External Funding Sources Research Articles

Policy Recommendations to Enhance Vietnamese SMEs’ Ability to Access Venture Capital

Small and medium enterprises, which form a large part of the entity of the domestic private sector, play a vital role in economic growth, socio-economic development and the international integration process. However, SME groups in developing countries are under-developed and face a lot of difficulties in growth due to the absence of sufficient finance. Profoundly, venture capital is typically a suitable and sustainable external source of finance for Vietnamese SMEs with high growth potential. This study provides an overview of the venture capital market and its role in SMEs’ performance in Vietnam. This research also found that one of the reasons why foreign investment funds are not interested in the Vietnamese market is that they have not seen safe and sustainable opportunities for investment. This study not only contributes to the existing literature, because this topic in Vietnam has not received much attention and evidence is not available, but also gives policymakers, in developing countries in general and Vietnam in particular, some recommendations to determine areas of improvement in regulatory and policy aspects enabling increased responsible SME access to venture capital.

The importance of external financing in management of innovative processes in the SME sector

Motivation: A broad approach to the SME sector causes that small and medium-sized enterprises are active in all segments of the economy. Each segment is characterized by a certain way of doing a business and thus financing it. Therefore, an important issue for the small and medium-sized entities is to provide both liquidity and continuity of financing and access to such sources of financing that will allow the implementation of innovative projects since innovation affects the pace and direction of development of the specific economic entity as well as significantly indicates the forms and structure of business cooperation.
 Aim: The aim of the article is to analyze the extent to which the various sources of financing are used by small and medium-sized enterprises in the implementation of innovative projects, and to show the relationship between external sources of financing and the level of expenditure on innovation of SMEs in Poland.
 Results: The analysis was based on examining the dependence of the scale of innovative activity of enterprises in the SME sector in Poland on the possibility of using not only own funds, but also funds from external sources, the use of which by small and medium-sized enterprises is still too low and is often limited to EU funds.

Effects of Financial Development and Institutions on Firm in Malaysia

This study is motivated to examine if firm growth is dependent on access to external finance but subject to the macroeconomic environment. Using firm-level data from firms listed in Bursa Malaysia for the 2006-2014 period, the study applies dynamic panel system generalized method of moments (GMM) estimation (Blundell & Bond, 1998) to estimate how a country’s embedded financial development and institutional quality impacts the linkage of firms’ external financial dependence and growth opportunities to firm growth. A dynamic system GMM approach is employed to address the endogeneity and serial correlation concern. Firms that have greater growth opportunities actually grow faster with better financial development with embedded good institutions in the case of Malaysia. So findings concluded that firms experience higher growth through better allocation of finance since they have good potential to grow. This has shed important light on policymakers in formulating the design of many financial development policies across a wide set of countries aimed at fostering financial markets and the banking services sector to provide the vital sources of external financing needed by corporations in financing their investments. A well-functioning financial system is a necessary condition for promoting firm growth.

COVID-19—A Black Swan for Foreign Direct Investment: Evidence from European Countries

This study aims to reconsider the role of foreign direct investment determinants for European national development and to analyze the impacts of the pandemic situation caused by COVID-19. Foreign direct investment is a source of development; therefore, this study includes empirical applications, specifically the random effect model, for EU countries, during the pandemic period. This study provides some valuable conclusions regarding the changes caused by the main determinants of foreign direct investment, such as unemployment, interest rates, economic growth, inflation, and business confidence. Additionally, the proxies of COVID-19 are the number of cases and number of deaths, both appearing to positively contribute to FDI outflow, the former with a higher impact than the latter. Based on the availability of the data, this paper deals with 22 European Union countries for Q1, Q2, and Q3 of 2020. Data for all the chosen variables were not available for the fourth quarter (Q4); thus, this period was not considered, which constitutes a limitation of this study, but confirms the need for robust FDI inflows to support the sustainable post-pandemic development recovery of less-developed EU countries. As the need for external funding sources, i.e., FDI inflow, grows in times of crisis, governments should take suitable measures to uplift the confidence of socially responsible foreign investors during difficult times generated by black swan events. There is almost no detailed research regarding the impact of COVID-19 on FDI flows received by European Union countries.

