Capital markets in Bosnia and Herzegovina are underdeveloped and fragmented. Despite their potential to diversify financing sources, they currently constitute only a small part of the overall financial system. According to the OECD Western Balkans Competitiveness Outlook 2024, shortcomings in legal and institutional frameworks continue to constrain capital market development, leaving the country behind its regional peers (OECD, 2024[20]). Although basic legal frameworks for both equity and debt markets are in place, alignment with the EU capital market regulations remains incomplete. In addition, targeted support mechanisms, particularly for SMEs seeking to access market-based financing, are limited.
Strengthening capital markets in Bosnia and Herzegovina
As capital markets fall within the exclusive competence of the entities under the constitutional framework, both entities in Bosnia and Herzegovina operate their own stock exchanges, each characterised by relatively low levels of market capitalisation. The Sarajevo Stock Exchange (SASE) in the Federation (FBiH) and the Banja Luka Stock Exchange (BLSE) in Republika Srpska (RS) were both founded in 2001, with trading officially starting in 2002. In 2024, market capitalisation was estimated at around 22.0% of GDP in the FBiH and 30.6% in RS (Figure 5). This institutional “split marketplace” matters for market capitalisation because it divides an already small pool of issuers and investors, reducing market depth.
Percentage of GDP
Note: To calculate the figures for both the FBiH and RS, each entity’s market capitalisation as of December was divided by its respective annual GDP.
The planned establishment of a Brčko District Stock Exchange may deepen further the dispersion of trading activity. In March 2026, the Brčko District adopted a new Law on the Securities Market, advancing plans to create its own exchange, backed by local authorities and a group of U.S. investors. Analysis of the new law suggests that the exchange is conceived less as a conventional securities venue and more as a hybrid financial infrastructure platform, combining securities trading with crypto-asset-related activities.
Given Brčko District’s limited issuer base and small investment ecosystem, the model appears unlikely to develop in the near term into a domestically anchored exchange with meaningful local liquidity. Instead, it may be better understood as a trading infrastructure platform, aimed at attracting non-local liquidity, including international investors. Yet, beyond the risk of further dispersing an already limited pool of issuers and investors in Bosnia and Herzegovina, the framework underscores the need for structured co-operation between Brčko District and entity-level authorities – through agreements or other mechanisms that ensure supervisory coherence across BiH's capital markets, in line with the constitutional competences of the respective authorities.
Despite a high number of listings, Bosnia and Herzegovina’s capital markets remain shallow, with a shrinking active issuer base. In 2025, there were 565 total listings across both entities’ stock exchanges: 191 issuers on SASE and 373 on BLSE (SASE, 2025[24]; Banja Luka Stock Exchange, n.d.[25]). While this figure is rather high by regional standards, it overstates the effective depth of both markets. The majority of listings are concentrated in lower-tier segments, designed for smaller or less mature companies and subject to reduced reporting requirements. Meanwhile, the active issuer base has been shrinking over the last decade: in 2025, SASE recorded 20 delistings, more than twice the number of new listings (9), and another 35 companies on SASE were classified within a bankruptcy segment, indicating a high likelihood of eventual delisting.
Only a small proportion of listed companies actively raise growth capital, as the large number of listings primarily reflects the legacy of mass privatisation. In the post-war period, with the support of international financial institutions, many former state-owned enterprises were converted into joint-stock companies, whose shares then became eligible for trading on stock exchanges under government-mandated listing requirements. Listings were often compulsory, driven by privatisation laws or regulatory requirements linked to capital increases, rather than by a deliberate decision to use equity markets to finance expansion or attract new investors. Consequently, a substantial proportion of these firms do not use capital markets in the conventional sense to raise funds for growth, and their shares are not actively traded.
Public mistrust in the financial sector, particularly among households, also contributes to the low participation in and liquidity of capital markets. As part of the post-war privatisation programmes, citizens received shares in former state-owned enterprises, but many experienced losses or saw little tangible benefit from ownership. This was due to several factors, ranging from bankrupt or mismanaged firms to limited financial literacy and a lack of accessible information. Many citizens were not equipped to trade or value their shares effectively. Privatisation Investment Funds, established to pool vouchers provided to individuals and support capital market development, largely failed to function as effective financial intermediaries (World Bank, 2012[26]). These weaknesses were further exacerbated by the boom-bust cycle of the mid-2000s, alongside significant allegations and ongoing investigations concerning capital market manipulation in the FBiH (Box 1).
