 (see Dimension 5a) and regional partnerships with municipalities represent an important innovation in outreach, helping bridge urban–rural gaps in access to entrepreneurship support. The continuation and revision of Mobile Info Points is explicitly foreseen under the Action plan for the implementation of the SME Strategy 2025-2027, with a dedicated allocation of MKD 450 000 (~EUR 7 300) annually, which confirms a degree of budgetary commitment to this outreach modality (Government of North Macedonia, 2025[109]). However, these initiatives remain limited in scale, frequency and geographic coverage. In the absence of permanent regional entrepreneurship centres, foreseen but not yet operationalised under the new strategy, outreach relies on episodic interventions rather than continuous service provision. As a result, service provision remains intermittent and territorial access uneven, particularly in structurally weaker regions such as the Northeast and Polog. The planned network of regional entrepreneurship centres is therefore critical to institutionalising outreach and ensuring more balanced territorial access.
From a market perspective, the continued reliance on public intermediaries for programme co-ordination has limited the development of competitive delivery models. While the gradual involvement of private providers marks a step forward, the private BSSs ecosystem remains thin and structurally dependent on public co-financing. The Voucher Counselling Scheme and the Standardised Mentoring Programme15 engage accredited consultants, under minimum quality standards and performance-based certification (Agency for Promotion of Entrepreneurship, 2023[110]). However, in the absence of a fully operational national accreditation framework and a performance-based remuneration system, as foreseen in the new strategy, SMEs face limited incentives to engage commercial consultancy services beyond publicly subsidised schemes. This weak private participation, compounded by legal and administrative constraints on programme visibility, undermines the development of a self-sustaining advisory market.
As delivery expands and the system seeks to move toward more market-oriented provision, monitoring and evaluation become critical for learning and accountability. M&E practices have gained structure but still fall short of linking outputs to outcomes. INOVA now uses follow-up and end-up surveys to track participation, turnover, and employment effects, but these data mainly capture activity volume rather than business performance (Agency for Promotion of Entrepreneurship, 2023[110]). No independent evaluations have been conducted since the 2019 Japan International Cooperation Agency (JICA) mentoring review, and existing evidence remains limited to short-term feedback and satisfaction rates (Agency for Promotion of Entrepreneurship, 2023[110]). As a result, the government cannot yet determine which types of support deliver the highest returns in productivity or business survival. This limits accountability and constrains learning across programmes. The outcome-based framework envisaged under the new strategy could transform this dynamic if coupled with shared indicators and integration with the SME Observatory, but its implementation will require stronger institutional capacity for data governance.
2.4.2. Support services for SMEs’ expansion and growth
Building on the consolidated foundational BSSs framework, North Macedonia’s policy framework for SME expansion and competitiveness has become more coherent, underpinned by the SME Strategy 2025-2030 and the Export Promotion Strategy 2024-2027, both aligned with the National Development Strategy 2024-2044 (NDS) and complemented by digitalisation, green transition, and innovation agendas outlined in the Smart Specialisation Strategy 2024-2030.16 However, despite this strengthened strategic framing, delivery arrangements for SME growth support remain uneven. While early-stage entrepreneurship and innovation support have become more structured, more advanced services aimed at scaling, acceleration and sustained competitiveness are less clearly embedded in sequenced progression pathways. As a result, SMEs’ transition from capacity-building to sustained export growth remains constrained by fragmentation across instruments and institutions.
Within the SME support landscape, innovation-related services represent the main entry point for firms seeking to upgrade capabilities, adopt new technologies or improve investment readiness. North Macedonia’s support services ecosystem comprises a relatively well-balanced but still limited mix of incubation, acceleration, and technology-extension services, including five incubators, seven accelerators, and three technology extension services providers. These are predominantly concentrated in Skopje and its surrounding municipalities and provide complementary business development and investment-readiness services that indirectly support SME growth.17 Looking ahead, the SME Strategy 2025-2030 foresees the creation of regional innovation hubs and additional acceleration mechanisms to extend access beyond the capital, and the NDS 2024–2044 places innovation and technology transfer at the centre of productivity upgrading. In practice, however, innovation support remains largely project-based and donor-funded, with no permanent, multi-annual financing to ensure continuity (see Cluster 2). As a result, innovation support does not yet function as a sequenced progression model: firms accessing incubation or acceleration services are not systematically linked to complementary measures in digitalisation, green upgrading or scale-up readiness.