European banking sector and bank lending amid COVID-19

The unprecedented economic impact of the COVID-19 pandemic might also have a negative impact on banks. Banks in the euro area play an important role as the main source of external financing for the private sector. Hence, the negative impact of COVID-19 could translate into both deeper economic contraction and hinder banks’ ability to finance the post-pandemic economic recovery. Therefore, this study provides a review of the bank lending and banking sector situation in the first year of the pandemic. It presents changes in bank lending and conducts a descriptive analysis on the following main potential determinants of bank lending growth during the pandemic: bank lending supply and demand, public sector lending guarantee schemes and monetary policy easing. It also describes how the overall situation of the banking sector was influenced and the perspectives for the medium term. The descriptive analysis is complemented with a simple econometric analysis on the determinants of bank lending across the euro area countries.

Does the Remittance Generate Economic Growth in the South East European Countries?

This paper aims to examine the causal relationships between remittances and economic growth in 10 Southeast European developing countries, including Greece as a developed country. The research uses various econometric techniques, such as OLS, fixed-effects model, random-effects model, and Hausman-Taylor IV estimators. The regression results have shown up that there is a positive link between remittances and economic growth in 10 Southeastern European countries. Findings support the hypothesis that the remittance inflows generate economic growth in 10 Southeast European countries. Despite this, a positive relationship is also revealed between foreign direct investment, final consumption expenditure, gross capital formation, exports, and economic growth. The only exchange rate does not have a causal link on economic growth, meaning that the exchange rate does not affect economic growth. Since the remittances have a positive effect on the economic growth, and they represent a large source of external financing in Southeast European countries, the government should implement the right policies to reflect on encouraging and channelizing the remittance inflows for investment purposes, which in turn lead to a reduction of migration and unemployment. The study is original and makes effort to promote the role and significance of remittance inflows in the Southeast European developing countries, including Greece. The findings of the study might be valuable for Governments of these countries and other policymakers to channels remittances for investment purposes.

DETERMINANTS OF CASH HOLDINGS: EVIDENCE FROM BALKAN COUNTRIES

The purpose of this paper is to identify the determinants and indicate their impact on the company’s cash holdings in the wholesale industry in ten Balkan countries. Effective cash holdings management is key to any company’s healthy and smooth business operation, so comprehending and analyzing the relationship between the company’s internal determinants and cash holdings is vital. The sample used for this work included 106 companies, whose operations were studied over a four-year period (2014–2017), using the panel data model with fixed effects. The obtained results showed that three of the five observed variables (size, leverage, non-cash liquid assets, profitability and asset tangibility) have a statistically significant impact on the company’s cash holdings. It was determined that larger wholesale companies generally hold less cash, primarily due to more favorable external sources of financing, thus, financially stronger wholesale companies on the Balkans are likely to hold less cash. Only by practicing adequate inventory management and receivables collection policy can wholesale companies ensure effective working capital, leading to the fact that more profitable wholesale companies hold more cash. The realized profit of wholesale companies is used to increase liquidity as well as to stimulate business growth and development. The research results revealed that, in order to achieve an optimal cash holdings level, the observed wholesale companies in Balkan countries tend to constantly balance between profitability and liquidity. This paper contributes to improving the liquidity of wholesale companies in Balkan countries. It also offers wholesale companies assistance in establishing and maintaining an optimal cash holdings policy in order to reduce the potential risk of financial distress enable them to take advantage of all investment alternatives to maximize profit. All stakeholders will benefit from the developed model with significant determinants of the cash holdings policy along with the findings of this paper, especially when making decisions related to the cash holdings policy of wholesale companies and improving the overall business efficiency.

The implications of remittances for agricultural land use and fuelwood collection: evidence from the remaining forested landscapes in the Philippines

Despite the projected sharpest decline in remittances in history due to the global economic crisis induced by the COVID-19 pandemic, remittances are expected to remain an important source of external financing for many developing countries. The Philippines is among the top five recipients of remittances worldwide, while outmigration is an important livelihood strategy for rural communities in the country due to rapid population growth, poor employment opportunities, and scarce agricultural land. Migration and remittances can influence smallholder land use with potential implications for forest resource use through an impact on household income and household decisions on local activities. However, little attention has been paid in previous research to how remittances relate to changes in rural households’ land use and their implications for forests. The goal of this study is to investigate the links between the inflow of both international and internal remittances and rural households’ land use in forested landscapes in the Philippines. In order to do that, we use the data from 1024 household surveys and an instrumental variable approach to investigate the impact of remittances on fuelwood use and on the area cultivated by perennials and cereals. The findings of this study show that remittances positively influence the size of land planted by perennials and reduce households’ reliance on fuelwood use. Our findings provide an improved understanding of the links between migration—remittances—natural resource management, which will become especially relevant as countries struggle to deal with the economic fallout associated with COVID-19. We argue that demographic policy measures should play a bigger role in land use, land use change, and forestry negotiations than before. Moreover, global sustainability agendas such as the sustainable development goals should recognize the impacts of migration on natural resources to help bridge the gap between developmental and environmental goals.