The global financial crisis of 2008 had significant implications for capital markets worldwide, including in Bosnia and Herzegovina. In the years preceding the crisis, both entity-level stock exchanges, which were founded in 2001 with trading officially starting in 2002, experienced rapid expansion. By 2005, market capitalisation had increased sharply, reaching BAM 1.89 billion (EUR 967 million) on the Sarajevo Stock Exchange and BAM 1.20 billion (EUR 613 million) on the Banja Luka Stock Exchange (OECD/EBRD, 2005[27]).
This expansion proved short-lived. As global financial conditions tightened, stock markets in Bosnia and Herzegovina experienced a sharp decline. The main Sarajevo Stock Exchange index fell from a peak of over 6 000 points in April 2007 to below 900 by March 2009. Trading activity also contracted significantly: total turnover on SASE declined by nearly 63%, from BAM 1.27 billion to BAM 477 million (EUR 650 million to 244 million) between 2007 and 2008 (SASE, 2009[28]). A similar trend was observed on the Banja Luka Stock Exchange, where turnover dropped from BAM 742 million to BAM 275 million (EUR 379 million to 141 million) over the same period (Banja Luka Stock Exchange, 2009[29]).
For many households, the consequences were severe. Prior to the downturn, individuals had invested their savings in equities, often with limited understanding of associated risks. Resulting losses led to a sustained decline in trust, discouraging continued participation and limiting the entry of new investors.
At the same time, concerns related to market governance have added to these challenges. In 2020, authorities arrested several individuals connected to the Securities Commission of the FBiH and the supervisory structures of the Sarajevo Stock Exchange, following a long-running investigation into suspected organised crime and money laundering (Ljubas, 2020[30]). This was followed by indictments issued in 2021 in the so-called “Profit” case, involving allegations of stock market manipulation and falsification of securities trading records. However, publicly available information does not clearly establish the final outcomes or full procedural status of these proceedings.
In the wake of these events, the Securities Commission of FBiH has undertaken efforts since 2021 to restore its credibility and, with it, broader confidence in capital markets. A new Commission was appointed in September 2021, ending a nearly two-year operational standstill. Subsequent steps have included the signing of a co-operation agreement with the Competition Council of Bosnia and Herzegovina in 2024, aimed at improving transparency and efficiency in the enforcement of securities laws.
Note: For market capitalisation in 2005, original figures were given in USD (USD 1.2 billion and USD 760 million, respectively).
Sources: (OECD/EBRD, 2005[27]; SASE, 2009[28]; Banja Luka Stock Exchange, 2009[29]; Ljubas, 2020[30]); inputs provided by the Securities Commission of the FBiH.
Against this backdrop of weak public trust and limited historical engagement with capital markets, incentives for retail participation remain insufficient. Both entities have largely aligned their incentive structures (Table 2) – for instance, dividends are exempt on listed equities from taxation for domestic individual investors, and no transfer tax on securities transactions are imposed. The principal divergence lies in the treatment of capital gains: the FBiH exempts gains on listed securities entirely, while RS taxes them as ordinary income at 13%. Despite these incentives, neither entity has introduced a bundled tax-advantaged retail investment account (i.e. the instrument most consistently associated internationally with broadening retail market participation). This gap is particularly notable given that household deposits are reaching record levels, suggesting that the domestic savings pool exists but is not being channelled toward capital market participation.
Sources: (PwC, 2026[31]; Government of the Republic of Serbia, 2025[32]; Mondaq, 2026[33]); inputs provided by local consultants.
Shortcomings in minority shareholder protection in the FBiH are also a contributing factor to low public equity investment. This is relevant given that almost half of the SOEs held by the FBiH government include private minority shareholders alongside the state, making the quality of these protections directly relevant to investor confidence (OECD, 2024[20]). A key part of the problem is legislative in nature: the Government Decree on Executing Authorities in Companies with State Capital Share requires company CEOs and board members to prioritise the interests of the state shareholder – even where these conflict with the interests of the company or its other shareholders. In practice, this creates conditions where decisions can be driven by political considerations rather than business performance, leaving minority investors exposed to preferential transactions, opaque dividend practices or the erosion of company assets. Recently, amendments to the Company Law and Law on Public Enterprises in the FBiH have been proposed to strengthen shareholder rights and encourage longer-term investor participation in company management.
