Kosovo Credit Guarantee Fund (KCGF 2), Guarantee 2

The micro, small and medium size enterprises (MSME) sector in Kosovo plays a vital role in the country's economy, providing the majority of employment and value-added contributions. However, this sector faces various challenges, including high informality, high unemployment rates, limited participation of youth and women in employment and business ownership, and low labor productivity. These issues, coupled with a heavy reliance on trade and construction sectors and a lack of participation in high-value activities, hinder the competitiveness of Kosovo's MSMEs in regional and international markets. To address these challenges and accelerate economic development, Kosovo must implement focused economic policies. First and foremost, empowering women economically by promoting women's participation in the workforce and entrepreneurship, identifying, and supporting economic sectors with high potential for success in international markets and investments in energy efficiency and climate resilience. By addressing these structural problems and implementing these strategic objectives, Kosovo can drive economic growth, enhance competitiveness, promote inclusivity, and foster sustainability in the country. Access to finance is crucial for the success and survival of businesses. Many enterprises face difficulties in securing financing due to lack of collateral or limited business history, which makes them appear risky to banks. The proposed intervention aims to tackle these issues by providing a re-guarantee facility for KCGF, a local credit guarantee institution. The proposed intervention has several key objectives: improving the business environment and supporting women in business to promote inclusivity and narrow the gender gap, supporting export enterprises to strengthen the country's export base and integrate into international markets, greening MSMEs through investments in energy efficiency and renewable energy sources to promote sustainable growth and reduce environmental impact, and generating new employment opportunities while enhancing working conditions, labor productivity, and gender inclusiveness. These objectives align with the Strategy for Sweden's reform cooperation for Western Balkan and Turkey 2021-2027. The proposed re-guarantee contributes to the goals of promoting human rights, the rule of law, and gender equality, with a specific focus on the women in business window. It also aligns with the goal of environmentally and climate-resilient sustainable development and sustainable use of natural resources through the green window and contributes to inclusive economic development, with emphasis on the export window to promote job creation and integration of local firms into regional and EU markets. The proposed intervention’s objectives encompass crucial aspects of economic development, gender equality, environmental sustainability, and inclusive growth. By addressing the challenges in access to finance and supporting specific sectors and initiatives, the intervention aims to drive positive change in Kosovo's business landscape, promote social and economic inclusivity, strengthen the export base, and contribute to a greener and more sustainable economy. The proposed contribution involves a re-guarantee scheme aimed at supporting the guarantees provided by the Kosovo Credit Guarantee Fund (KCGF) for specific segments of the MSME market in Kosovo. Building upon previous collaborative efforts with KCGF, Sida and the Embassy in Kosovo recognized the importance of structuring a second re-guarantee facility to address key sectors identified as crucial for achieving the desired impact in line with the Swedish strategy in Kosovo. These sectors, referred to as "windows" in the guarantee, encompass a wide range of potential impact opportunities through the re-guarantee collaboration with KCGF.