The Regeneration of Urban Blue Spaces: A Public Health Intervention? Reviewing the Evidence.

Research in recent years has demonstrated that urban surface waters (“urban blue spaces”) can provide beneficial effects on human health and wellbeing. Despite blue spaces prevailing on urban development agendas across the world, little investigation has been done whether and how the regeneration of such spaces is used as a (community-based) public health intervention. Therefore, a review was conducted to analyze urban blue space regeneration projects in terms of their significance for public health. Results show that the regeneration of urban blue spaces displays a diversity of intervention types and follows certain development trends seen in general urban regeneration: Similarities mainly arise in relation to objectives (multi-dimensional goals with increasing focus on environmental sustainability and economic interests), stakeholders (shift to multi-actor governance with a rise of partnerships and community participation), and funding (prevalence of mixed financial schemes and increasing reliance on external funding sources). Although threefold public health effects have been noted across the projects (i. behavioral changes toward healthier lifestyles, ii. healthier urban environments, iii. health policy changes), results of this review indicate that the potential to use urban blue regeneration as a community-based health intervention has yet to be realized.

Foreign Direct Investment and Its Impact on The Regional Level: A Prospective Analysis

Some countries in development like China, the Philippines, Nigeria, Pakistan, Bangladesh, Vietnam and Ukraine do an active promotion in order to raise foreign direct investment (FDI) under the proposal of a positive effect in economic growth while implementing this type of fundraising. Thus, it constitutes an important source of external financing, allowing increases in productivity through technologic transfer as well as rises in competitiveness, efficiency in the managerial models, and expand the countries’ exporting capabilities. After the economic crisis experienced in the 80’s, Latin America, specifically countries like Argentina, Brazil and Mexico, that have based their financing in loans, stopped to raise money by these means when the crisis appeared, arising as an alternative the FDI, also on account of the foreign creditors demanding the payment of their issued resources and the warning of not giving any more financing until these countries restructure their economies, it was established the capital stock of the recipient economy. In this context, it was necessary to implement structural reforms, which were contemplated in the “Washington Consensus”, such as price stabilization and fiscal deficit control with the purpose of recovering the trust to investors and reactivating the capital flow through loans or foreign direct investment aimed at Latin America. In 1990, foreign direct investment became the primary source of external financing to peripheral countries (Aitken y Harrison, 1999:1).

EQUITY MANAGEMENT OF MOBILE COMMUNICATIONS COMPANIES

In modern conditions, the issue of reorientation of companies to market financing is relevant, one of which is the mobilization of resources based on attracting investment in exchange for corporate rights issued by legal entities. Despite the large volume of equity management publications, it is important to assess the state of equity management in mobile businesses. In the process of managing own capital as a source of investment and development of the enterprise is very important to analyze the effectiveness of its formation and use, which is the basis for determining ways to increase the level of competitiveness. The purpose of this article is to formulate proposals for improving the management of equity in mobile enterprises. The article systematizes the approaches to determining the nature of equity, which characterizes the total value of the company’s assets owned and used by it to form a certain part of assets. The efficiency of equity management of mobile communication enterprises is analyzed on the example of PJSC “Kyivstar”. PJSC “Kyivstar” provides services in the field of Internet, international communications, financial services, messaging, geolocation, services that help save, basic services of the mobile operator. PJSC “Kyivstar” is one of the largest telecommunications companies in Ukraine, which offers a wide range of services in the field of wireless communications. The analysis showed that the company should take measures to improve the management of equity, as PJSC “Kyivstar” depends on external sources of funding, the company has no working capital, low return on equity. PJSC Kyivstar is experiencing a decrease in equity due to a reduction in registered capital and retained earnings. Retained earnings account for the largest share of the company’s equity (almost 90%). To improve the efficiency of Kyivstar PJSC’s equity use, it is necessary to reduce the number of costs and focus on improving revenues and the quality of services provided.

