Western Balkans Competitiveness Outlook 2024: Serbia

4. Access to finance

Abstract

Access to finance is crucial for developing the private sector in all economies. This chapter, along with three sub-dimensions, explores the necessity for businesses to be able to access financing sources to start up, grow, diversify and ultimately contribute to overall competitiveness. The first sub-dimension, the bank financing framework, assesses the regulatory framework of bank financing, including the quality of the banking industry legal framework, registration and information systems, and the policies that make bank finance inclusive. The second sub-dimension, access to alternative financing sources, focuses on the various means that businesses can get financing, encompassing access to capital markets, private equity as well as factoring and leasing. The third sub-dimension, digital finance, delves into the effects of digital solutions on payment services and the emergence of new avenues for business finance.

Key findings

Serbia’s access to finance score has been stable since the Competitiveness Outlook 2021, at a level of 3.3 (Table 4.1), remaining the highest score in the Western Balkans. The government has taken several measures to develop the capital market and digital finance, but the economy records a low performance on bank finance inclusion – a policy area assessed for the first time.

Table 4.1. Serbia’s score for access to finance

Dimension	Sub-dimension	2018 score	2021 score	2024 score	2024 WB6 average
Access to finance	3.1: Bank financing framework			3.3	3.5
	3.2: Access to alternative financing sources			3.0	2.4
	3.3: Digital finance			3.5	2.3
Serbia’s overall score		3.2	3.3	3.3	2.8

The key findings are:

• Access to bank finance for the smallest businesses is hindered by stringent collateral requirements, limited credit guarantee schemes, and the absence of policies supporting microfinance. SMEs constitute only 31.6% of total loan recipients from commercial banks in 2022, compared to the Western Balkan average of 39%. This discrepancy underscores the need for targeted interventions to improve SME financing conditions.

• Backed by the Capital Market Development Strategy, Serbia's capital markets’ legal framework has progressed since the last assessment cycle, especially with the implementation of the Law on Capital Market in January 2023. However, translating these developments into tangible implementation has been hampered by the constraints posed by limited administrative capacity within institutions responsible for its implementation.

• Serbia leads the Western Balkan economies as the first to utilise Distributed Ledger for Financing Technologies (DLT) for accessing finance. In June 2022, the first initial offering of factoring tokens has been conducted, raising around EUR 175 000. Subsequently, in December 2022, the Securities Commission approved another white paper for the same issuer to offer factoring tokens. While this financing method shows promise, it remains relatively novel and awaits broader recognition among companies and investors.

• Alternative forms of financing, including business angel networks (BAN) and crowdfunding, currently operate without specific regulations. However, the National Bank of Serbia (NBS) drafted a law governing crowdfunding activities and is in the process of reviewing it to ensure alignment with Serbian Law and the respective EU acquis on European business crowdfunding service providers. Still, no specific timeline for its adoption and implementation has been communicated.

• Serbia has made good progress in strengthening its legal framework for digital payments as part of its Single Euro Payments Area (SEPA) integration efforts. Especially, Serbia is in the way of extending banks’ payment services to third-party payment service providers with full alignment to the EU Second Payment Services Directive (EU PSD2) by the end of year 2024.

State of play and key developments

Serbia's financial sector relies heavily on the banking industry, which constitutes 91.1% of total financial system assets in 2022, a slight decrease from 91.6% in 2015 (National Bank of Serbia, 2022[1]). This contrasts sharply with the euro area, where the banking sector represents only 50% of total financial assets (European Central Bank, 2023[2]). In the banking sector, consolidation continued, reducing the number of commercial banks to 21 in 2022 (down from 23 in 2021 and 30 in 2013). However, the concentration level remains relatively low, signalling the persistence of competitive pressures within the Serbian banking industry.1 The top three Serbian banks collectively managed approximately 39.4% of assets of the banking industry in 2022 – a slight uptick from 36.6% in 2013 – which remains significantly below the averages observed in the Western Balkans (68.8%) and the EU (71.5%) (World Bank, 2022[3]).

