Growth through increase in access to finance: Recommendations for SEE

Abstract

Since the impact of the global financial crisis of 2007/2008, and a subsequent impact of EU sovereign debt crisis of 2010, transition countries of South East Europe (SEE) have been in recession, stagnation or had very low growth rates. The debate on how to initiate growth in SEE is frequently focusing on austerity measures, attraction of FDI, structural reforms, fiscal policy stimulus or simplification of business procedures. This paper is focusing on a set of potential measures in the area of increasing access to finance for local small and medium-sized enterprises (SMEs) and other local companies capable of achieving competitive output in tradable part of gross domestic product (GDP). In other words, how to ease financing of endogenous entrepreneurs and help them evolve into competitive local, regional and eventually European companies? Analysis in this paper is focused on five important areas for better access to finance: non-performing loans (NPLs), collateral valuation, credit risk guarantees, nonbanking financial institutions (both credit institutions and securities institutions), and monetary policy and bank regulation and supervision. In all of these areas important improvements are possible.