Analyses of financing needs of SMEs by size and age in Albania

AuthorEugen Musta
PositionMarin Barleti University
Pages30-38
Vol. 1 No. 1
January 2017
European Journal of Economics, Law and Social Sciences
IIPCCL Publishing, Graz-Austria
ISSN 2519-1284
Acces online at www.iipccl.org
30
Analyses of nancing needs of SMEs by size and age in Albania
Eugen Musta
Marin Barleti University
Abstract
Small and Medium Enterprises (SME) play a very important role in the economy as the biggest
employer and also with a contribution of more than 50 % of the turnover and value added.
Because of this they have been the subject of many studies and analysis on various aspects of
their activity. The most typical approach when studding them has been their comparison by
size, but the literature suggest that age can also be an in uential factor on rm behavior and
decisions specially when it comes to nancing options and constrains. This study compares
these two approaches in an a empt to nd out which one is actually be er in explaining
rms’ behavior in Albania. For this purpose we analyzed di erent pa erns of behavior of
rms of di erent sizes and ages on the usage of several bank services regarding their external
nancing options. The results suggested that size is a be er explanatory on rm nancing
options and constrains, but age even though not being a good explanatory variable on its own
it can nonetheless be a very good supporting argument when combined with size and by this
can help develop a be er understanding of the behavior within size groups.
Keywords: Albania, SMEs, Financing, Size, Age.
Introduction
In the early 2000s, Albania was one of the fastest-growing economies in Europe,
with growth rates of 5% to 6%. But this fast economic expansion was interrupted
by the global economic crisis of 2008–2010 and by the following Euro-zone crisis,
in particular in neighboring Italy and Greece, and reached its lowest growth rate
of 1.1% in 2013. In 2014 growth picked back up and the economy has grown with
2.6% in 2015, and is expected to be at 3.2% for 2016 (World Bank, 2016). Albania has
built on a consumption-oriented economy and the growth has been driven mainly by
remi ances from Albanian emigrants mainly in Italy and Greece. Remi ances level
has been as high as 16% of GDP in the mid-2000s and this ow of income increased
the purchasing power of the population. This may be the reason that the dominating
economic sector in the country is trade. Although remi ances now represent only
8–9% of GDP, their role is still high, and trade is generally expected to continue
dominating the SME sector (EIB, 2016).
In the post crisis era Albania is facing the need of a new strategic growth model. The
economy must shi from a consumption-oriented economy towards a production
driven one and this shi must be done fast in order to catch up on the growth train.
Falling remi ances and the signi cant decrease in the construction sector, which
used to be a big contributor in the economy in the 2000s, make this shi necessary
and urgent.

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