The 2026 edition of the SME Policy Index comes at a critical juncture for the Western Balkans and Türkiye. Over the past decade, governments in the region have made sustained efforts to strengthen SME policy frameworks and align them with European standards. Yet, the context in which these policies operate has fundamentally changed, shaped by successive global shocks, accelerating green and digital transitions and rising geopolitical uncertainty.
Beyond these immediate pressures, a deeper shift is underway. Uncertainty has become structural, while the systems traditionally used to manage it are under strain. In this context, the challenge is no longer primarily to design better SME policies, but to ensure that the existing frameworks deliver.
SMEs remain central to economic growth in Montenegro, accounting for approximately 76% of value added and over half of total employment. Against this backdrop, the economy has made progress across several areas key to SME development since the previous assessment cycle:
Bankruptcy procedures have been strengthened through legislative reform, with second chance policies beginning to take shape as a policy priority. Amendments to key laws have improved the transparency of insolvency procedures, reinforced enforcement measures and strengthened the accountability of bankruptcy administrators. The 2023 Law on Preventing Illegal Business further tightened the framework by prohibiting owners or co-owners of bankrupt companies from establishing new businesses, enhancing creditor confidence and limiting opportunistic behaviour. On procedural efficiency, in-court liquidation proceedings average 24 months—shorter than other economies in the region. While second chance policies have yet to be institutionalised, foundational conditions are in place: the MSME Strategy identifies business re-entry as a priority, and the Ministry of Economic Development reports adequate capacity and a trained advisory network to develop a dedicated support programme.
Montenegro has made meaningful progress in building an effective ecosystem for SME innovation. The Innovation Fund has implemented 10 programmes financing 155 projects totalling around EUR 6 million by end-2024, spanning instruments for early-stage start-ups, established SME innovation and business-academia collaboration. The opening of the Science and Technology Park in June 2024 marks a further milestone, providing technology transfer services and structured pathways for business-research institution collaboration. On the regulatory side, the adoption of the Law on Incentive Measures for the Development of Research and Innovation introduced a corporate income tax credit for profits reinvested in approved research and development projects—an initial step towards broadening indirect financial support for innovation.
Efforts to improve the enterprise skills framework are advancing along two fronts. On skills intelligence, a cross-sectoral approach is embedding skills forecasting across education, industrial and SME strategies, strengthening the evidence base for tailoring education and training systems to SME needs. Training needs analyses and sectoral studies in high-growth fields such as ICT are supporting this effort. On participation, the new Law on Adult Education (2025) broadens the scope of adult learning by enabling employers to organise internal training and professional development programmes, allowing firms to respond proactively to evolving skills demands. Montenegro is also among the few economies in the region to have defined microcredentials within its legal and regulatory framework, providing a foundation for more flexible learning pathways that can help widen participation and address skills shortages.
However, despite these achievements, several challenges remain that hamper the ability of Montenegro’s SMEs to drive EU convergence:
SME digitalisation remains at an early stage, with shallow technology adoption reflecting an underdeveloped support environment. While digital tool use is widespread, it remains concentrated in basic solutions such as company websites and social media; beyond AI, 89% of SMEs have not adopted any advanced technology, including cloud computing or big data analytics. Low usage rates are partly driven by cost, which businesses identify as the largest barrier to digital transformation. Yet, government financial support is limited, with one dedicated funding line worth only EUR 300 000 in 2024, leaving enterprises heavily reliant on donor-funded initiatives. Compounding this, only 11% of SMEs are aware of available government support programmes, limiting the reach of an already constrained offer.
Non-bank financing channels remain underdeveloped, leaving many SMEs with insufficient resources to operate, expand and innovate. The proportion of fully credit-constrained firms rose sharply from 3.8% in 2019 to 14.4% in 2023-24, reflecting a marked deterioration in financing conditions. While bank lending to the private sector is relatively well-developed, it remains insufficient to meet overall financing needs, and alternative channels are too limited to effectively fill the gap. Activity on capital markets remain negligible, with the Montenegro Stock Exchange recording a turnover ratio below 1% since 2019, compared to over 40% in the EU. Venture capital has effectively ceased, with no activity recorded in 2023 or 2024 following a peak of EUR 1.03 million in 2022. Similarly, leasing and factoring lag well behind EU averages: factoring stands at 1.6% of GDP against an EU average of 11.9%, and leasing at 0.7% compared to 2.05%.
Weak internationalisation support limits SMEs' capacity to access and compete in regional and global markets. In recent years, SMEs' share of total goods exports has declined sharply, from 47.5% in 2021 to 20.5% in 2024. Export support is fragmented, operating through multi-purpose SME instruments rather than a coherent dedicated framework. No digital tools specifically designed for export promotion are in place. Additionally, Montenegro's integration into global and regional value chains remains modest, with the absence of a dedicated framework reducing policy coherence and constraining the ability to articulate clear pathways linking SME upgrading, supplier development and export outcomes.
Sustained progress on these fronts will be critical to unlocking the full contribution of Montenegro's SMEs to economic growth and convergence.