Alongside innovation, digitalisation and green transition are increasingly recognised as critical drivers of SME competitiveness in North Macedonia. Strategic frameworks embed digital and green upgrading as core objectives, reflecting closer alignment with EU competitiveness, sustainability and digital transition priorities. Compared to earlier policy cycles, these strategies introduce clearer targets and a broader range of financial and advisory instruments at the design stage to supporting SME upgrading. Pilot measures, such as digital-transformation grants, innovation vouchers, and green-technology projects implemented through INOVA, have expanded the scope of SME support. In practice, however, digital and green transformation remain weakly integrated into SME growth-stage support and are not embedded in sequenced progression pathways. Public support is dispersed across multiple strategies, institutions and budget lines, limiting co-ordination between digital upgrading, skills development and internationalisation support. As a result, most SMEs remain concentrated at early stages of digital adoption and greening, relying primarily on basic tools or incremental efficiency measures rather than undertaking productivity-enhancing transformation. High perceived costs, limited access to dedicated finance, reliance on donor-funded initiatives, skills shortages and low awareness of available support continue to constrain uptake, particularly among micro and small firms (see Clusters 2 and 3).
For SMEs that reach commercial readiness, internationalisation represents the most advanced layer of growth support. The Export Promotion Strategy 2024–2027 and its Action Plan18 introduce clearer objectives and a structured approach to export support, including a target to raise the export-propensity ratio from 66.2 % in 2021 to 75 % by 2027 (Government of North Macedonia, 2024[112]). While aligned with EU competitiveness and market-integration objectives, delivery remains constrained by institutional fragmentation. Implementation is centred on Invest North Macedonia, which, through its Export Portal launched in 2023, provides visibility, matchmaking, and market-intelligence tools (Invest North Macedonia, 2023[113]), complemented by export diagnostics and mentoring delivered with the Swiss Import Promotion Programme (SIPPO) and the Enterprise Europe Network. Over 2023-2024, these activities reached approximately 1 000 firms, primarily through trade-fair participation, business-to-business events, and training.19 However, export promotion and export finance continue to operate through separate institutional channels with distinct mandates and financing arrangements, notably involving the Development Bank of North Macedonia (EC, 2024[114]). As a result, internationalisation support remains programme-driven rather than sequenced: advisory vouchers (including modules on export marketing and digitalisation) remain limited in scale and continuity, and the absence of dedicated financing for standards, certification and sustainability compliance for EU-oriented exports weakens the link between capability upgrading, export readiness and sustained export performance.
These structural constraints continue to weigh on SME export outcomes. Although the contribution of SMEs to total exports increased from 20.3% in 2018 to 27.5% in 2022 (OECD, 2025[35]), it remains significantly below both the Western Balkan average of 47.6% and the EU average of around 37%. The upward trend therefore reflects incremental gains in the number of exporting firms rather than a structural shift in export capacity. SME exports remain concentrated among a limited group of firms and sectors, with modest value-added and diversification, suggesting that integration into external markets continues to lag behind regional peers (see Figure 2.6).
Percentage of exports of goods and services
Notes: The WBT average does not include Kosovo as no data are available for 2022. The WBT average does not include Montenegro as no data for this indicator are available.
Sources: Eurostat (2025[115]); OECD (2022[10]; 2019[116]). Additional data for Albania from INSTAT (2024[117]) and information provided by the government for this assessment. Additional data for Bosnia and Herzegovina from the Agency for Statistics of Bosnia and Herzegovina (2020[118]; 2023[119]; 2024[120]); and the European Commission (2025[121]). Additional data for North Macedonia from MAKSTAT (2024[122]; 2024[123]). Additional data for Serbia from SORS (2024[124]).
