105 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE cialized microfinance policy leaves Croatia without the solution used by many nations to address SME financing needs. Unlike in neighboring Bosnia and Herzegovina or Serbia, where MFIs play a substantial role, Croatia’s regulatory framework restrains the establishment of nonbank microcredit providers. Shortly after the economic transition, Croatia passed the Banking and Savings Banks Act of 1993, which established strict licensing regulations for institutions authorized to extend credit. This act was among the first of a long series of regulations aimed at modernizing and stabilizing the post-transition Croatian economy, which increasingly focused on attaining EU membership over the next two decades. In 2002, nonbank credit opportunities significantly expanded with the Savings and Loan Cooperatives Act, allowing cooperative institutions to extend loans to their members and establishing savings and loan cooperatives (SLCs) as an alternative credit source (given that they were among the only nonbank entities authorized to do so) (Hrvatski sabor, 2002). However, by recommendation of the Ministry of Finance, SLCs were abolished in 2008 amid efforts to further align with EU standards and preserve financial stability during the global crisis. The few MFIs operating at the time were licensed SLCs and thus forced to dissolve. SLCs were given the choice between becoming a credit union or a savings bank, but every savings bank license application from SLCs was rejected, and credit unions face strict requirements imposed by the HNB that substantially limit growth potential (European Microfinance Network, 2020). In essence, with strict regulations shaping Croatian banking since its transition, as well as the lingering trauma of the late 1990s banking crisis, Croatia’s small microfinance sector dissolved with the 2008 financial crisis. Fortunately, various initiatives are helping fill this void, often using EU development funds. Through targeted microcredit lines and guarantees, the Croatian Bank for Reconstruction and Development (HBOR) and the Croatian Agency for SMEs, Innovation and Investments (HAMAG-BICRO) have become the primary public lenders and guarantors of European Structural and Investment Funds (ESIF) for SMEs without commercial bank intermediation. Under the Operational Programme Competitiveness and Cohesion during the 2014–2020 EU allocation period, HAMAG-BICRO launched ESIF Micro Loans and ESIF Small Loans in late 2016. These credit lines, designed specifically for entrepreneurs, startups, and rural businesses that lack sufficient collateral or credit history to qualify for commercial bank loans, provide loans up to €50,000 at subsidized interest rates well below commercial offerings, with grace periods of up to 12 months and maturities up to 10 years (Alpeza et al., 2019). Overall, these terms make them substantially more flexible and appealing to SMEs than previous options. Table 1 Share of financially constrained firms and macroeconomic indicators, 2016–2024 Sources: European Investment Bank, 2016–2024; World Bank Group, 2025a, 2025b. Year Share of financially constrained firms (%) European Structural Investment Fund growth and investment volume (€) GDP growth rate (%) SME loan rates (%) Nonperforming loans ratio (%) 2016 13.0 0.00 3.5 5.01 15.0 2017 13.0 54.98M 3.3 4.14 12.1 2018 7.0 55.86M 2.9 3.29 10.4 2019 8.0 110.95M 3.1 2.88 7.4 2020 7.0 112.23M –8.3 2.83 7.6 2021 11.0 112.43M 12.6 2.28 5.7 2022 10.3 111.33M 7.3 2.62 4.3 2023 11.4 112.51M 3.8 4.86 3.6 2024 7.3 112.03M 3.8 5.20 3.1 2016 - 15.0 % 2017 - 12.1 % 2018 - 10.4 % 2019 - 7.4% 2020 - 7.6% 2021 Year Share of financially constrained firms (%) European Structural Investment Fund growth and investment volume (€) GDP growth rate (%) SME loan rates (%) Nonperforming loans ratio (%) 2016 13.0 0.00 3.5 5.01 15.0 2017 13.0 54.98M 3.3 4.14 12.1 2018 7.0 55.86M 2.9 3.29 10.4 2019 8.0 110.95M 3.1 2.88 7.4 2020 7.0 112.23M –8.3 2.83 7.6 2021 11.0 112.43M 12.6 2.28 5.7 2022 10.3 111.33M 7.3 2.62 4.3 2023 11.4 112.51M 3.8 4.86 3.6 2024 7.3 112.03M 3.8 5.20 3.1 2016 - 15.0 % 2017 - 12.1 % 2018 - 10.4 % 2019 - 7.4% 2020 - 7.6% 2021 Year Share of financially constrained firms (%) European Structural Investment Fund growth and investment volume (€) GDP growth rate (%) SME loan rates (%) Nonperforming loans ratio (%) 2016 13.0 0.00 3.5 5.01 15.0 2017 54.98M 3.3 4.14 12.1 2018 7.0 55.86M 2.9 3.29 10.4 2019 8.0 110.95M 3.1 2.88 7.4 2020 7.0 112.23M –8.3 2.83 7.6 2021 11.0 112.43M 12.6 2.28 5.7 2022 10.3 111.33M 7.3 2.62 4.3 2023 11.4 112.51M 3.8 4.86 3.6 2024 7.3 112.03M 3.8 5.20 3.1 2016 - 15.0 % 2017 - 12.1 % 2018 - 10.4 % 2019 - 7.4% 2020 - 7.6% 2021 financially growth rate loan rates loans ratio 3.5 3.3 7.0 2.9 8.0 3.1 7.4 5.7 7.3 4.3 3.6 7.3 3.8 3.1 - - - - -
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