During the past decade, the overall credit provision by the Serbian financial sector has exhibited a stagnant trend. In 2022, domestic credit to the private sector was equivalent to 40.4% of GDP, while 41.0% in 2013. This figure is substantially higher in the Western Balkan region (46.4% in 2022) and the European Union (69.5%) (World Bank, 2022[3]).

Sub-dimension 3.1: Bank financing network

Serbia’s legal framework for the banking industry is well developed, as Basel III standards have been fully implemented since June 2017.

After raising the key policy rate from 1.0% in January 2022 to 5.0% by December 2022, the National Bank of Serbia (NBS) implemented measures to mitigate the impact of increasing interest rates on debtors’ solvency. Specifically, the Decision Amending the Decision on Capital Adequacy of Banks, implemented in December 2022, enables banks to restructure receivables from financially distressed debtors by extending repayment periods for consumer loans that are shorter than nine years.2 In December 2022, the NBS also implemented the Decision Amending Temporary Measures for Banks for Natural Persons, easing credit conditions until the end of 2024. This Decision requires banks to freeze or reduce the interest rate on variable-rate housing loans until the end of year 2024 for loans approved before 13 September 2023. The maximum interest rate is set to 4.08%, which will also be applied to new loans until the end of 2024. Moreover, this Decision allows banks to extend the repayment periods for housing loans without any fee for five additional years for loans contracted in 2023.3

Serbia has relatively stringent lending requirements. While both tangible and intangible assets (except trademarks) can be used to secure loans, small and medium-sized enterprises (SMEs) do not benefit from lighter requirements. However, NBS regulations lighten provisioning requirements regarding SME lending through decreased risk-weight coefficients specific to these loans, which could support SME corporate lending.

Serbia established a functional cadastre and information and registration system for moveable assets, which is actively utilised by the local banking sector. The real estate cadastre, covering the entire territory, is accessible on line with weekly updates. The Register of Pledges, an integrated electronic database, provides comprehensive coverage of registered pledge rights and is accessible on line to the public. Regarding credit information systems, the Association of Serbian Banks oversees data collection, ensuring confidentiality and compliance with the Law on Personal Data Protection and the Law on Information Security. Financial institutions can request online data with written borrower consent. However, a weakness lies in the system's non-comprehensive coverage of non-regulated entities like non-bank financial institutions, retailers, and utilities, limiting its effectiveness.

Although a vast majority of the Serbian population and businesses have access to bank finance, such finance is less inclusive for small businesses. Serbia's bank finance penetration is advanced, with 89.4% of the population holding a bank account in 2021, a level comparable to the EU (95.1%) and substantially more than in the Western Balkan region, where the average stands at 71.2% (International Monetary Fund, 2023[4]). However, regarding the accessibility of bank finance for all businesses, outstanding SME loans from commercial banks stand for only 31.6% of total bank loans in 2022 (35.4% in 2018) (International Monetary Fund, 2023[4]), a lower level than in the Western Balkans (39.0%); meanwhile that figure is higher than 60% in comparable economies from the EU, such as Slovak Republic (60.5%) or Latvia (76.0%) (OECD, 2022[5]).

