Private Briefing September 2024
No. 138 | Year XII
The September Private Briefing brings a dynamic start to the most intense period in the economy and financial sector. Reflecting this seasonality, we cover a wide range of topics, from start-up support to the life-long learning concept, with two central themes focused on SMEs. A new financing model is available for our market, in which we also participate: corporate bond issuance, offering an alternative (or potentially mainstream) way to finance fixed assets.
Additional Capacity for Start-Up Support
// The Promotion of Entrepreneurship and Self-Employment Programme (PESEP), implemented by the Serbian Entrepreneurship Foundation (SEF), is the successor to the largest national start-up support program, designed by Glenfield. It has recently received new momentum with the addition of NLB Komercijalna Banka as the sixth bank in this phase, and the ninth overall since the program’s inception.
// Access to financing remains a critical challenge for the development of domestic SMEs, especially start-ups. To mitigate this, PESEP offers support across several areas, the first being favorable loans provided through partner banks, with relaxed approval criteria. This is made possible by a specially structured business projection model and a carefully designed risk-sharing approach, implemented through training for bankers to analyze companies without previous financial statements. This is aligned with the program’s goal of helping start-up entrepreneurs fully realize their business ideas, launch sustainable businesses, and contribute to economic growth as well as improving employment levels both quantitatively and qualitatively. The term “Start-Up” in this program carries its authentic meaning of a novice in business with a solid and sustainable business idea, prior knowledge and experience, and the drive to turn this idea into a growing business. Support is available regardless of industry, sector, technology, or level of innovation. The second area of support is the Start-Up Academy, where certified business trainers work with participants to test the market viability of their business ideas and develop a comprehensive strategy, including market entry, products, and financial planning with clearly defined external financing needs. The third area provides expert support for up to a year after the completion of training and financing, accessible through 17 regional offices of the Chamber of Commerce. This includes a special mentoring program, additional training, and a network of experienced mentors. For those who successfully materialize their business idea and repay the loan, a significant amount of non-refundable funds is available. Additionally, the program offers a Match Making platform, a unique portal for networking participants with advisors, mentors, and experienced colleagues.
// Of all the listed elements, while financing is a rare opportunity for start-ups to access commercial loans, business skills training plays a crucial role in preparing entrepreneurs for the challenges ahead, providing them with the necessary knowledge to develop business strategies and manage finances and investments. Altogether, this program stands out due to its combination of highly favorable and accessible financing, paired with advisory and mentoring support. We encourage all those who have already taken the entrepreneurial plunge, or are about to, to download the necessary documentation and apply through one of SEF’s partner banks.entrepreneurship. Their differences enable the customization of support for various entrepreneurial needs and objectives, fostering a more inclusive business environment.
Equipment Procurement: The Most Popular Ever Ministry of Economy Programme
// For this year’s Equipment Procurement Programme by the Ministry of Economy, announced on August 5, the interest was so significant that the acceptance of applications was paused by August 13, after the entire budget of 800 million dinars was practically reserved in just over a week. This strong response from the business sector, which caused a record-short utilization period, highlights the substantial appetite for affordable financing, especially in the procurement of fixed assets. The general goal of all programs implemented by the Ministry through the Development Fund is to enhance the competitiveness of the economy as a whole, improve the operations of companies and entrepreneurs, and create new jobs, primarily through investments in fixed assets. Under this program, grants are intended to co-finance the purchase of new production equipment and equipment for construction works, which includes production machinery, transport and handling equipment involved in production and internal transport processes, as well as parts and specialized tools for machines, and machinery and equipment for improving energy efficiency and environmental aspects of production, as well as construction machinery for construction works. Eligible beneficiaries of grants and loans from commercial banks are active entrepreneurs, micro or small legal entities, and cooperatives registered for manufacturing or construction activities, and privately owned.
