CONCLUSIONS

1. The changes in the economic and the legal systems, as well as in the ensuing economic policies.- The policy of SME financing needs to be formulated as a part of a wider approach that would comprise the changes within the economic and legal systems. The corresponding systemic arrangements, and the ensuing policies appeared to be fairly devastating throughout the preceding decade. Therefore, both the system and the accompanying policies nowadays need rather fundamental reconstruction, including introduction of some important new elements into the system.

Without these changes, the new investments might easily turn into wasteful spending of scarce capital and other recourses. Here, among the most important system elements, requiring precise regulation t in accordance with European standards, seem to be the following:

• The complex of ownership issues ( which has been complicated additionally because of the still existing category of the so called “social ownership” in Serbia), and in relation to that the required new regulations concerning the mortgage system;

• Adjusting the fiscal system and policy in order to be more stimulating for SMEs;

• Adjusting the regulations concerning capital market functioning;

• Adjusting the labour market regulations;

• Developing an elaborated institutional network for SME developments (centers, agencies, small consultancy firms, and other arrangements aimed at supporting the SMEs).

2. Providing funds for SMEs financing. Whatever forms and mechanisms of financing are to be introduced in Serbia, first there is the need to provide the “critical mass” of funds, i.e. in volumes that would be large enough to satisfy the bulk of demand. The critical event in that respect, that is expected with great apprehension is the Donor Conference, supposed to take place by the end of June. The volume of funds that are expected to be collected is around the US$ 1.2 bln. - a considerable amount for any country in the Balkans, hopefully large enough to move forward decisively the economic development of Serbia, which is now still blocked into a grave circulus vitiosus of stagnation, unemployment and underpayment. Besides its direct effects, the Donors Conference is expected to yield considerable additional, or indirect effects. Namely, the hopeful success of the Conference should denote also a very explicit and strong signal to the worldwide investors that Serbia (and Yugoslavia) is to become an interesting and even attractive area for safe investments in the future.

3. Providing the wide range of instruments and methods for SMEs financing.

After providing the herein enlisted pre-conditions, the appropriate financial instruments could become really effective, i.e. they could give strong incentives to SME development and provide the solid basis for their sustainable and stable growth. Most financial instruments, that are standardly and more or less effectively used nowadays in the countries in transition, are still missing in Serbia, though rather hectic preparations are being made by the authorities for their timely introduction. On the

basis of a quick overview of the present situation, we have registered the following new developments in respect to institutional and instrumental arrangements aimed at creating a favorable environment for the new development cycle:

• Several foreign banks have established their offices in Belgrade and some of them have already started their operations: the MICRO FINANCE BANK has already realized its first credits, the RAIFFEISEN BANK has just established its office in Belgrade, as well as the EBRD. The French SOCIETE GENERALE reactivates its operations, and the BANK DE PARIS has also announced its intention to start operating in Yugoslavia, etc.; It is expected that very soon the conventional credit lines for SMEs financing will be available;

• Microcrediting as a practice already takes place in Serbia, but it is still far from being really widespread; in a few preceding years microcrediting was introduced in Serbia by the UNHCR, but primarily as a specific instrument for providing aid for refugees from other territories of the former Yugoslavia. In the sense of the more common banking practices, microcrediting is being introduced at the moment by the above mentioned MFB;

• The equity financing of SMEs is still not available, but the international financial institutions (first of all the specialized institutions of the World Bank) are expected soon to be present and active in Serbia, hence to initiate this kind of financing;

• The first group of “Business Angels” representatives has announced its plans to introduce this specific type of mechanism for the SME financing.

Yet, it is still in the domain of intended plans;

• The Loan Guarantee Schemes, though one of crucial components of the overall SMEs financing practice, seems to be still waiting to reach the agendas of international and domestic financial authorities.

Finally, in respect to the SME financing in Serbia, we can summarize that the crucial components of any substantial support for SME development are still at the very initial stages of being introduced. This judgment holds for each and every of those basic elements: restructuring and forming the appropriate legal and economic frameworks, provision of the badly needed

“critical volume” of financial recourses, and finally, developing the appropriate instruments and mechanisms for servicing the SMEs. This judgment probably presents Serbian economic scene in a rather gloomy light, but on the other hand, one could detect (although still through some “week signals”) that the new, promising institutional, economic and social environment for sustainable overall development of Serbia and Yugoslavia is being created - with lots of positive alternatives and chances for the SME development, too.

REGIONAL CONCLUSIONS AND POLICY