The accessibility of bank finance for businesses is likely to worsen due to the conclusion of the COVID‑19 credit line amid rising interest rates.4 Following the end of the last EU multiannual financial framework, the EUR 500 million COSME programme, loans for working capital and refinancing of working capital and investment loans, which commenced in April 2021, ceased operations in August 2022. Although there are still ongoing programmes supporting SMEs' access to bank finance, their combined financial capacity is lower. The largest programme is the United States International Development Finance Corporation's (DFC) around EUR 252 million loan portfolio guarantee launched in December 2022.5 It will be operated by the local banks ProCredit, Addiko, Banka Intesa and Raiffeisen banks, in partnership with the Serbian Ministry of Finance and USAID Serbia, to fund SMEs’ investment activities (United States Agency International Development, 2022[6]). The EBRD SME Competitiveness Support Programme, initiated in December 2019 and concluding in April 2025, also backs investments while targeting greening purposes, with a total credit line of EUR 30 million (European Bank for Reconstruction and Development, 2021[7]).6 Another active initiative, the Equipment for SMEs programme, has been implemented annually since 2015 by the Ministry of Economy in co-operation with the Development Agency of Serbia and commercial banks and leasing companies, and supports SMEs in acquiring new equipment. For years 2022 and 2023, EUR 15 million have been provided by the Serbian Government, and EUR 11 million by the EU (European Union, 2024[8]).7

The smallest Serbian businesses cannot rely on microfinance, as there is no specific regulation on its provision and no policy aimed at fostering its development. In this context, the Serbian Development Fund is the only non-bank financial intermediary in Serbia that provides microcredit directly to legal entities, entrepreneurs, and farmers. As such, it is the only legal entity apart from banks allowed to disburse loans. It can only disburse business loans (i.e. to legal entities and registered entrepreneurs, including start-up loans), which range between EUR 2 400 and EUR 56 000 with a 3% interest cap.8

Sub-dimension 3.2: Access to alternative financing sources

Despite recent legal progress since the last assessment cycle, alternative financing sources remain limited in Serbia, which maintains a dependency on traditional banking.

Capital markets in Serbia remain relatively underdeveloped. The Serbian stock market’s total market capitalisation stands for only 8.5% of GDP in 2021, far from the EU (75.4%) average (World Bank, 2022[3]).9 The Serbian Government endorsed the Capital Market Development Strategy for 2021-26 to develop capital markets. Key objectives include optimising the regulatory system to attain Markets in Financial Instruments Directive II (MiFID II) market status, improving the quality and accessibility of investment products, expanding the issuer base, attracting a more significant number of domestic and international investors, establishing an adequate institutional framework, bolstering technological and human resources capacities, and promoting financial education among market participants and the general population.10

The first noticeable outcome of the Capital Market Development Strategy has been the adoption of the Law on Capital Market in December 2021, followed by its implementation in January 2023. Serbia incorporated significant European directives and regulations within this legislative framework, such as the alignment to MiFID II.11 However, alignment with the Markets in Financial Instruments Regulation (MiFIR) framework remains low, and the overall administrative capacity of the Serbian Securities Commission and Ministry of Finance in implementing the Law on Capital Market is limited.12 To foster the administrative capacity of these institutions, the World Bank will work with the Serbian Government on the Catalysing Long Term Finance through Capital Markets Project” (Box 4.1).

Box 4.1. Catalysing Long-Term Finance through Capital Markets Project

Approved in March 2023, the Catalysing Long Term Finance through Capital Markets Project aims to i) improve the enabling environment for capital markets development and ii) deepen the corporate bond market, including through green and other thematic issuances. The programme will operate until April 2028 for a total cost of EUR 46.4 million.

The project comprises two components. The first component, institutional, legal, and regulatory reforms, will focus on supporting the government in strengthening the institutional, legal, and regulatory framework for capital markets development. It consists of the following sub-components: i) Ministry of Finance – capital markets policy and regulatory unit; ii) strengthening the Serbian Securities Commission and the central securities depository; iii) strengthening the Belgrade stock exchange; iv) taxation reform; v) other technical assistance for implementing the capital markets development strategy. The second component, the corporate bond issuer programme, will focus on expanding the corporate bond issuer base.

Source: World Bank (2023[9]).