This year, the program was implemented in cooperation with 8 commercial banks and 3 leasing companies. Loan terms, ranging from 18 to 60 months, combined with a mandatory grace period of at least six months, offer a flexible framework for companies investing in fixed assets. This structure allows businesses to focus on efficiently using the equipment before starting to repay their obligations, reducing initial financial pressure, and enabling a gradual increase in liquidity. Interest rates remain
highly competitive compared to standard commercial loans, ranging between 2.95% and 3.10% for loans, while leasing fees range from 2.80% to 3.50%, depending on the type of equipment and financing terms. This significantly reduces borrowing costs, speeds up the return on investment, and, combined with grants that cover up to 50% of the investment, offers businesses exceptional conditions for doubling the return on investment and accelerating development.
Relying on the average support amounts per beneficiary from last year, with the same conditions that companies with one employee can receive grants of up to 1 million dinars and companies with more employees up to 5 million dinars, it can be expected that this year’s budget will be sufficient to support between 150 and 200 beneficiaries, considering an average grant of around 3 to 4 million dinars per beneficiary. Given that grants cover up to 50% of the equipment’s value, while the remaining 50% is financed through a loan or leasing, combined with the beneficiary’s contribution, the estimated total value of the new equipment purchased through the program ranges between 1.6 and 2 billion dinars, or between 12 and 16 million euros.
// Given the conditions, the structure of the program provides businesses with opportunities to improve their operations through low financing costs, as confirmed by the strong response to this year’s call. This combination of long-term loan terms, favorable interest rates, and a significant grace period makes this program one of the most attractive solutions for acquiring fixed assets on the domestic market. However, the fact that the program lasted just over a week clearly highlights the need for broader access to long-term, quality financing, which is crucial for the long-term growth and development of the SME sector. The limited number of programs with favorable conditions like this suggests that the market still lacks a variety of support models, indicating a need for additional options to enable businesses to continuously invest in fixed assets and ensure their growth. In other words, while this program, like many similar state-supported initiatives, is highly beneficial, its evidently limited capacity and short duration highlight the need to diversify access to financing. This would allow businesses to achieve long-term growth through more diverse and sustainable sources of capital, reducing the constant gap in fixed asset financing, which has been measured in billions of euros for years.
Diversification of Financing for SMEs Through Corporate Bonds
// Diversification of funding sources for businesses in Serbia is a topic we’ve been analysing through Private Briefing for twelve years. Over this period, key issues related to access to capital, particularly in the SME segment, have largely remained unchanged. In addition to traditional financing sources like banks and leasing companies, there are several government and development institution programs focused on the SME sector. However, each of these financing options faces challenges that significantly limit their effectiveness as diversification methods. In this environment, the recently launched Corporate Bond Issuance Programme, supported by the World Bank and implemented by the Ministry of Finance, offers momentum and concrete solutions, but also much more.
The program has several clearly defined phases, starting with the initial analysis of companies’ readiness to issue bonds, followed by the development of an improvement plan, and culminating in the actual issuance of bonds in the capital market. Each phase is designed to thoroughly prepare companies, including identifying and addressing deficiencies in financial and corporate governance, which often act as barriers to attracting investors. The first step is the readiness analysis, during which candidates are evaluated through a series of financial and corporate governance indicators to assess their starting position and identify shortcomings. Based on this analysis, consulting firms engaged in the program develop an improvement plan aimed at eliminating these deficiencies through financial and legal advice, procedural revisions, executive training, and the preparation of necessary documentation. After the improvement phase, companies are ready for the final stage: the bond issuance itself. This step involves cooperation with brokerage firms and potential investors, with continued support from consulting companies that have accompanied the company throughout the process. The goal is to ensure a successful bond issuance that provides the company with the required capital, while offering investors an attractive and transparent investment instrument.