Despite growing policy attention20, progress in integrating SMEs into global and regional value chains remains limited depth and scale. Several matchmaking and supplier upgrading initiatives have been launched, including cooperation platforms between Technological Industrial Development Zone (TIDZ) investors and local producers and sector-specific roundtables supported by international partners. However, these initiatives remain project-based and modest in scale, without a dedicated supplier development programme or budgeted cluster policy. The SME Action Plan 2025-2027 envisages pilot actions in this direction, including targeted supplier-development schemes and cluster-support mechanisms, but these remain at an early stage of implementation. While foreign direct investment (FDI) inflows have seen an exponential increase of by 317 % (OECD, 2025[35]), their spillover effects into domestic production chains are still limited,21 and SME participation in global value chains has not significantly increased since 2019. Moreover, cluster development remains fragmented, relying primarily on donor support and lacking mechanisms for joint R&D, innovation collaboration or systemic upgrading.
Finally, the effectiveness of SME expansion and growth support remains difficult to assess, as M&E frameworks continue to focus primarily on programme delivery and short-term outputs rather than on firms’ progression through growth stages. While institutions track participation, disbursements and activities under innovation, digitalisation, green transition and export support schemes, there is no integrated system to follow SMEs from capacity-building through upgrading to sustained export performance or deeper value-chain integration. As a result, policymakers lack robust evidence on which combinations of instruments generate lasting productivity, export or global value chain outcomes, limiting feedback loops for policy adjustment and reinforcing the persistence of fragmented, project-driven support rather than a sequenced growth pathway for SMEs.
The way forward
Strengthen coordination and institutional integration of business support services delivery across SME growth-support instruments. Despite recent institutional consolidation under INOVA and clearer strategic frameworks, SME growth support remains fragmented across innovation, digitalisation, green upgrading, export promotion and export finance. Strengthening coordination mechanisms, such as under the Ministry of Economy and Labor, building on existing arrangements rather than creating parallel structures, could help align planning, monitoring and delivery across INOVA, Invest North Macedonia and the Development Bank of North Macedonia. Improved coordination should focus on sequencing financial and non-financial measures, harmonising reporting, and ensuring SMEs can progress more smoothly from capacity-building to scaling and internationalisation.
Secure multi-year financing and institutionalise outcome-oriented performance monitoring. SME growth and export support measures remain largely project-based and reliant on donor financing, limiting continuity and strategic planning. Introducing multi-annual budget envelopes for priority instruments, such as innovation acceleration, digital and green upgrading, export readiness and supplier development, would enhance predictability and scale. This should be paired with the gradual institutionalisation of a performance-monitoring system that tracks medium-term outcomes (e.g. innovation adoption, export diversification, or productivity growth), enabling evidence-based funding adjustments and stronger accountability.
Operationalise a targeted supplier-development and cluster-support framework to deepen SME integration into value chains. Despite strategic recognition of value-chain development, current initiatives remain fragmented and limited in scope. The government may consider prioritising the implementation of a Supplier Development Programme foreseen under the SME Strategy Action Plan, strengthening structured linkages between domestic SMEs and foreign investors in TIDZs and export-oriented sectors, such as information and communication technology (ICT), automotive and agri-food. This should include targeted co-financing for standards upgrading, certification and innovation partnerships, complemented by light-touch cluster facilitation to foster sustained collaboration rather than stand-alone, project-based initiatives. Over time, this could help translate FDI inflows into measurable productivity and export and value chain gains for local SMEs (see Box 2.5).
Prioritise the implementation of accreditation and quality assurance mechanisms for private business support services: Building on measures foreseen in the SME Strategy Action Plan, the economy is encouraged to operationalise accreditation standards and performance-based evaluation for private consultants, linking them to voucher schemes, mentoring programmes and, over time, performance-based contracting. This would reduce reliance on ad hoc public delivery, strengthen service quality and diversity, and support the gradual development of a more market-oriented BSS ecosystem aligned with SMEs’ growth and internationalisation needs.