While capital markets are still developing in Serbia, the Belgrade stock exchange requires substantially proportional regulatory requirements for smaller firms, such as SMEs, facilitating their access to stock and bond markets. For the issuance of shares or depository receipts, non-listed companies must possess a minimum capital of EUR 300 000 or maintain a 15% free float of shares. In the case of debt securities, the sole requirement is a minimum emission value of EUR 200 000. However, prime listing requires substantially more requirements. First, an issuer must demonstrate at least three years of business operations with associated annual financial reports.13 For share issuance, specific criteria include the payment of dividends per preference shares, a minimum capital of EUR 3 million, and the issuer must maintain a corporate website with versions in both Serbian and English. For the issuance of bonds, the emission value must be at least EUR 1 million, and the issuer's account should not have been blocked in the past 180 days. Despite flexible regulatory requirements fostering the accessibility of capital markets, no financial incentives are in place to promote the use of shares and bonds. Moreover, start-ups and early-stage companies, especially, continue to face high-risk perceptions from investors due to the lack of an extensive track record of financial performance. This results in higher liquidity issues in the secondary market, where there may be fewer buyers and sellers for SME securities. Currently, no entity provides a credit score in the corporate bond market, which could enhance investor confidence and facilitate efficient capital allocation by providing a standardised credit risk assessment for bond issuers.

The legal framework for private equity investment funds and venture capital is relatively developed. Governed by the Law on Alternative Investment Funds and bylaws enacted by the Securities Commission, Serbia is closely aligned with the Directive on Alternative Investment Fund Managers (AIFMD). However, on open-ended investment funds, the Law on Open-Ended Investment Funds with Public Offering is only partially aligned with the Directive relating to undertakings for collective investment in transferable securities (UCITS). Serbia still has no legal framework governing BANs.

Factoring and leasing are available and backed by well-developed legal frameworks but have experienced mixed developments. Leasing volumes have consistently increased over the past decade, as they account for 1.91% of the GDP in 2022, a significant increase from 1.49% in 2013; this allows Serbia to catch up with the EU as leasing volumes reached 2% of GDP in the region in 2022 (Leaseeurope, 2023[10]). On the other hand, factoring volumes receded, representing only 0.25% of GDP in 2022 (0.6% in 2013), while factoring turnover was equivalent to 12.6% of GDP in the EU in 2022 (EU Federation of Factoring & Commercial Finance, 2023[11]).

Factoring and leasing activities operate within a comprehensive legal framework in Serbia, and only leasing regulation experienced legislative changes since the last assessment cycle. While the legal frameworks are highly aligned with EU standards, the development of these forms of finance might be hindered by the lack of active policies, such as tax incentives and assistance and training for SMEs.

During the assessment period, the NBS has undertaken updates to existing regulations and introduced new ones to address the evolving challenges posed by the COVID-19 pandemic. Notably, in March 2021, the NBS adopted amendments to the Decision on Temporary Measures for Financial Lessors to provide lessees additional time and facilities to meet their obligations, specifically in response to the economic impacts of the pandemic. Additionally, the NBS facilitated restructuring obligations for lessees with existing financial leasing agreements related to agricultural assets. Support was provided to the farming sector with the implementation of the Decision on Temporary Measures for Lessors in October 2022, targeting the effective management of credit risk within the portfolio of leases for agricultural machinery and equipment.

Sub-dimension 3.3: Digital finance

Following the National Retail Payments Strategy (2019-24), Serbia has made progress in strengthening its legal framework for digital payments as part of its SEPA integration efforts. After achieving alignment with the EU's Second Electronic Money Directive (EMD2) licensing for e-money institutions during the last assessment cycle, thereby facilitating electronic money issuance, the NBS is updating its legal framework to align with the EU Second Payment Services Directive (EU PSD2) for expected implementation by the end of the second quarter 2024. Aligning with EU PSD2 will expand banks’ payment services to third-party payment service providers (TPPs), subject to suitable security requirements, to stimulate competition by introducing new players to provide payment services.14 In tandem with the ongoing improvement of the legal framework, the digital payment and e-money services sector has expanded in Serbia, with the number of e-money institutions reaching six in 2023 compared to only two in 2019 (National Bank of Serbia, 2024[12]). Despite not having yet implemented a comprehensive legal framework for digital payments, Serbian citizens are familiar with this technology as 87.5% of the adult population has reported having made or received a digital payment (World Bank, 2022[3]), a figure very close to the EU average (93.0%).

