THE ROLE OF BANK LOANS FOR SMALL AND MEDIUM-SIZED ENTERPRISES

Abstract

Small and medium-sized enterprises (SMEs) are a very important factor in solving most problems in national economies, so it can be safely said that they are stabilizers in the short term, and that they are generators for the development and success of the economy in the long term. Many analyzes and studies exist in order to provide recommendations that will be implemented by national authorities because SMEs are key in the overall operation of national economies as drivers of employment and participants in the creation of GDP and as such become a significant segment in modern economic flows. The main challenge of SMEs is access to finance, as well as determining the reasons for SME's limited access to finance. There is a great concern based on these challenges for SMEs due to the fact that such limited finances can limit the very operation and growth of companies, and consequently, create an obstacle in economic growth, so the concern is equal for businesses and for policy makers. The financial system in North Macedonia is solid, but still underdeveloped. Banks have the dominant participation in the system and have a high participation in the total assets of the financial sector, as well as in financial intermediation. Bank loans are the dominant form of financing for SMEs. Lending to the private sector as a percentage of GDP is over 50%, which is relatively low compared to developed EU countries. Through a survey on bank financing of SMEs, the main factor in the financing process was captured, as well as identifying institutional and political constraints. The findings indicate that banks consider the SME loan market large, competitive, underprotected and with positive aspirations for the future. From their side, a key premise is that the SME sector should be profitable, with good prospects, taking into account macroeconomic factors, the legislative environment and other factors that are specific to banks. All banks expect that SME is a segment that has aspiration for continuous growth and all banks agree that the existence of a credit bureau or credit register of the Central Bank od North Macedonia will facilitate the process of lending to SMEs in terms of a more transparent data structure, timelu updating and improved display of credit exposure. Bank financing has aspirations to continue to be a key source of financing for SMEs, but it is still necessary to expand the financial instruments for SMEs in order to meet them and help them in maintain economic development at a satisfactory level in investment and innovation, in employment, especially in the part of innovative and fast-growing enterprises with a high risk profile in terms of yield. Despite the progress that has been visible in the past years, small and medium-sized enterprises continue to perceive access to finance as a challenge for theis operations. However, there is a necessity in the implementation of further activities to support the SME sector in terms of strengthening the institutional, regularoty and operational environment in which it operates. Overall, the SME sector still has room to be supported and encouraged to increase their overall contribution to the economy.