Volume 1 Cedric - revised luca Final - RUIG-GIAN

5.2. Addressing constraints for SME developmentDespite such efforts, further implementation and following through of reforms isnecessary in terms of creating a conducive environment for SME development by liftingmain constraints to their creation and operation. The sector is still faced with consolidationand further development constraints, that would need to be addressed by public authorities,in collaboration with key stakeholders.It is possible to distinguish main constraints to the SME sector by stages of operation.Input constraints include the insufficient supply of skilled workers, access to informationand technology which limit innovation and competitiveness, the quality of raw materials(since they are usually exported or are available only to larger firms), and inadequateinfrastructure and services such as transportation, energy, urban planning and production.Output constraints refer to the nature of domestic markets, a limited access to publiccontracts and subcontracts, inefficient distribution channels and their control by largefirms, the external competition of international markets and SMEs’ limited internationalmarketing experience, poor quality control and product standardization, limited access totransnational business partnerships and constraints in consulting services (ranging from thelack of adequate technical support services in certain areas or sectors, their high unit cost,the lack of cost-effective management solutions for the scale of SMEs and scarceawareness of the existing services). Considering the regional political and securitydisorders, entrepreneurs are faced with the loss of the main export market in FormerYugoslavia, the loss of confidence of external business partners and the closing of transitroutes. Finally, respondents point at a general restrictiveness of regulatory, managementand institutional frameworks. Regulations such as tariff and non-tariff barriers favourlarger firms, labour codes do not integrate the specificities of SME operations, start-upcosts of business are often discouraging (including licensing and registration requirements)and the antitrust legislation is weak.In consideration of such constraints, which are and have been experienced by theSME sector in several other countries, support strategies and experiences to the SMEsector have been elaborated and studied by international organizations to focus on keybottlenecks at the micro and macro-economic levels. At the micro-economic level, supportstrategies include promoting technology dissemination, business skills training and theimprovement of businesses development services. 114 Potential macro-economic avenues tosupport entrepreneurship and SME development include improvement in legal regulations,simplification of administrative procedures, improvement of financial services for SMEs,and integrating SMEs into regional and global markets. SMEs’ capacity to defend theircollective interests and their effective participation in civil society also need to bestrengthened. A consideration of key avenues to support the sector is provided below.5.3. Access to credit for the SME sectorThe problem of appropriate access to financing appeared in the questionnaires as thefirst priority for SMEs. The start-up capital of each of the businesses came almostexclusively from private savings (cf Table 1), and the stakeholders interviewed indicated intheir individual comments the inadequacy of the financial services received from thebanking system, starting from inadequate interest rates. It has been noted, furthermore, thatbanks have adopted quite strict, sometimes excessively rigid, loan policies and when114 ‘Impact assessment/evaluation paper on ILO technical cooperation: Projects and programmes on thedevelopment of micro-enterprises, including cooperatives’ ILO Committee on Technical Cooperation, GenevaMarch, 1998 http://www.ilo/public/english/standards/relm/gb/docs/gb271/tc-3.htm.127