ՀԱՅԱՍՏԱՆԻ ՀԱՆՐԱՊԵՏՈՒԹՅՈՒՆՈՒՄ ՆԵՐԴՐՈՒՄՆԵՐԻ ՖԻՆԱՆՍԱՎՈՐՄԱՆ ԱՐՏԱՔԻՆ ԱՂԲՅՈՒՐՆԵՐԸ. ՌԻՍԿԵՐ ԵՎ ՍԱՀՄԱՆԱՓԱԿՈՒՄՆԵՐ/EXTERNAL SOURCES OF INVESTMENT FINANCING IN THE REPUBLIC OF ARMENIA։ RISKS AND LIMITATIONS/ВНЕШНИЕ ИСТОЧНИКИ ФИНАНСИРОВАНИЯ ИНВЕСТИЦИЙ В РЕСПУБЛИКЕ АРМЕНИЯ։ РИСКИ И ОГРАНИЧЕНИЯ

Economic growth requires investment that can be financed from both domestic and foreign sources and based on domestic and foreign savings, respectively. Developing countries with low savings levels turn to external sources of financing for domestic investment, which has often come with certain risks and limitations. The geopolitical and geo-economic events of recent years, which increased uncertainties, have led to new risks and restrictions on external sources of financing domestic investments, the study of which is important for national economies, including the economy of the Republic of Armenia in terms of readiness and adequate response to challenges. The article attempts to reveal the risks and limitations associated with external sources of financing for investments in the RA, such as foreign direct investment. It was revealed that, although in 2021 global flows of foreign direct investment were restored to their pre-pandemic levels. Such a development did not occur in new industrial projects of developing countries, which also applies to Armenia. It is concluded that the risks and restrictions associated with external sources of financing for domestic investment may create problems for further economic growth of the Republic of Armenia. Improving the competitive position of the RA in terms of attracting FDI during this period of radical restructuring of global supply chains was seen as a way to overcome risks and restrictions by increasing the country's technological absorptive capacity and promoting the formation of new sectors of the economy.

Main Characteristics of Small and Medium Sized Agrifood Enterprises in Selected Regions of Cameroon

In a context characterised by low competitiveness of agrifood enterprises in Cameroon, a socio-economic study on Small and Medium-Sized Agrifood Enterprises (SMAE) in the Cameroon cities of Yaoundé in the Centre region, Douala in the Littoral region, and Bafoussam in the West region was carried out between March and September 2021. This was with the aim of analysing the main characteristics of these enterprises. Data were collected from 300 managers of SMAE selected through a purposive sampling method. Descriptive statistical were used to analyse the data. The results revealed that SMEA in Cameroon are mostly Very Small Enterprises (VSE) (89.7%) with less than 10 years of existence, and self-funded without external sources of finance. Their production systems are essentially artisanal (69%) and their personnel are not qualified (72%). In addition, they are mostly organised in the form of Common Initiative Groups (CIGs), cooperatives or enterprises without legal status. These SMAE are mainly run by married (66,7%), female (56%) and higher level graduate (60%) managers with ages ranging from 41 to 50 years. The decision-making process in these enterprises is centred on the managers with a structure based on group work and very few employees with a job description. However, meetings are held frequently in these enterprises, and employees are most often consulted and informed of any developments. Furthermore, the main marketing strategy used by these enterprises is word of mouth, while informal observation is the main business intelligence strategy. Very few SMAE have Research and Development (R&D) activities. Nevertheless, they rely mainly on training to stay technologically alert. In addition, they generally collaborate with customers and suppliers. These characteristics mainly predispose Cameroonian SMEA to be unprofitable and inefficient. Therefore, the paper recommend to sensitize SMAE to the advantages of being formal, to put in place fiscal measures that match up with SMAE’s activities, to develop financial systems adapted to SMAE’s reality, to empower women and reduce gender inequalities in order to improve their managerial performances, to raise young entrepreneurs awareness of the importance of perseverance and the benefit of marriage on business, to help SMAE managers and their personnel to continuously build their capacity, to support SMAE financially and technically, to help SMAE in developing well defined business strategies, to sensitize SMAE managers to the importance of decentralisation in their activities and to promote collaboration between SMAE and strategic partners in their environment.

