SME Hub - Connecting Private Service Providers, Public Agencies and SMEs
In order to grow and create more and better jobs and higher incomes for their workforce, Serbian manufacturing companies urgently need to raise productivity. The most productive ones are those that manage to access the supply chains of large, export-oriented corporations. By partnering with the private sector, Switzerland aims to bundle and connect the so-far fragmented services and subsidies of relevant private and public actors into an accessible offer tailor-made to the needs of SMEs- the SME Hub.
| Country/region | Topic | Period | Budget |
|---|---|---|---|
|
Serbia |
Employment & economic development nothemedefined
SME development
Business support & economic inclusion Employment creation |
01.07.2022
- 30.09.2028 |
CHF 8’844’000
|
- Foreign private sector North
- Foreign private sector South/East
- Swiss Private Sector
-
Sector according to the OECD Developement Assistance Commitiee categorisation INDUSTRY
BUSINESS & OTHER SERVICES
OTHER SOCIAL INFRASTRUCTURE AND SERVICES
Sub-Sector according to the OECD Developement Assistance Commitiee categorisation Small and medium-sized enterprises (SME) development
Business support services and institutions
Employment policy and administrative management
Aid Type Mandate without fiduciary fund
Project and programme contribution
Project number 7F09590
| Background | Serbia has attracted record-high levels of foreign direct investment in recent years, including from Switzerland. Still, domestic private investment is weak, and small and medium enterprises (SMEs) employing 66% of the workforce, are lagging behind export-oriented, foreign-owned firms. Low factor productivity, demographic decline and the green transition are the key long-term economic challenges. On average, Serbian firms are one-third as productive as EU firms. But this average hides extreme dispersion across Serbian firms’ productivity. The most productive 20% of Serbian companies are globally competitive, and World Bank estimates indicate that wage levels are 300% higher than in the least productive 20% of companies. This has huge implications in terms of poverty reduction in a country where half of the employed population still earns salaries below EUR 500 and 20% of employees earns the minimum wage of EUR 350. At the same time, the population and workforce is shrinking, ageing and urbanizing rapidly, due to a combination of low birth rates and net outmigration. |
| Objectives | Serbian manufacturing SMEs offer more and better jobs, higher wages and better working conditions, while reducing the intensity of their environmental footprint. |
| Target groups |
· 5300 existing and new employees of 80 manufacturing SMEs in Serbia (with up to 250 employees each), earning between EUR 400-600/month, in particular women and excluded groups. - Communities affected by environmental externalities of these SMEs and their suppliers. To impact the target group, the SME Hub will work with key stakeholders: MNCs looking to source from local suppliers, owners and managers of manufacturing SMEs, service providers and public funders whose mandate aligns with its mission. |
| Medium-term outcomes |
Outcome 1: Manufacturing SMEs accelerate their growth by making use of private advisory services and available public and private financing sources, to access larger, more stable or more profitable business-to-business (B2B) markets. Outcome 2: Multinational companies (MNCs) engage with the SME Hub to invest into existing and new SME suppliers in Serbia and substitute imported components with locally procured intermediate inputs. Outcome 3: The SME Hub model of delivering integrated and customized support services for SMEs proves attractive and sustainable. |
| Results |
Expected results: - SMEs will make use of business development services provided by SME Hub (80 SMEs) and access external financing provided by a SEF’s partner bank (15 SMEs), state and donor funding (32 SMEs); - At least 12 MNCs will commission work from SME Hub to invest in local suppliers and financially contribute to SME transformation plans; - At least 23 private sector actors, state and donor agencies coordinate their SME support activities with the SME Hub; - At least 400 SMEs will become aware of the benefits of working with MNCs and of the SME Hub services. Results from previous phases: Under the openings credit, SDC 1) contributed two thirds of the costs to the preparatory work by ICT Hub to finalize the ProDoc, prepare the SME Hub facility, negotiate first batch of partnerships, elaborate and pilot business diagnostic tool for SMEs; and 2) SDC invested significant time in preparing this PSE in line with the new handbook, with support of the CEP backstoppers Brugger&Partners, iGravity, and the advisory firm Orange&Teal: - Multiple due diligence processes (PSE Risk Assessments) for ICT Hub and Serbian Entrepreneurship Foundation (SEF), the two key partners in this programme, with support of Brugger&Partners; - Mandate to iGravity to advise SDC on specific questions (payment framework tool for effective risk-sharing, elaboration of SME Fund Implementation manual); - pre-agreed terms for the credit-guarantee scheeme with Serbian Entreprenuership Foundation (SEF); - an elaborated cost-benefit analysis from Orange&Teal, considering all quantifiable benefits and investments from all actors (beyond SDC). |
| Directorate/federal office responsible |
SDC |
| Project partners |
Contract partner Private sector Other partners 1) Contribution contract with ICT Hub LLC regarding SME Hub and SME Fund; 2) Contribution contract with Serbian Entrepreneurship Foundation (SEF) regarding management of SDC funds earmarked for partial credit-guarantees for specific group of SMEs working with SME Hub; 3) Mandate contract to specialized consultancy company to support SCO in managing and steering partnerships (backstopping mandate), to be procured; 4) Mandate contract to local research organization for longitudinal impact assessment on a sample of SMEs engaging with SME Hub, to be procured. |
| Coordination with other projects and actors |
Swiss projects (SECO, SDC): E2E project on workforce skills development; the IFC ESG project to open up new SME markets for the ESG reporting advisors trained by IFC; the IFC Light-manufacturing project to further promote the match-making platform to connect to buyers abroad, exchange experiences on manufacturing SMEs and in joint outreach to SMEs in selected fora (e.g. automotive cluster). Government and other donors: Ministry of Economy, Serbian Development Agency (RAS) programmes, in particular its supplier development programme and “EU for equipment programme”; EBRD Advice for small business programme, and USAID Serbia Innovates on green tech solutions for SMEs. |
| Budget | Current phase Swiss budget CHF 8’844’000 Swiss disbursement to date CHF 745’569 |
| Project phases | Phase 1 01.07.2022 - 30.09.2028 (Current phase) |