Serbia has two local crowdfunding platforms, but they do not operate with a dedicated legal framework. The leading platform, Ventu, was launched at the end of 2020 with financial support from the United States Agency for International Development (USAID). Its activity remains very marginal, as it has supported only five companies at the time of writing. Overall, crowdfunding in Serbia suffers from significant administrative burdens for companies seeking funds and is currently limited to local investors due to complex and costly regulations for foreign investors. To develop this activity, the NBS drafted a law governing crowdfunding activities and is in the process of reviewing it to ensure alignment with Serbian Law and the respective EU acquis on European business crowdfunding service providers (European Union, 2020[13]). Still, no specific timeline for its adoption and implementation has been communicated.

There is a robust legal structure for Distributed Ledger Technology (DLT) for financing backed by the Law on Digital Assets implemented in June 2021, which offers alternative ways to access finance. In particular, the legislation on Security Token Offerings (STOs) and Initial Coin Offerings (ICOs) includes partial exemptions from capital market regulations for public offer values below EUR 3 million for STOs and ICOs.15 16 These digital finance tools may offer smaller businesses an alternative means to access finance, allowing them to circumvent traditional banking requirements and regulatory requirements associated with capital markets (OECD, 2019[14]). It should be noted that the Serbian Law on Digital Assets is in line with the security requirements of the fifth Anti-Money Laundering Directive (AMLD5), which aims to detect and prevent money laundering using virtual currency exchanges and wallets.17 Regarding developing ICOs and STOs in Serbia, only one company, Finspot, has an approved White Paper for token issuance. Approved in June 2022, Finspot's initial offering of factoring tokens saw moderate success, with a subscription rate of 58%, raising about EUR 175 000 out of a total offering of EUR 300 000. However, the subsequent ICO approved in December 2022 achieved a substantially lower subscription rate of only 5.6%, raising EUR 89 000 out of a total offering of EUR 1 852 500. Overall, this financing method remains new and has yet to be recognised by most companies and investors.

Overview of implementation of Competitiveness Outlook 2021 recommendations

Serbia has made progress in aligning the legal framework of capital markets with EU standards. However, more policies are needed to facilitate businesses' access to long-term debt financing and develop alternative funding sources such as private equity and crowdfunding. The critical developments based on the previous CO recommendations are elaborated below.

Table 4.2. Serbia’s progress on past recommendations for access to finance

Competitiveness Outlook 2021 recommendations	Progress status	Level of progress
Continue efforts to implement crowdfunding legislation in line with EU norms	The National Bank of Serbia (NBS) has formulated a preliminary version of a regulation tailored to govern crowdfunding activities. Simultaneously, the Law on Digital Assets provides a framework enabling crowdfunding by utilising digital assets.	Moderate
Consider a business angel network review	The business angel network and associated legal framework have not been assessed. The legal framework governing BANs is not yet in line with EU standards, and no strategic approach or legislation has been adopted since the last assessment cycle to address this matter.	None
Promote access to equity capital through the stock market	The Serbian Government endorsed the Capital Market Development Strategy for 2021-26 to develop capital markets. The first noticeable outcome has been the implementation of the Law on Capital Market in January 2023. However, no financial incentives scheme is aimed at developing stock markets. One opportunity to build capital markets could lie in the potential privatisation programme of state-owned enterprises (SOEs), while explicit privatisations have not been communicated.	Moderate
Facilitate market-based long-term debt financing for businesses	Presently, policies are scarce in Serbia to facilitate businesses' access to long-term debt financing. Although the bond market accommodates a segment for non-listed firms, its growth is impeded by the lack of credit rating services. This deficiency in information for assessing solvency risk deters investors, resulting in restricted liquidity within the bond market. Furthermore, the development of the bond market is hampered by the absence of financial incentives that would otherwise encourage the utilisation of bonds.	Limited