Ներքին խնայողություններով տնտեսության բարդության աստիճանի բարձրացման համար անհրաժեշտ ներդրումների ֆինանսավորման հայեցակարգային շրջանակ/ A Conceptual Framework for Domestic Saving Financing the Investment Required to Increase the Complexity of the Economy

The paper reviews the issues related to external and internal sources of investment financing for the introduction of frontier technologies, considering the guidelines for increasing the economic complexity of the Republic of Armenia, established in the program of the Government of the Republic of Armenia for 2021-2026. The degree of economic complexity depends on its distance from the world technological frontier. One of the channels for the transfer of productive knowledge needed for the adoption of frontier technologies is FDI, which suffers insufficient levels of inflows. In addition, the uncertainty of external sources of financing has increased under the trends of the last decade and recent influence of COVID-19. Based on the results of the analysis, the authors concluded that the stable, high level of investment required for sustainable economic growth based on technological progress must be provided through domestic savings. A conceptual framework for an export platform for FDI and domestic investment is proposed, aimed at increasing the level of economic complexity of the country.

ТРАНСПОРТНО-ЛОГІСТИЧНА ІНТЕГРАЦІЯ УКРАЇНИ ЗІ СВІТОВОЮ ТРАНСПОРТНОЮ СИСТЕМОЮ НА ПРИКЛАДІ ПРИДНІПРОВСЬКОГО ЕКОНОМІЧНОГО РАЙОНУ

The relevance of the study is supported by the fact that the domestic modern, developed transport and logistics system contributes to the extension of foreign trade relations and socio-economic progress of both individual regions and the country as a whole. The purpose of the article is to analyze the state of the transport and logistics system of the Dnieper River economic region and, using its case, formulate recommendations on the transport and logistics integration of Ukraine into the world transport system. The dynamics of freight transportation, transport and logistics system and transport infrastructure of the Dnieper economic region (the cases of Dnipropetrovsk and Zaporizhzhia oblasts) are analyzed. An approach to the development of the domestic transport sector and recommendations for the transport and logistics integration of Ukraine with the world transport system are formed. It is determined that the creation of transport and logistics clusters as one of the main conditions for stimulating the socio-economic progress of the country, regions and individual enterprises is promising at the meso-level or at the level of the economic region. It is proved that the Dnieper economic region has sufficient transport and logistics infra- structure, which can be the basis for the creation of a regional transport and logistics cluster. The formation of such a transport and logistics cluster can be the foundation and model for the creation of similar clusters in other economic regions of Ukraine. The study notes that the optimal growth area of the transport sector of Ukraine is the creation of a multidisciplinary and multifunctional integrated transport and logistics system, which will ensure the integration of the domestic transport complex into international transport and logistics systems. The transport and logistics integration of Ukraine and the world transport system should be aimed at increasing transit through the country, which requires the development of logistics complexes within the country according to international standards, the organization of a system of national transport corridors of the appropriate level and thus the attraction of domestic and external (international) sources of financing. The above requires the development and implementation of measures aimed at protecting the national interests of Ukraine in the system of international transport corridors.

Natural Disaster, Public Attention, and External Sources of Corporate Finance

Natural Disaster, Public Attention, and External Sources of Corporate Finance

Foreign Direct Investment and Employment Generation in Nigeria

FDI as a growth stimulating factor is seen as the largest source of external financing to developing countries and helps to ease capital constraints and contributes to output and employment generation. This paper examined the impact of foreign direct investment on employment generation in Nigeria within the period 1991 to 2021. The variables used in the study include employment rate, foreign direct investment, trade openness and real exchange rate. The paper used the autoregressive distributed lag (ARDL) model for its regression analysis. The data for the analysis was sourced from CBN statistical bulletin and world bank development indicator. The study finds that foreign direct investment and Trade openness have a positive impact on employment generation in Nigeria. Real exchange rate has a negative impact on employment generation in Nigeria. The paper finds that a short run relationship exists between foreign direct investment, real exchange rate, trade openness and employment generation in Nigeria. Based on the findings, the paper recommends that Government should make effort to attract more Foreign Direct Investment into the country to create more employment opportunities through Multi-National Corporations. The Government should encourage trade openness in order to enhance more Foreign Direct Investment in the country as it will increase the standard of living of the citizens by the provision of highly paid employment.