The corporate bond market has generally been shallow in both entities, with activity largely confined to the financial sector rather than supporting productive investment. In RS, approvals by the Securities Commission indicate visible market activity, with issuance reaching BAM 37 million (EUR 18.9 million) by April 2026 – already exceeding the BAM 33.5 million (EUR 17.1 million) recorded for the entirety of 2025, although still below the BAM 48 million (EUR 24.5 million) observed in 2024 (Figure 6). Despite this activity, the market remains concentrated among a small number of repeat issuers, primarily non-bank financial institutions, and typically involves relatively small deal sizes. For example, in 2025, 17 corporate bonds were issued by just seven entities, with certain issuers dominating: Mikrokreditno društvo “PRO FIN” d.o.o. Istočno Sarajevo alone accounted for six issuances totalling BAM 9.5 million (EUR 4.9 million). In the FBiH, issuance patterns differ, with fewer but significantly larger transactions. As of April 2026, only one corporate bond has been issued on the SASE, amounting to BAM 50 million (EUR 25.6 million). While total issuance reached BAM 76.5 million (EUR 39.1 million) in 2025 (up from BAM 30 million [EUR 15.4 million] in 2024), activity remains sporadic. The offering by the brewery Sarajevo Pivara in 2025, nominally worth BAM 15 million (EUR 7.7 million), represents a notable example of engagement by non-financial corporations (Klix Biznis, 2025[34]).
BAM (millions)
Source: OECD calculations based on publicly available data on approved and completed corporate bond issuances published by the Sarajevo Stock Exchange and the Banja Luka Stock Exchange.
The limited scale and diversity of institutional investors, particularly pension funds, remain a key factor constraining the domestic investor base. Legal frameworks for voluntary pension funds have existed since 2017 in both the FBiH and RS, but the progress has been uneven. The entities’ pension systems are predominantly based on a “pay-as-you-go” model, where current contributions finance existing pensions and do not generate significant investable assets. Funded (asset-backed) schemes, which accumulate savings and invest them in financial markets, remain nascent (Omerović, 2025[35]).
In RS, gradual but tangible progress has been made. The entity’s European Voluntary Pension Fund has expanded its membership significantly, growing from approximately 3 000 in 2019 to nearly 38 000 in 2024, and reaching assets of approximately BAM 53 million (EUR 27.1 million) in 2025 (Omerović, 2025[35]; European Voluntary Pension Fund, 2025[36]). This growth has been underpinned by a modest fiscal incentive, exempting employer contributions to voluntary pension accounts from social security contributions and income tax up to BAM 1 200 (EUR 610) per year. Participation has also been bolstered by the introduction of an “automatic voluntary opt-out” mechanism in 2019, under which employees are enrolled in the Fund by default rather than having to sign up individually. This approach is currently being scaled through the Government's Pension Plan, which automatically covers all employees whose salaries are paid from the RS budget.
In the FBiH, no voluntary pension fund has yet become operational. A primary barrier is a regulatory contradiction: the entity’s Law on Voluntary Pension Funds requires that a majority share of a management company be owned by a commercial bank or insurance company, while banking regulations prohibit commercial banks providing depository services from owning a pension fund. Compounding this, no meaningful tax incentives exist to encourage employer or employee participation. Moreover, recent budgetary reforms, which have fully integrated the pension fund into the FBiH budget, seemingly reflect a shift in political priority toward securing existing benefits rather than developing private pension provision.
No voluntary pension funds exist in the Brčko District. At the end of 2025, the District prepared a letter of intent to the World Bank to join the Pension, Social and Tax Administration Project, with the aim of assessing the feasibility of establishing its own voluntary pension fund. However, at the time of writing, no further updates were available.
High social security contributions, and the resulting lower disposable incomes, also constrain the further development of voluntary pension systems. Mandatory social insurance contributions, including for pension, are high. They stand at 17% of gross salary in the FBiH and Brčko District and 18.5% in RS, compared to an OECD average of 7.2% (PwC, 2026[37]; OECD, 2025[38]). Combined with relatively low disposable household income, this leaves limited financial capacity for individuals to invest separately in voluntary schemes.
On the trading side, investor market access remains narrow, with bond transactions in the FBiH restricted to licensed brokers. Conversely, RS has taken steps to broaden access by permitting purchases of its 2025 savings bond issue by ordinary citizens (Box 2). Although limiting transaction to licensed brokers is the norm globally, in smaller markets they can contribute to a narrow base of active intermediaries; in Bosnia and Herzegovina, only four brokers operate on the SASE and five on the BLSE, which can limit market depth and contribute to low trading rates by institutional investors.
