Small and medium-sized enterprises in Serbia are increasing their use of bank financing, but their share of corporate lending is declining as larger companies attract a growing proportion of available credit. Outstanding SME loans reached €9.28 billion, representing a 7.3% increase, while new lending to smaller businesses rose 17.7% to €6.34 billion, according to OECD data. Despite the increase in lending volumes, SMEs accounted for just 31.9% of new corporate lending, compared with 35.6% previously. Their share of total outstanding business loans also declined to 26.1% from 27.1%.
Higher borrowing costs affect smaller companies
The financing difference is particularly visible in interest rates. Foreign-currency loans to SMEs carried an average rate of about 6.7%, approximately 1.7 percentage points above the rate paid by large companies. For businesses investing in machinery, production facilities, energy systems or working capital, the higher cost of borrowing can affect the overall financing requirements of individual projects.
At the same time, Serbia’s manufacturers face investment needs related to automation, energy efficiency, environmental compliance and integration with EU supply chains. Credit access indicators have improved. The SME loan-rejection rate declined to 9.7% from 19.2%, while non-performing SME loans fell to around 3.0%.
Investment needs are increasing
The financing environment is becoming more important as companies face additional requirements to modernise production and maintain access to European markets. Serbian exporters are required to invest in production upgrades, energy performance, digitalisation and European reporting and supply-chain requirements. Businesses supplying EU customers may also require capital for emissions measurement, product traceability and other compliance systems. Larger companies can draw on a broader range of financing sources, including syndicated bank loans, parent-company funding and direct access to development institutions. Smaller businesses remain more dependent on domestic commercial banks, making the cost and availability of bank financing particularly significant for their investment plans.
Development institutions provide additional financing channels
Existing programmes involving the European Investment Bank, European Investment Fund, EBRD and commercial banks provide credit lines and guarantee schemes for smaller companies, green investment and digitalisation. These programmes can provide additional financing capacity where conventional bank lending is increasingly concentrated among larger borrowers.
Guarantees, interest subsidies and risk-sharing mechanisms can reduce lending risks for banks while lowering financing costs for SMEs without requiring changes to lending standards. Such structures can also support investment financing rather than being limited to short-term liquidity needs.
SMEs represent most Serbian businesses
The financing issue extends across the wider Serbian economy because SMEs account for approximately 99% of Serbian enterprises, more than 64% of employment and around 56.9% of gross value added. Their capacity to finance investment therefore affects productivity, employment and the competitiveness of domestic supply chains. Serbia’s banking system continues to have strong liquidity and historically low levels of non-performing loans. At the same time, the latest lending figures show that larger companies are receiving a growing share of corporate financing while borrowing at lower interest rates. SME lending has therefore continued to expand in absolute terms, reaching €9.28 billion in outstanding loans, but the sector’s share of corporate credit has declined as financing increasingly shifts toward larger borrowers.