Optimizing access to external finance by small and medium-sized enterprise start-ups: Towards the development of a conceptual framework

This study aims to experimentally analyse how start-up awareness, management skills, and financial providers’ requirements relate to the key drivers of business success. A framework has been developed to increase start-ups’ capacity to obtain external financing (Bamata, 2019). Data were collected by a simple random sample from a survey of 253 SMEs in Pietermaritzburg, South Africa. Data analyses from the questionnaire using the statistical program SmartPLS were carried out utilizing descriptive and inferential analyses and structural equation modelling. It was shown that start-up awareness and management skills positively affect SMEs’ access to government, corporate, and personal/social sources of financing. Seven hypothetical connections were evaluated, and the results were obtained. The suggested framework maps the entrepreneurial awareness and management abilities of a start-up entrepreneur with funding provider needs and gives an idea of the type and optimum funding choices to be applied for the company (Bamata, Govender, & Fields, 2019). By utilising this framework, SME owner-managers would become aware of their financing needs and be ready to choose the most suitable source of external finance.

МОДЕЛЮВАННЯ САМОПІДТРИМУВАНИХ СТРАТЕГІЙ ДЛЯ УРЯДОВОЇ ФІНАНСОВОЇ СИСТЕМИ, ДЕРЖАВНОЇ БАНКІВСЬКОЇ СИСТЕМИ ТА ІНВЕСТИЦІЙНОЇ СИСТЕМИ ВІДНОВЛЮВАНОЇ ЕНЕРГОГЕНЕРАЦІЇ

The interaction of the government financial system, the state banking system, and the investment system of renewable photo-voltaic (PV) power generation equipment can lead to sustainable strategies of these three parties (including government subsi-dies and bank loans) in the distributed state PV-market depending on its level of development. However, the instability of power output, caused by the variability and changing nature of renewable energy sources, poses challenges for large-scale power dispatch. In addition, the development of the PV-industry has been constrained by a long period of return on investment in solar photovoltaics and the need for large initial investments. With the rapid development of the sharing economy, the provision of financial support and the sharing of investment risks among investors in the PV-energy have become key means of promoting the PV-industry. State incentive policy was considered an effective approach to significant promotion of PV-systems. Government subsidies reduce the need for large initial investments, and market mechanisms, such as feed-in tariffs and tax rebates, increase return on investment and reduce payback periods. In addition, bank loans are considered another major source of external financing for the development of the PV-industry. Third-party financing with appropriate risk-sharing is considered an effective approach to promote the use of photovoltaic technologies. As government subsidies put pressure on the state budget and bank loans require banks to take significant credit risks, there are clear barriers to governments and banks supporting the develop-ment of the PV-industry. By 2022, the issues of computing such targeted government subsidies and bank loans with limited credit risks, which maximize incentives for the diffusion of PV-technologies, remain underdeveloped. The current important issues for suggested numerical studying and modeling are: can government subsidies and bank loans significantly contribute to the diffusion of PV-installations at various levels of the PV-market development; what evolutionarily stable states will be formed at different levels of the PV-market development; how the volume of government subsidies, the share of bank loans, the capacity of PV-installations by investors will affect the evolutionary trajectories of the all PV-market parameters and the transformation of various evolutionarily stable states. To do this, numerical modeling is performed to study the dynamic evolutionary trajectories at different levels of the PV-market development.

Social economic outcomes of remittances from the diaspora and their role in managing the COVID-19 pandemic in the emerging economy

Migration and remittances in Kosovo are promoters of local economic development and have an important role in the economic well-being of citizens, as well as other aspects in financing and developing the economy through stimulation. This article will evaluate and assess using subjective research methodologies the impact of diaspora during the pandemic period time. Anytime was crucial for many citizens that depend on the remittances, according to this statement, we mention that diaspora has a major role also in economic development in general. So, the purpose of this paper is to define and deeply explain the socio-economic outcomes of diaspora during the pandemic of COVID-19. In this way, we have used two types of data, primary and secondary for further analysis where we have used different techniques such as descriptive, crosstab, and Chi-square, which we have analyzed and shown by using SPSS software. Also, our paper is based on Hamdi Hoti and Hoxha’s (2018) and Jusufi and Ukaj’s (2020) findings and suggests that remittances have always been one of the most important and stable sources of external financing for the country. This is very important for states such as the Republic of Kosovo.