European Integration - Realities and Perspectives. Proceedings 2018
The Effect of Supportive Policies
on SME Development – Kosovo Case
Abstract: This paper examines the effect of government policies affecting the de velopment of SMEs. SMEs
are promoters of economic development, but being small, they are al so very vulnerable to the unfavorable
business environment thus they need to be supported. The paper will spe cifically address the impact of
government subsidies and loans in supporting the development of the first SMEs in their turnover. Kosovo is a
country in transition therefore it is expected that these effects will be interesting, as the opportunities of
government institutions to help them are very poor either by t he lack of means or by the wrong allocation of
funds in sectors that have no influence in the economy. The analysis of the results was done using econometric
models such as simple OLS regression and auto-correlation vector analysis VAR. There are many studies that
have provided different opinions about the effects of these supporting policies on SME development. Hence,
their findings and results from empirical analysis will draw useful conclusions and recommendations.
Keywords: SMEs; development; effects; subsidies; loans
In order to promote the development of an entrepreneurial economy, it is necessary for the state to
establish a system to support its development. This fact, in developed countries, has been clearly
reflected since the 1980s. XX and also the results of this support are uncontested.
In this support system are locked state, private enterprises, voluntary organizations, non-governmental
organizations, institutes and public agencies, which are organized and trained to provide various
services and support to SMEs.
Entrepreneurship is the term that best suits and adapts to the free market economy, then the question
arises, why should we propose that they should be helped, the implementation of the idea would be
best done with a minimal intervention of other factors, especially the state?!
SMEs need a much more secure environment than financial capital, as it with the innovation and
flexibility it characterizes as an enterprise generates revenue (without wanting to reduce the
importance of financial support). The overall aim of SME support and entrepreneurship is to help
those enterprises that have a good prospect in the future both in the production process and in the
realization process, and on the other hand the entrepreneur's expenses somehow to be minimized.
Support is provided through organized institutional networks such us: public, private, state and
voluntary. It seems that transition countries fail in this dimension, exactly in finding the correct way of
1 Senior Lecturer, PhD, AAB College, Faculty of Economics, Republic of Kosovo, Address: Zona Industriale Prishtinë -
Fushë Kosovë, Prishtinë, Tel.: +383 38 600 005, Corresponding author: