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

Financial Stability ReportNumber 1firms have in their disposal. One of the factors that may influence the lower level of accessto finance for firms in Kosovo may have been the lack of investment projects, which meansthat the current level of access to finance may be sufficient for the actual firms’ financingdemands.11.4. ConclusionsThis analysis is based on data from BEEPS, which was first implemented in Kosovo in2009. Results from this survey enable the identification of the obstacles faced by firms inKosovo, and compare them with obstacles for firms in other countries of the region. Basedon survey results, it can be concluded that firms in Kosovo considered the lack of electricityas well as the presence of corruption and informal economy as the most problematicobstacles to their business operation and growth. Unlike other regional countries, theparticipation of firms that reported access to finance as the main obstacle to their activitiesin Kosovo is quite low. However, we should note that access to finance was not considered amajor obstacle for businesses in Kosovo mainly because other areas such as electricity, thepresence of corruption and the informal economy, were considered more problematic thanthe constrained access to finance.On the other hand, access to finance for firms in Kosovo appears to be more constrainedcompared with other countries in the region. This to some extent is attributed to thestructure of firms operating in Kosovo, which consists mainly of small firms, that alsoreflects the structure of companies involved in the survey. Small firms are considered to bemore constrained in terms of their ability to access bank financing mainly due to factorsrelated to the limited information on their past performance as well as the higher rate ofloan coverage by collateral for these firms.At the same time, the percentage of firms that use bank financing for investments and thepercentage of funding covered by the investment banking in Kosovo is lower compared withcountries in the region. This may reflect not only problems on the demand but also supplysideconstraints. High interest rates for loans in Kosovo and the high level of collateralneeded discourages the demand of borrowers to access bank financing. However, higherconstraints to access bank financing in Kosovo compared with countries in the region mayalso reflect lack of investment ideas and projects by the firms, which directly affects theirdemand for access to bank financing.| 97