Against the backdrop of limited retail participation in capital markets, the Government of Republika Srpska launched its first sovereign retail savings bond programme in 2025, explicitly designed as a financial education initiative to introduce citizens to capital markets. The programme offers accessible entry conditions: a minimum investment of BAM 100 (EUR 51), a fixed annual interest rate of 4.5%, semi-annual interest payments, and a two-year maturity. Crucially, bonds can be purchased not only through licensed brokers but also directly at Pošte Srpske counters, a network of post offices accessible in towns across the entity, significantly lowering the practical barriers to participation.
Recognising that accessibility alone is insufficient, the authorities accompanied the programme with a concerted awareness-raising campaign. This included a promotional leaflet covering why individuals should consider savings bonds, what they need to know, and how to purchase them, alongside a glossary of key financial terms and an educational video walking potential investors through the process. The result has been encouraging: authorities report a notable increase in the number of individuals engaging in the bond market, exceeding initial expectations.
By offering a low-risk, straightforward, and well-explained investment product, the programme has served as a first point of contact with financial markets for many participants, building familiarity with concepts such as fixed-income instruments, interest payments, and investment risk. This kind of hands-on exposure is widely recognised as one of the most effective ways to improve financial literacy and build the confidence needed for broader capital market participation over time.
Moreover, regulatory barriers limit issuance activity. The obligation to publish a full prospectus for all bond issues add complexity and cost to the process, posing a particular burden for smaller or private offerings and discouraging issuers – particularly in the FBiH, where exemptions are limited. In RS, the framework provides greater flexibility, with exemptions from the full prospectus requirement available in certain cases, including for smaller issuances, and provision for abbreviated prospectuses in others.1 Nonetheless, measures to encourage corporate bond issuance, especially for SMEs, are not yet in place (OECD, 2024[20]).
A final constraining factor for the bond market is the frequent issuance of short-term, budget-driven government securities, particularly in RS. While a liquid sovereign debt benchmark is necessary for the corporate debt market to develop by allowing corporate issuers to price their bonds effectively (OECD, 2023[40]), government bonds absorb the limited available liquidity and may crowd out corporate bonds by offering a lower risk alternative for investors. Furthermore, the absence of a regular government bond issuance calendar and an official yield curve further reduces market transparency, making it harder for companies to plan their financing activities.
There are early efforts in Bosnia and Herzegovina to leverage bond markets to support enterprises’ decarbonisation and resource-efficiency investments. Notably, together with other Western Balkan governments, Bosnia and Herzegovina has recently endorsed Green Bond Standards (Box 3), and there are some early signs of the emergence of a market for green and sustainable bonds. The first green bond in Bosnia and Herzegovina was issued by Naša Banka on the BLSE for BAM 4.2 million (EUR 2.1 million) in 2023 (World Bank, 2024[41]), More recently, the microloan provider MKD Partner successfully issued its first green bonds worth BAM 1.5 million (EUR 767 000) on the SASE in November 2025, achieving 100% subscription, meaning all bonds offered were fully purchased by investors. The issuer stated that all funds raised would be used to provide microloans aimed at financing measures that achieve energy savings and/or reduce CO₂ emissions (SASE, 2025[42]).
According to the OECD Global Debt Report 2025, achieving net-zero emissions will require more than USD 4 trillion in annual clean energy investment – yet current public finance and traditional debt instruments fall short of that mark (OECD, 2025[7]). Robust capital markets can enable the issuance of green and sustainability-linked bonds, attract institutional investors and offer diversified financing instruments aligned with the long maturities of climate-related projects.
Recognising the role of sustainable finance in mobilising capital for the green transition, in 2025, as part of the Berlin Process, the Western Balkan governments endorsed the Green Bond Standard (GBS). The GBS provides a regionally tailored framework that builds on the principles of the EU Green Bond Standard, while taking into account the specific institutional capacities and market conditions of the region’s economies.
Specifically, the GBS establishes a voluntary, opt-in framework for the issuance of use-of-proceeds sovereign and corporate green bonds. Both public and private sector issuers choosing to apply the “WB6 Green Bond” designation must comply with uniform regional requirements designed to ensure environmental integrity, transparency in the allocation of proceeds and credible external verification.
