From Finance to Digital Skills: Why Bosnia's Small Businesses Are Still Struggling to Compete

Bosnia and Herzegovina's SMEs drive employment and economic growth but face major challenges from limited financing, weak innovation, digital skills shortages and complex regulations. The OECD urges stronger reforms, green investment and business support to boost productivity, create jobs and improve competitiveness in European markets.

Bosnia and Herzegovina's small and medium-sized enterprises (SMEs) are the backbone of its economy. However, limited financing, weak innovation, labour shortages, and complex government regulations prevent businesses from reaching their full potential. According to the SME Policy Index for Western Balkans and Turkey 2026 – Economy Profile for Bosnia and Herzegovina, published by the Organisation for Economic Co-operation and Development (OECD), the country has improved entrepreneurship policies and business support systems, but implementation remains inconsistent. The assessment draws on research and data from the OECD, the Agency for Statistics of Bosnia and Herzegovina, the Central Bank of Bosnia and Herzegovina, the Federal Institute of Statistics and the Republika Srpska Institute of Statistics. It warns that stronger reforms are necessary to improve productivity, create employment and bring the economy closer to European Union standards.

Small Businesses Drive the Economy but Struggle to Grow

SMEs accounted for approximately 99.7% of registered businesses, 70.7% of employment and 69% of business-sector gross value added in 2024. Bosnia and Herzegovina had around 86,920 registered enterprises, including 86,640 smaller businesses. Together, these enterprises employed approximately 436,168 people and generated EUR 10.88 billion in value added.

Despite their economic importance, SME productivity remained at only 48% of the EU average. This suggests that businesses are generating employment but struggling to improve efficiency, introduce advanced technologies and expand into higher-value industries.

The economy grew by 3.2% in 2024, while inflation declined to 1.7%. However, GDP per capita, measured in purchasing power standards, reached just 35% of the EU average. Unemployment fell to 12.6%, but youth unemployment remained high at 34.6% during the first half of 2024.

The OECD identifies complicated government structures as a major obstacle. Different regulations across the Federation of Bosnia and Herzegovina, Republika Srpska and Brčko District create administrative burdens and uneven business conditions. Although company registration has improved, businesses continue to face inconsistent procedures, regulatory uncertainty and difficulties accessing government assistance.

Limited Financing and Weak Innovation Hold Back Expansion

Access to finance remains one of the biggest challenges for smaller businesses. Commercial banks accounted for 87.7% of financial-sector assets in 2024, leaving enterprises heavily dependent on traditional loans.

Outstanding bank lending represented 46.2% of GDP, compared with an EU average of 74.6%. High collateral requirements, limited credit guarantees and underdeveloped investment markets make it difficult for businesses to finance expansion, purchase modern equipment or develop innovative products.

Innovation infrastructure has improved, with 19 business incubators operating in 2025 and the country's first science and technology park established in Republika Srpska in 2024. Both major entities are developing innovation funding mechanisms to encourage research and technological development.

However, weak co-operation between universities and businesses, insufficient research investment and limited technical expertise continue to restrict progress. The OECD recommends stronger research partnerships, improved financing and targeted assistance to help enterprises develop new products and compete internationally.

The report also highlights opportunities in manufacturing, information technology and export-oriented industries. However, businesses need better access to European markets, international quality standards and advanced production technologies to increase competitiveness.

Digital Skills and Green Financing Emerge as Critical Challenges

Digital transformation offers significant opportunities, but most businesses remain dependent on basic technologies. Approximately 94% of surveyed SMEs use at least one digital tool, mainly websites, social media and standard business software.

More advanced technologies, including artificial intelligence, automation and data analytics, remain less widely adopted. Only 30% of adults possess at least basic digital skills, compared with an EU average of 55.6%. Around 17% of surveyed SMEs identify inadequate digital capabilities as a barrier.

Environmental sustainability presents another major challenge. Green financial products account for less than 2% of total financial offerings, limiting investment in energy efficiency, renewable energy and cleaner production.

In Republika Srpska, only 34% of allocated SME greening funds were realised during 2022–2023. The OECD warns that businesses failing to modernise environmentally could face growing difficulties meeting European market requirements, particularly as carbon-related trade regulations become stricter.

Jobs, Women's Entrepreneurship and Reforms Shape the Future

Labour shortages, emigration and mismatches between education and business requirements are weakening economic competitiveness. Although entrepreneurship education and vocational training programmes have expanded, many employers continue to struggle to recruit qualified workers.

Women's entrepreneurship also faces persistent barriers. Existing programmes often focus on establishing businesses rather than helping them expand. Only 10% of women entrepreneurs reported access to mentoring in 2025, highlighting weaknesses in business support networks.

The OECD recommends stronger vocational education, adult training, digital skills development and more accessible financing for women-led enterprises.

The EU's approximately EUR 976.6 million Growth Plan allocation could support economic reforms, subject to implementation conditions. However, the OECD stresses that funding alone cannot resolve structural weaknesses.

Ultimately, Bosnia and Herzegovina must simplify regulations, strengthen government coordination, expand financing and accelerate innovation. The report concludes that transforming policy commitments into practical results will be essential for creating better jobs, improving business productivity, strengthening exports and narrowing the economic gap with the European Union.