Operational aspects of Slovenia’s approach
Slovenia’s Industrial Strategy 2021–2030 illustrates how fragmented value-chain initiatives can be consolidated into a co-ordinated supplier upgrading system. Acknowledging that earlier industrial policy delivered limited results due to weak co-ordination, the strategy prioritises structured collaboration across SMEs, large firms, research organisations and public institutions. This is operationalised through Strategic Research and Innovation Partnerships (SRIPs) under smart specialisation, which function as long-term, cluster-like platforms rather than stand-alone projects. SMEs represent 71% of cluster members, and SRIPs are monitored and periodically evaluated (European Cluster Collaboration Platform, 2023[125]).
Policy outcomes
Slovenia links this collaborative architecture to explicit, quantifiable industrial-performance objectives. Manufacturing and processing are treated as strategic engines of productivity and exports, with 19 671 processing firms employing 201 722 people, contributing 23.2% of national value added and generating almost two-thirds of total exports. The Industrial Strategy defines labour productivity (value added per employee) as an umbrella indicator, targeting an increase from EUR 43 679 in 2018 to EUR 65 832 by 2030, alongside export growth from EUR 21.8 billion to EUR 29.8 billion over the same period (Ministry of Economic Development and Technology, 2022[126]). This “platform + measurement” logic underlines that supplier development is not limited to financing individual SME upgrades, but is embedded in repeated SME–buyer interaction and tracked against economy-wide productivity and export objectives.
Policy relevance for North Macedonia
Slovenia’s experience is relevant for North Macedonia, where value-chain ambitions remain constrained by fragmented and limited-scope initiatives, and where FDI in TIDZs has yet to generate systematic spillovers for domestic SMEs. A Slovenia-inspired approach would support the operationalisation of a Supplier Development Programme by focusing on governance and sequencing rather than stand-alone projects. This could include diagnosing SME gaps against investor procurement requirements, co-financing standards upgrading and certification, and embedding support within cluster-facilitated collaboration to institutionalise repeated SME-buyer interaction. The key transferable element is the creation of a single, structured upgrading pipeline that links SME support to measurable outcomes such as certifications achieved, contracts secured with TIDZ investors, and subsequent productivity and export gains in sectors such as ICT, automotive and agri-food.
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← 1. The working group brought together representatives from public institutions, business associations, academia and civil society.
← 2. This designation is without prejudice to positions on status, and is in line with United Nations Security Council Resolution 1244/99 and the Advisory Opinion of the International Court of Justice on Kosovo’s declaration of independence.
← 3. DIT conducted 16 464 inspections between 2024 and 2025 - a 245% increase over the 2022-2023 average, and the GPI carried out 669 inspections, 40% above the original target value of 400 inspections (Ministry of Economy and Labour, 2025[131]).
← 4. Author’s calculation based on dividing the total enterprise turnover reported by the State Statistical Office by the total number of active enterprises in the economy. This yields an average turnover of approximately EUR 500 000 per firm. When focusing on SME-intensive sectors (Hospitality, retail, construction, professional services, ICT, and transport) the same ratio produces an estimated range of EUR 100 000 –600 000 per firm.
← 5. A Dynamic Purchasing System (DPS) is a fully electronic procurement tool that allows new suppliers to join at any time and enables contracting authorities to filter pre-checked suppliers for specific competitions, offering a faster alternative to traditional frameworks (Crown Commercial Service, 2023[132]).
← 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. Average lending interest rates for non-financial corporations have jumped from less than 4% in 2022 to 6.1% in December 2024, with a peak of 7% in September 2023 (National Bank of the Republic of North Macedonia, 2025[127]).
← 8. This programme has been funded by a loan from the Hungarian Export-Import Bank. The interest rate is fixed at 3.25%, and the repayment period is 15 years, including a 3-year grace period.
← 9. For more information, see Development Bank for North Macedonia (2025[128]).
← 10. The most recent equity listing on the Stock Exchange of North Macedonia dates back to 2013, when the former SOE OKTA AD Skopje was listed. In August 2025, North Macedonia’s streaming platform Gley launched an initial public offering, but the offering raised only to 3.3% of the targeted MKD 120 million, well below the minimum subscription condition (Bloomberg Adria, 2025[129]). Corporate bonds emissions have been more dynamic, with four emissions since 2022, but restricted to the banks UNI Banka AD Skopje and Centralna Kooperativna Banka AD Skopje. For example, see Development Bank for North Macedonia (2025[133]).
