Abstract
The early transition period witnessed the rapid growth of Albanian SMEs despite the fact that the country was subjected to several severe shocks, especially those associated with the collapse of the pyramid schemes and the war in Kosovo. The growth of small enterprises in agriculture, trade, services, and construction, with microenterprises constituting the bulk of SMEs, has been the engine of growth and contributed to the long term recovery of Albanian economy. However, the growth of SMEs has been hampered by a variety of barriers erected, directly or indirectly, by the state. Fiscal constraints particularly high rate of taxes and contributions, financial constraints and the institutional environment have been some of the major barriers they have had to surmount. These barriers have encouraged many firms to conduct some or all of their activities in the informal sector of the economy. The survey of fifty SMEs established since 1992 highlights the difficulties faced by these enterprises in the environment of early transition. The econometric evidence confirms the role of financial barriers to SME growth, especially when they are combined with the poor institutional environment. The results show that the government has to embark on SME policies designed to disseminate the information on support programmes widely, and to speed up the reform of the financial system, legal framework and law enforcement.
Similar content being viewed by others
References
Alimova T., Buer V. and Golikova V.: 1995, Problems of small business formation in transition period, Communist Economies and Economic Transformation 1, 67–82.
Bank of Albania, Annual Report, various issues from 1996 to 1999.
Boycko M., Shleifer, M. and Vishny, R.W.: 1996, A theory of privatisation, The Economic Journal (March), 309–319.
Bratkowski, A., Grosfeld, I. and Rostowski, J.: 2000, Investment and finance in de novo private firms, Economics of Transition 8(1),101–116.
European Bank for Reconstruction and Development, Transition Report, various issues, London, EBRD.
Estrin S., Dimitrov, M. and Richet, X.: 1998, State enterprise restructuring in Bulgaria, Albania and Romania, Economic Analysis, 1(3), 239–255.
Gedeshi, I.: 1999, Albania, in E. Peev (ed.) Separation of Ownership and Control in Southeast Europe - A Comparison of Bulgaria, Romania and Albania, 1990-1996, Sofia, KOTA.
Hashi I. and Mladek, J.: 2000, Fiscal and regulatory impediments to the entry of new firms: a comparative analysis of five transition economies, Journal of East-West Business 6(2), 59–94.
Hashi I. and Xhillari, L.: 1999, Privatisation and transition in Albania, Post-Communist Economies 11(1), 99–125.
Institute of Statistics: 1998, Albania in Figures 1996-1998, Tirana, INSTAT.
Institute of Statistics: 1999, Statistical Bulletin, No. 2.
Jarvis C.: 1999, The rise and fall of the pyramid schemes in Albania, IMF Working Paper 99/98, Washington D.C.
Johnson S., Kaufman, D. and Shleifer, A.: 1997, Politics and entrepreneurship in transition economies, The William Davidson Institute Working Paper No 57, June.
Lati, L.: 2001, The Causes and Consequences of Corporate Restructuring: The Case of Albania. Doctoral Dissertation, Staffordshire University, Stoke-on-Trent, UK.
Ministry of Economic Cooperation and Trade: 1999, The Medium-Term Strategy for SME Development, Tirana.
OECD: 1996, Small Business in Transition Economies, Paris, OECD.
Shleifer A. and Vishny, R.W.: 1994, Politicians and firms, Quarterly Journal of Economics CIX (November), 995–1025.
Shleifer A.: 1997, Government in transition, Harvard Institute for International Development, Development Discussion Paper No. 573 (March).
World Bank: 1994, Ukrainian Enterprises: Activities and Constraints, Washington, The World Bank.
World Bank: 1995, Lithuania: Private Sector Development, Washington, The World Bank.
Xhillari, L. and Telhaj, S.: 2001, Barriers to entry and their impact on firms' performance in Albania, in E. Balcerowicz, L. Balcerowicz and I. Hoshi (eds.) Barriers to Entry in Early Transition, NewYork, Kluwer Publishers (forthcoming).
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Hashi, I. Financial and Institutional Barriers to SME Growth in Albania: Results of an Enterprise Survey. MOCT-MOST: Economic Policy in Transitional Economies 11, 221–238 (2001). https://doi.org/10.1023/A:1013157127524
Issue Date:
DOI: https://doi.org/10.1023/A:1013157127524