The way forward for access to finance

To make bank finance accessible, support alternatives to bank finance and develop digital finance, policy makers should:

• Make bank finance accessible for all businesses. Permanent credit guarantee scheme programmes, such as those implemented during the COVID-19 pandemic, could broaden financing opportunities for SMEs. Additionally, policies to develop the activity of existing microfinance facilities, such as interest rate caps and active platforms for SMEs, can also help remove barriers to finance for the smallest businesses (see the Ireland example in Box 4.2).

• Continue efforts to harmonise further capital markets' legal framework with EU standards. Adopting EU acquis regulations on stock and debt markets can increase investor confidence, strengthening cross-border co-operation. That can create opportunities for local businesses to attract investment and raise capital from a larger pool of investors.

• Make capital markets accessible for all businesses. Serbia could establish credit rating services to assess SMEs' financial risk and implement a specific corporate bond market segment. Ensuring an adequate legal framework might not be sufficient; SMEs may not afford the regulatory requirements for accessing capital markets, as the costs associated with compliance and reporting can be prohibitive. To mitigate these regulatory costs, Serbia could also implement policies providing fiscal incentives to raise funds in the capital markets.

• Continue efforts to diversify financing sources, with a focus on business angels. While Serbia has established legal frameworks for various alternative funding mechanisms, such as private equity and digital assets, BANs still lack regulation. This form of funding can provide early (e.g. seed or venture) capital financing, offering growth opportunities for promising SMEs.

Box 4.2. Access to Finance Hub in Ireland

The Access to Finance Hub was established as a single access point for SME funding in Ireland. It provides access to a Credit Review function, which helps SMEs that have been refused credit from the major lending institutions. The Hub includes four key funding schemes catering for event-specific funding, such as COVID-19 and Brexit, as well as continuous funding schemes called the Growth and Sustainability Loan Scheme and the Microenterprise Loan Fund.

Succeeding the Future Growth Loan Scheme that stopped operating in March 2023, the Growth and Sustainability Loan Scheme makes up to EUR 500 million in loans available (0.1% of the Irish GDP in 2022). Loans between EUR 25 000 and EUR 3 million, with terms of up to ten years and attractive conditions, will be available to eligible SMEs through the scheme. The scheme targets a minimum of 30% of the lending volume towards environmental sustainability purposes to encourage SMEs to take positive actions in support of the climate change agenda. 70% of available funds support strategic long-term investment, such as investments in tangible or intangible assets, machinery or equipment, research and development, business expansion and premises improvement.

Operating since 2012, the Microenterprise Loan Fund Scheme provides support in the form of loans for up to EUR 25 000. The scheme is available to start-up, newly established, or growing micro-enterprises employing fewer than ten people and a turnover below EUR 2 million, with viable business propositions that do not meet the conventional risk criteria applied by banks. In 2022, 401 loans were drawn to EUR 6.9 million. 88% of approvals are granted to businesses employing three people or fewer, and 45% are granted to start-ups (in business for less than 18 months).

Source: Eurofound (2022[15]).

References

[11] EU Federation of Factoring & Commercial Finance (2023), Annual Factoring Data; Factoring turnover in Europe, https://euf.eu.com/data-statistics/annual-factoring-data.html (accessed on 24 November  2023).

[15] Eurofound (2022), Access to Finance Hub, https://static.eurofound.europa.eu/covid19db/cases/IE-2022-1_2963.html (accessed on 14 May 2024).

[7] European Bank for Reconstruction and Development (2021), EBRD and EU support SME competitiveness in Serbia, https://www.ebrd.com/news/2021/ebrd-and-eu-support-sme-competitiveness-in-serbia-.html (accessed on 11 January 2024).

