Overview and Development Perspectives of SME Banking, With a Focus on Bosnia And Herzegovina

Small and midsized enterprises (SMEs) represent the primary moving mechanism of new jobs creation and increase of gross domestic product. They are the foundation of European economy and their contribution for achieving the European Union strategies for sustainable growth. Fostering development and growth of SMEs is a priority among the goals of national economies for developed countries of the world as well as for countries in transition. Financial system plays important role for achieving these goals with a main purpose of preserving the stability of national economy. For the last few years, the main focus of the financial system towards real sectors is expanding. From the market observed as to complex for risk management, SME sector became strategic goal for financial institutions worldwide. Due to the information technologies development, banking sector is increasing its support for development and growth of SMEs through the increase of financial support and also through the consulting services as a response to the challenges faced by this sector. This paper has two main objectives. The first one is point out the importance of SME banking, as the important contributor to bank profitability, in developed part of the world(focusing on the USA and EU) and in some countries of Western Balkans. The second objective is to investigate the level of SME banking development in Bosnia and Herzegovina. Using a structured questionnaire, in this paper authors will discuss perceptions of banking sector in B&H towards their orientation to SME sector and futures plans for their support as well as managing credit risk associated with financing SME sector. Keywords: financial system, small and medium enterprises (SMEs), SME banking, comparative experiences, Bosnia and Herzegovina.