To support implementation, the standard includes a transitional list of activities that qualify as “green,” aligned with the five pillars of the Green Agenda for the Western Balkans, reflecting the region’s priority sustainability objectives.
Sources: (RCC, 2025[43]; OECD, 2025[7]).
Given the public equity market’s underdeveloped state, private equity can play a complementary financing role. By providing early- and growth-stage capital, private equity can support firm development to a scale and level of maturity that may eventually enable access to public equity markets, thereby functioning as a pipeline for future listings. Business angel investing has the potential to play a role in the economy’s early-stage financing landscape by helping bridge the gap between initial funding (typically sourced from personal networks or retained earnings) and later-stage VC (USAID, 2024[44]). This role is particularly important given that few banks offer loans tailored to the needs of start-ups. One survey found that most start-ups in the country seek funding between EUR 100 000 and EUR 1 million – beyond what traditional financial providers might be willing to offer (USAID, 2024[44]).
The unique context of Bosnia and Herzegovina presents a valuable opportunity to strengthen the private equity ecosystem by tapping into the largely underutilised potential of diaspora financing. In 2024, over 1.6 million people from Bosnia and Herzegovina were living abroad, representing approximately 34% of the total population (United Nations, 2024[45]). Efforts to mobilise diaspora financing have included donor initiatives, including the now-discontinued USAID’s Diaspora Invest project, which aimed to connect start-ups with diaspora investors, as well as more recent initiatives, namely the launch of the diaspora-backed venture capital fund, Cloud Health EuroVentures, in October 2025 (CH EuroVentures, 2025[46]). However, these initiatives remain limited in scope, and a more systematic, government-backed approach is lacking.
Angel investing and VC ecosystems are virtually non-existent in Bosnia and Herzegovina. Beyond regulatory constraints, market and institutional gaps continue to hinder the development and availability of these financing instruments. Angel investing has yet to gain meaningful momentum, with earlier efforts to establish active investor groups in 2010 and 2014 failing to sustain activity or generate notable investment. Similarly, the VC ecosystem is still in its nascent stages. Available data show extremely low levels of VC investment, amounting to just EUR 2.6 million in 2024, significantly below levels observed in peer economies such as Bulgaria (EUR 56.8 million) and Croatia (EUR 115.3 million), and no investments recorded in 2025 (Dealroom, 2026[47]).
One of the barriers to the development of private equity in Bosnia and Herzegovina is the absence of a robust and cohesive regulatory framework. At the entity level, private equity is governed by a patchwork of different laws, which creates inconsistencies and legal uncertainty for investors. There is moreover an absence of clear legal definitions tailored to the specific features of private equity. In the FBiH, equity financing falls under the Law on Investment Funds, which does not explicitly cover VC or angel investing. The entity has not yet adopted legislation on alternative investment funds (AIFs) nor amended existing laws to accommodate private equity instruments. In contrast, RS has made good progress in reforming its regulatory environment. In 2022, the entity amended its Law on Investment Funds to allow for the creation of AIFs. The reform introduced a dedicated legal framework for AIFs, including VC funds, enabling more flexible capital allocation and aiming to attract a broader and more diverse investor base. Yet, despite this advancement, full alignment with EU regulations, namely the Alternative Investment Fund Managers Directive (AIFMD), has yet to be achieved.
Building on this reform, the RS’s first AIF was established in May 2024, following approval granted to the fund management company Management Solutions. As of April 2026, the market has expanded to three licensed AIFs: two managed by Management Solutions and one managed by FS Capital, a fund management company established in November 2024 and specialising exclusively in alternative investments. Among these AIFs, investment activity appears to be concentrated in debt instruments, primarily financing SMEs and entrepreneurs, rather than in equity, thereby limiting its role in supporting high-growth firms.
← 1. Under Article 60 of the Law on the Capital Market of RS, as amended in 2021, several categories of public offers may be carried out without the obligation to publish a prospectus. These include offers addressed exclusively to qualified investors, offers to a limited number of investors (up to ten non-qualified investors), offers where each investor subscribes for a minimum of BAM 100 000 (EUR 51 150), offers of securities with a nominal value of at least BAM 100 000 (EUR 51 150) per unit, and offers with a total value below BAM 1 000 000 (EUR 511 520) within a twelve-month period. In such cases, issuers remain obliged to provide adequate information to investors, with the scope and content prescribed by the Rulebook on the Issuance of Securities of the Securities Commission of the RS.