[2] European Central Bank (2023), ECB Data Portal, https://data.ecb.europa.eu/data-comparison/e595831e-7662-41cf-ab04-f191303138ac (accessed on 24 November 2023).

[16] European Commission (2020), Guidance for the Economic Reform Programmes 2021-2023 of the Western Balkans and Turkey, European Commission, Brussels, https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/erp_2021-2023_guidance_note.pdf.

[8] European Union (2024), EU Projects in Serbia, https://www.euzatebe.rs/en/projects/equipment-for-smes (accessed on 11 January 2024).

[13] European Union (2020), Regulation (EU) 2020/1503 of the European Parliament and the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937, https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32020R1503.

[4] International Monetary Fund (2023), Financial Acess Survey (FAS), https://data.imf.org/?sk=E5DCAB7E-A5CA-4892-A6EA-598B5463A34C&sId=1460043522778 (accessed on 24 November 2023).

[10] Leaseeurope (2023), Solifi releases their 2023 Global Leasing Report, https://www.leaseurope.org/solifi-releases-their-2023-global-leasing-report-1 (accessed on 24 November 2023).

[12] National Bank of Serbia (2024), Payment institutions and electronic money institutions, https://nbs.rs/en/finansijske-institucije/pi-ien/ (accessed on 11 January 2024).

[1] National Bank of Serbia (2022), Annual Financial Stability Report, https://www.nbs.rs/en/drugi-nivo-navigacije/publikacije-i-istrazivanja/GISFS/.

[5] OECD (2022), Financing SMEs and Entrepreneurs 2022: An OECD Scoreboard, https://doi.org/10.1787/e9073a0f-en.

[14] OECD (2019), Initial Coin Offerings (ICOs) for SME Financing, http://www.oecd.org/finance/initial-coin-offerings-for-sme-financing.htm.

[6] United States Agency International Development (2022), U.S. International Development Finance Corporation Announces Partnership with Four Commercial Banks to Increase Lending to Small and Medium Sized Enterprises, https://www.usaid.gov/serbia/press-release/dec-13-2022-us-international-development-finance-corporation-announces-partnership-four-commercial-banks-increase-lending-small-and-medium-sized-enterprises (accessed on 9 February 2024).

[9] World Bank (2023), Serbia- Catalyzing Long Term Finance through Capital Markets Project (English), https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099212502272311919/bosib09b18d4b20420a8ea0f82a5b662db6#:~:text=The%20development%20objective%20of%20the,project%20comprises%20of%20two%20components (accessed on 9 January 2024).

[3] World Bank (2022), The Global Financial Development Database, https://www.worldbank.org/en/publication/gfdr/data/global-financial-development-database (accessed on 24 November 2023).

Notes

← 1.  A bank can only operate in Serbia if it is registered as a domestic legal entity, regardless of whether the bank’s owner is from a foreign economy.

← 2.  Loans for the purchase of motor vehicles can be extended if their initial duration is shorter than 11 years. It should also be noted that these repayment period extensions do not require any modification of banks’ capital requirements. During the extended periods, borrowers can also get repayment assistance, regardless of their debt-to-income ratio at the time of restructuring.

← 3.  The NBS implemented similar decisions to support the agricultural sector with the Decision on Temporary Measures for Banks Aimed at Adequate Management of Credit Risk in Agricultural Loans Portfolio in Conditions of Aggravated Agricultural Production implemented in October 2022, and the Decision Amending the Decision on Temporary Measures for Banks Aimed at Adequate Management of Credit Risk in Agricultural Loans Portfolio in Conditions of Aggravated Agricultural Production implemented in January 2023.

← 4.  The key policy interest rate of the NBS rose from 1.0% in January 2022 to 5.0% in December 2022 and reached 6.5% in December 2023.