← 11. The EU acquis refers to the EU Alternative Investment Fund Managers Directive (AIFMD 2011/61/EU) and Regulation (EU) 345/2013 on European Venture Capital Funds.
← 12. A business angel syndicate refers to a group of individual business angels who co-invest collectively in the same company, as an equity-financing channel alongside VC funds, typically by pooling capital (and often sharing deal sourcing, due diligence and follow-on support) (OECD, 2025[86]).
← 13. Loans range from a minimum of EUR 15 000 to a maximum of EUR 2 million, with a repayment term of up to two years and currently a variable rate from around 3.75 % per year. Eligible firms are privately owned (over 51 %) in North Macedonia that demonstrate growth in operations or exports, increased employment, or investments in modernisation, energy efficiency, or environmental protection. For more details, see Development Bank of North Macedonia (2025[130]).
← 14. Mobile Info Points are a mobile outreach mechanism providing basic entrepreneurship information and application support in municipalities without permanent SME service offices, targeting micro-enterprises and entrepreneurs in underserved and rural areas.
← 15. In the same year, 38 SMEs received vouchers for consultancy, while 69 benefited from structured mentoring under the Standardised Mentoring Programme. Both initiatives, the Voucher Counselling Scheme, which subsidises up to MKD 50 000 (~ EUR 810) of consultancy fees, and the Standardised Mentoring Programme, which pairs SMEs with trained mentors through APPRM’s accredited expert pool, are structurally dependent on public co-financing. Their continuity and scale remain closely tied to annual budget allocations, as private contributions typically cover only a small share of total costs.
← 16. The Smart Specialisation Strategy 2024–2030 sets out North Macedonia’s national framework for innovation-driven growth, identifying priority domains such as smart agriculture and food, sustainable energy and materials, ICTs and industry 4.0. It aims to foster technological upgrading, research–business collaboration, and regional specialisation, aligning with EU smart specialisation principles and cohesion policy objectives.
← 17. Business Incubators: Youth Entrepreneurial Service Foundation Incubator Skopje (see more at http://www.yes.org.mk/YES/Testimonials.aspx?r=6&l=54&c=22); SEEUTechPark— Tetovo (launched in 2013) (See more at: https://techpark.seeu.edu.mk/); Startup Club Skopje (see more at https://startupclubskopje.com/); CEED Hub Skopje – Skopje (2016) (see more at: https://ceedhub.mk/); HEMI Incubator;
Business Accelerators: Business Impact Lab (see more at: https://www.businessimpactlab.co/); X Factor Accelerator (See more at: https://xfactor.mk/en/); Business-technology Accelerator UKIM BAU (See more at: https://bauaccelerator.com/about-us/); Seavus Accelerator (see more at: https://seavusaccelerator.com/); Wave Group (see more at: https://wavegroup.ai/); Accelerate2030; and Circular Clim Accelerator North Macedonia.
← 18. The plan outlines a range of activities aimed at strengthening SME export capacities, including participation in international trade fairs, trade missions, and business-to-business matchmaking events, the provision of market-intelligence tools and an online exporter database through the Export Portal, as well as training and mentoring programmes on export readiness, certification, and quality standards.
← 19. The figures were provided by national stakeholders during the data collection phase for the 2026 SME Policy Index.
← 20. Both the Export Promotion Strategy and the SME Strategy 2025–2030 highlight the development of value chains and clusters, particularly in automotive components, ICT, and agri-food, as key levers for productivity and export diversification (Government of North Macedonia, 2024[112]); (Government of North Macedonia, 2025[109]). The NDS 2024–2044 further identifies supplier development and stronger linkages between domestic SMEs and foreign investors in the TIDZs as priorities for boosting innovation and upgrading production capacities (Government of North Macedonia, 2024[2]).
← 21. According to government responses to the 2025 SME Policy Index questionnaire (Question 2.2.8), four to five linkages between domestic SMEs and multinational enterprises have been established since 2022 with government support, primarily through the Competitiveness Support Programme and the Go Digital initiative. No data are yet available on the sectoral distribution or the sustainability of these partnerships, as systematic tracking of supplier linkages remains under development.