Beyond being just another opportunity for access to capital and a chance for SMEs to improve their business models and financial management—making them more resilient to market changes—this program’s true significance goes much further. Diversification of funding sources is a fundamental aspect of developed capital markets, and according to all relevant experiences from the region and beyond, it is one of the most critical factors for SME growth. While bank financing remains the most common choice for companies in Serbia, the biggest challenge for beneficiaries lies in the high and rigid security requirements, which banks prefer as a risk
management model. This significantly limits access to capital for many businesses, especially those in development that often lack adequate collateral. On the other hand, reliance on government support programs, such as subsidized loans or grants, offers numerous advantages to businesses. However, these programs, no matter how useful, essentially substitute the missing spectrum of support models, which are standard in developed economies, and are limited in capacity. Moreover, only a portion of them represent regular, stable, and continuous options. All of this makes the Corporate Bond Issuance Programme even more significant.
// From the users’ perspective, the advantages of bond issuance for SMEs are numerous. Firstly, companies gain access to long-term investors. Additionally, bond issuance offers more favourable financing conditions, with lower costs compared to bank loans, particularly because bonds provide greater flexibility in repayment terms and financing conditions, which is crucial for companies in the growth phase. Glenfield, being dedicated to providing expert support to the SME sector, has been selected by the ministry to offer financial advisory services. Our expertise in financial management and work with small and medium-sized enterprises enables us to offer concrete advice and tools for successfully raising capital through bond issuance. If you see this program as an opportunity for a new phase of growth for your business, Glenfield can assist you in preparing for the capital market and in long-term strategic development.
Erasmus+: Life-Long Learning for Competitiveness and Sustainable Market Presence
// In addition to regular and competitive access to financing, in the context of dynamic market development, it is equally important for SMEs and farmers to constantly strengthen their capacities. This is a key component in ensuring that companies and employees possess the skills crucial both for defence and for growth in current market conditions, as well as to meet developmental needs. In this context, lifelong learning is better viewed as a necessity rather than an option. The EU Erasmus+ programme, while also offering support to entrepreneurs through a series of initiatives that enable mastery of best practices and adoption of the most significant business skills, is entirely free of charge.
From a business perspective, lifelong learning through Erasmus+ represents a strategic approach to improving human resources. It has been empirically proven that companies investing in employee development through such programmes
increase productivity, build resilience to market changes, quickly seize new market opportunities, and as a result, long-term profitability rises by up to 2.5 times compared to competitors who do not innovate or strengthen capacities.
// As a long-time participant in the Erasmus+ programme, Glenfield has been particularly engaged in the field of Entrepreneurial Education, as expected from a leader in supporting the economy in this part of the world. Through this programme, we have created and developed an entirely independent online platform, e-learning.glenfield.rs, in collaboration with top experts from the EU. This platform allows users to access courses tailored to the specific needs of the modern market. It is designed to respond to the growing demand for flexible and accessible educational content, enabling individuals and companies to align their professional development with market trends. In the coming period, additional and significantly expanded support will be available to businesses through a new EU funding window. A special benefit for users from the Western Balkans is the opportunity to choose the type, method, and content of the support, allowing it to be further tailored to meet local needs. In this context, we are sharing with our Private Briefing readers for the first time a pilot survey regarding the needs of businesses. We invite you, as representatives of the business sector, business aggregators, or the financial sector, who see daily areas for improvement, to share your views by clicking on the link. As a token of appreciation, two randomly selected survey participants will be awarded prizes
| KEY ECONOMIC INDICATORS | Sep - 24 | |
|---|---|---|
| 1 | Annual inflation | 4,30% |
| 2 | Reference interest rate | 5,75% |
| 3 | Unemployment rate | 8,20% |
| 4 | Average net salary - RSD | 97.835 |
| 5 | Average pension - RSD | 45.703 |
| 6 | Exchange rate RSD/EUR | |
| On the last day of the month | 117,0222 | |
| Average exchange rate for the month | 117,0364 | |
| 7 | Exchange rate RSD/USD | |
| On the last day of the month | 105,6443 | |
| Average exchange rate for the month | 106,3628 | |
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