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Moldova Seeks to Boost Small and Medium-Sized Enterprises (SMEs) with New Registration

Stimulating Economic Growth and Job Creation

In a move to stimulate economic growth and job creation, the government of Moldova has formally registered over 44,000 small and medium-sized enterprises (SMEs), with more than 85% classified as microenterprises employing fewer than 10 people.

SMEs: The Backbone of Moldova’s Economy

According to the European Union, SMEs account for over 97% of all enterprises in Moldova, generating more than 30% of the country’s income and responsible for over 50% of all jobs. The majority of these SMEs are based in the services sector and focus on the domestic market.

Challenges Facing SMEs

However, owners of microenterprises and SMEs face significant challenges in accessing funding to launch and grow their businesses. A recent study found that commercial banks make it nearly impossible for smaller businesses to obtain loans due to cumbersome paperwork, time requirements, and high interest expenses.

Many business representatives rely on savings or family and friends for financing needs.
SMEs lack transparency, hiding financial reports and obscuring profits to reduce tax burdens.
Banks are hesitant to lend to these businesses due to their own responsibility to find indirect verification of a business’ assets.
Employees do not see the benefit of paying taxes, which are perceived as high, while the return is minimal.

Non-Bank Financial Institutions (NBFIs) Fill the Financing Gap

Non-bank financial institutions (NBFIs) have been moving to fill the financing gap left by banks, developing relationships with SMEs and responding positively. By December 31, 2017, there were 181 non-bank lending agencies registered in Moldova, of which approximately 130 were operational.

Remittances: A Significant Factor

The outsized role of remittances is also significant, with high levels of out-migration from Moldova resulting in substantial remittance inflows. Remittances often constitute the main income source for many households, making it essential to support SMEs and entrepreneurship development.

Conclusion

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As Moldova seeks to boost its economy, supporting SMEs and entrepreneurship will be crucial to achieving growth and job creation goals. The government’s efforts to formalize SME registration and develop a more favorable business environment are steps in the right direction.