Assessing the Impact and Challenges of SMEs on Albania's Economy

Abstract

The SME sector in Albania has a significant impact on the country's economy. The total number of economically active enterprises in Albania increased by 1.4% in 2021 compared to 2020, reaching 104,031 enterprises. Microenterprises experienced a decrease of 5.8% compared to 2016, while small and medium-sized enterprises showed growth with an increase of 27.09% and 23.24%, respectively, in 2021 compared to 2016. SMEs in Albania play a vital role in employment generation, accounting for 60.3% of total employment in the country. While microenterprises constitute over 92% of SMEs in Albania, they employ a relatively smaller proportion of the total number of employed individuals compared to their number. Small and medium-sized enterprises have shown an increasing trend in employment, with increases of 26.79% and 22.86% respectively compared to 2016. The SME sector in Albania contributes approximately 55% of the total turnover realized in the economy. Microenterprises will generate 21.97% of the total turnover, small enterprises will contribute 30.55%, and medium-sized enterprises will account for 26.50% of the turnover in 2021. The value added by SMEs in Albania has shown an increasing trend. Micro, small, and medium-sized enterprises experienced growth rates of 30.12%, 66.84%, and 66.63% respectively compared to 2016. Small enterprises consistently accounted for the highest percentage of investment during the analyzed years. However, there have been fluctuations, with large enterprises taking the lead in investment in 2017 and 2018. Overall, there has been a decreasing trend in investment growth in Albania, with negative growth rates observed in 2020 and 2021. Productivity: The labor productivity of SMEs in Albania has increased every year from 2016 to 2021. Larger enterprises generally exhibit higher labor productivity compared to smaller ones, benefiting from economies of scale, resource allocation, and access to advanced technologies and systems. Albania has made progress in implementing the Small Business Act (SBA) and has achieved high average scores in areas related to SME policy and support. Efforts to create a supportive ecosystem for SMEs include improvements in the institutional and regulatory framework, operational environment, public procurement, standards and technical regulations, and internationalization of SMEs. Limited accessibility to finance, technology, and knowledge remains a significant challenge for SMEs in Albania. Addressing this challenge requires efforts to improve access to finance through specialized lending programs and loan guarantee schemes and enhance financial literacy among SME owners. In conclusion, while SMEs in Albania make a significant contribution to the economy in terms of employment, turnover, and value-added, there are areas that require further attention and support, such as access to finance and investment. Efforts to address these challenges and promote a favorable environment for SMEs can contribute to their growth, competitiveness, and overall economic development.