The 2026 edition of the SME Policy Index comes at a critical juncture for the Western Balkans and Türkiye. Over the past decade, governments in the region have made sustained efforts to strengthen SME policy frameworks and align them with European standards. Yet the context in which these policies operate has fundamentally changed. Today’s environment is more volatile, shaped by successive global shocks, accelerating green and digital transitions and rising geopolitical uncertainty.
Beyond these immediate pressures, a deeper shift is underway. Uncertainty has become structural, while the systems traditionally used to manage it are under strain, with multilateral co-operation under increased pressure. In this context, the challenge is no longer primarily to design better SME policies, but to ensure that the existing frameworks deliver.
SMEs remain central to economic growth in the Western Balkans and Türkiye, accounting for the vast majority of firms, between 66% and 83% of employment, and 54%-78% of value added. Yet a combination of structural weaknesses and a rapidly evolving operating environment constrains SMEs’ ability to drive EU convergence.
The 2026 SME Policy Index identifies the following challenges:
Policy frameworks are not sufficiently equipped to support SME resilience across the full business lifecycle. Despite strengthened policies in recent years, delivery remains uneven and often reactive. Gaps in early risk identification, limited use of data, and insufficient co-ordination across institutions reduce the ability to anticipate and manage emerging pressures. This is reflected in limited SME data coverage, with only around 16% of OECD-requested indicators being fully available across economies. At the same time, short-term and often project-based funding, combined with limited institutional capacity, undermine the consistency and predictability of support. Further, underdeveloped crisis preparedness, recovery and second-chance mechanisms constrain firms’ ability to absorb shocks and re-enter activity.
Access to finance remains a structural constraint on investment, adaptation and shock absorption. Around 20% of SMEs in the region are credit-constrained, limiting their ability to invest and manage risk. Recent crises have further increased pressure: 77% of businesses reporting rising costs, and nearly 50% identify access to finance as a major or moderate obstacle in 2024. While banking systems are relatively developed, lending conditions remain restrictive. Credit guarantee scheme and other risk-sharing instruments exist but are limited in scale and effectiveness, while alternative finance sources – such as capital markets and early-stage funding – remain shallow. In this context, rising input and energy costs are further tightening liquidity, reducing firms’ scope to adjust, invest in upgrading and strengthen long-term viability.
Skills shortages and mismatches continue to constrain productivity and firms’ respond to evolving market demands. Despite relatively high unemployment, at 10.5% in 2024, many SMEs struggle to find workers with the right skills: one-third report that available skills do not meet their needs, and nearly two-thirds identify shortages as a barrier to growth. These challenges reflect both ongoing emigration - an estimated 70-80% of emigrants from the region are of working age thereby reducing the availability of high-skilled labour – and education and training systems that are not sufficiently aligned with business needs.
SME upgrading is not keeping pace with the demands of digital and green transitions, limiting both competitiveness and resilience. Although adoption of digital tools and green practices is increasing — with most SMEs in the region using at least one digital tool and around 40% offering green products or services — it remains largely concentrated in basic applications. Business investment in research and development is low, at just 0.28% of GDP, and innovation capacities remain limited. As a result, productivity levels are weak, export diversification is constrained, and convergence with the European Union remains slow. At the same time, SMEs face mounting pressures to comply with evolving EU standards, particularly in areas such as decarbonisation. This challenge is compounded by the region’s relatively low level of readiness for the climate transition despite higher vulnerability to its impacts, and as a result, firms remain relatively carbon-intensive.
SME support ecosystems are expanding but gaps in sequencing across SME growth stages are limiting their effectiveness in building resilience and supporting scale-up. While support portfolios have broadened to include innovation, digital transformation, green upgrading and internationalisation, instruments often operate as standalone measures rather than as part of a coherent progression. This results in a persistent “missing middle” between early-stage support and growth-stage scaling, with critical gaps between incubation to early growth, innovation and commercialisation, and domestic consolidation and export readiness, reducing SMEs’ ability to sustain upgrading and to translate support into productivity gains and market expansion.