Financial Stability Report No1 20 December 2010 - Banka Qendrore ...

Number 1Financial Stability Report11. Access to Finance in Kosovo: Results from BEEPS 2009Valentin Toçi, Zana Gjocaj and Arben Mustafa11.1. IntroductionThis analysis addresses the problem of firms’ access to bank finance in Kosovo andcountries in the SEE region. The analysis relies primarily on data obtained from BEEPS(Business Environment and Enterprise Performance Survey), which is a joint project of theWorld Bank and European Bank for Reconstruction and Development (EBRD), designed tocollect information on the impact of business environment in the operations of firmsthrough detailed surveys. These surveys were conducted in almost all transition economiesin 1999, 2002, 2005, 2007 and 2009. Apart from information regarding the obstacles thatfirms face, the four cycles of BEEPS also provide information on firm characteristics andperformance indicators such as sales level, profits, sources of funds that firms use tofinance their investments, etc.BEEPS is becoming an important tool for increasing the awareness of policy-makers aboutthe obstacles firms face and to assist them in establishing policies that will improve thebusiness environment in which firms operate. The financing obstacles that firms face maybe induced by governments (for instance, when creditor rights are not well protected due tofailures in the judiciary system), as well as by different market features such as imperfectmarkets, which will hamper businesses and make their access to finance expensive.Easier access to external financing has proven to encourage firm growth and subsequentlyimprove the overall economic performance. Therefore, the implementation of BEEPS inKosovo enabled the policy-makers to identify the main impediments to the businessoperation and growth in the domestic economy, with particular emphasis on obstacles thatbusinesses face when accessing bank finance.BEEPS surveys conducted in Kosovo included 270 firms, of which 70 percent were declaredas small firms. Over 50 percent of surveyed companies in Kosovo have stated that theyhave been operating in the market for a period of 6-10 years, while 20 percent ofrespondents declared 16-20 years. All of the surveyed firms were of domestic ownership.Regarding sectoral distribution, 38 percent of firms were declared as manufacturing firms,6.3 per cent as trade firms and 38.5 percent declared that offer other services. Consideringthe structure of the Kosovo’s economy, which is mainly dominated by trade firms, BEEPSmight not be considered a representative sample for the economy of Kosovo.92 |11.2. Main obstacles for businesses in KosovoAccording to BEEPS, among ten main obstacles that firms assessed as most problematicwere ranked the lack of electricity, the presence of corruption, informal economy, etc.,(Figure 71). In 2009, about 33.5 percent of firms surveyed ranked lack of electricity as themain obstacle to their daily operations and growth, reflecting the ongoing problems withelectricity supply in the country. Also, the presence of corruption (20.6 percent) and theinformal economy (12.8 percent) were assessed as major obstacles to doing business inKosovo.