Title: Sources of financing small enterprises: A case of federation of Bosnia and Herzegovina
Abstract: In Bosnia and Herzegovina, as a consequence of dissolution of former Yugoslavia, the war in
BH, as well in the region, post war crisis, transition, badly implemented and unfinished
privatization, globalization, increased competition and due to many other reasons has come to a
large decline in production, employment and failure of a large number of enterprises.
Adjustment to market principles of business operation of the world’s economy, which are
becoming more and more globalized, has caused growing unemployment and loss of numerous
workplaces in transitional countries.
Entrepreneurship and sector of small and medium enterprises (SMEs sector) have been
developed in such turbulent, politically and economically pronouncedly dramatic conditions
contributing more and more to changes in economic structure and generating new employment.
A trend in relation to which SMEs are growing faster in advanced market economies than large
ones has implied an expectation according to which small and medium enterprises in
transitional economies and then in BH, as the sector of large enterprises would be faster
privatized and restructured, shall extend and grow as to absorb surpluses from the labor
market. A large number of small and medium enterprises have been developed upon implemented
privatization (which has not been entirely completed) and liberalization of institutional
framework for foreign investments and especially for development of private entrepreneurship,
and this process, which is spreading out in majority of transitional countries, as well as in BH,
has played and is playing a role of shock absorber and alleviates a drastic decline of
unemployment.
Employment growth in the SMEs sector of countries candidates for EU accession (which is
larger on the average about 3,5 times annually over a period from 1995 to 1999 than the one
achieved in the western economies) illustrates a contribution of SMEs, both to alleviation of
unemployment implied especially by a loss of work places in large enterprises, and to
development of employment as a whole. Small and medium enterprises are agents of a permanent innovation through entrepreneurship
which renews, transforms and stimulates development of economies worldwide, and recently
also the BH economy.
Dynamism of entrepreneurship is such that a large number of business undertakings are born
every hour from day to day all over the world, and according to available data every workday
in each hour more than 1000 new business undertakings are born in the USA.
In developed market economies, a relative market share of small enterprises is growing
constantly by comparison with a total number of enterprises. The illustration of a significance
of small enterprises in the European economy is enabling a figure of more than 19 million of
small enterprises (98,8% of total number of business subjects), out of which 17,8 million
(92,3%) are micro sized. Similar figures are also in the neighboring Republic of Croatia, and
such large number of enterprises provide work for a large number of employees too, thus,
according to data in the Republic of Croatia, 65,70% are employed with small and medium
enterprises while 34,30% of employees are employed with large enterprises.
Small enterprises represent the backbone of each economy, they are main promoter of
innovations, employment, adaptability and competitiveness, as well as social and local
integration in Europe as emphasized in the preamble of the European Charter for Small
Enterprises.5
One of fundamental hypothesis for establishment, business operation and development of small
economy is ensuring of needed capital in adequate quantity and form, as well as under
appropriate conditions.
Publication Year: 2007
Publication Date: 2007-09-01
Language: en
Type: article
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