← 5.  The lending conditions include meeting 2 of the following 3 criteria: up to 300 employees, annual revenues of a maximum of USD 15 million, and total assets of a maximum of USD 15 million. The minimum and maximum loan amounts, as well as the term, depend on the bank but generally, the minimum is USD 10 000, while the maximum ranges from 4 million to 10 million, with a term of 4 to 10 years.

← 6.  The EBRD provides a EUR 20 million loan to Unicredit Leasing Serbia, and the EU provides an additional EUR 10 million in Instrument for Pre-Accession Assistance (IPA) funding. The programme is implemented in co-operation with the Ministry of Economy of Serbia. Beneficiary SMEs can also obtain technical assistance, including EBRD advisory support. They will be eligible for a cashback grant of 15% of the total loan amount once their investment project is completed, which will be funded by the EU.

← 7.  It should be mentioned that a few other policy initiatives are in place to promote SMEs’ access to finance. In 2021, the programmes delivered by the Innovation Fund were equivalent to EUR 11.4 million. Moreover, while not in the form of credit guarantees, the SME Hub initiative that was launched in July 2022 by the Swiss Agency for Development and Cooperation (SDC) and the Serbian company ICT HUB provides services to help SMEs access finance. Additionally, the Equipment for SMEs, Entrepreneurship Development Projects, Financial Support for New Businesses and Youth, and Financial Support for Women Entrepreneurs programmes offer a mix of grants and loans from various sources like commercial banks, leasing companies, and the Development Fund. Since 2016, these programmes have been running regularly, supporting over 1 000 SMEs annually with a total budget of around RSD 2 billion (approximately EUR 17 million). They are crucial in assisting groups often overlooked by banks, such as new businesses, women, and young entrepreneurs.

← 8.  The Serbian Development Fund does not disburse personal loans.

← 9.  This statement only considers Western Balkan economies with functioning stock markets, i.e. Bosnia and Herzegovina, Montenegro, North Macedonia, and Serbia. It should also be mentioned that high capitalisation in Montenegro results from the major privatisation programme of state-owned enterprises (SOEs).

← 10.  MiFID II is a comprehensive set of regulations enhancing investor protection, increasing transparency, and standardising regulatory disclosures across financial markets (https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0065).

← 11.  Other EU regulations involve the regulation of markets in financial instruments (EU No. 600/2014), investor-compensation schemes (Directive 97/9/EC), prospectus requirements (Regulation [EU] 2017/1129), transparency requirements for issuers (Directive 2004/109/EC), amendments to transparency requirements and prospectus regulations (Directive 2013/50/EU), criminal sanctions for market abuse (Directive 2014/57/EU), market abuse regulation (Regulation [EU] No. 596/2014), and settlement finality in payment and securities settlement systems (Directive 98/26/EC, with a focus on settlement finality in securities settlement systems).

← 12.  MiFIR is a set of regulations that complements MiFID II within the European Union. It directly addresses issues such as transaction reporting, pre- and post-trade transparency, access to clearing and trading venues, and regulating commodity derivatives (https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0600).

← 13.  The reports should include a positive auditor's opinion in the business year before the listing application and indicate a net profit for that period.

← 14.  EMD2 directive: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009L0110; PSD2 directive: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015L2366.

← 15.  See Article 7 of the Law on Digital Assets. The issuance of digital assets under this law circumvents the need to register these financial instruments with the Central Securities Depository. Consequently, the usual regulations outlined in the Law on Capital Market do not apply to these specific financial assets.

← 16.  Overall, the ten decisions from the “Law on Digital Assets” resulted in the comprehensive regulation governing the STOs and ICOs dealing with the provision of digital asset services, pledge and fiduciary rights on digital assets, and the Securities Commission and NBS competencies. The supervisory bodies applying the law are the NBS for the scope of the law related to cryptocurrencies as a type of digital asset, and the Securities Commission for a digital asset with the characteristics of financial instruments.

← 17.  Alignment to this directive has been achieved in December 2020 with the implementation of the Law on Financial Markets based on Distributed Ledger Technology.