Small and medium-sized enterprises (SMEs) create three out of four jobs in Lithuania and that is 10 % higher than the EU average. SMEs are economic growth drivers in Lithuania as stated in the “Small Business Act” for Europe report published by the European Commission. This is the latest EU study aimed at assessing measures for improving environment for small and medium-sized business.
© DELFI / Domantas Pipas

SME's create more jobs than large firms do

In 2017, SMEs generated 68.5 % of value added in Lithuania and this is over 10% higher than the EU average. They also employ three out of four people while the average is almost 10% lower in the EU. The report states that SMEs are expected to be the main growth drivers for the economy as a whole, creating almost 17 700 new jobs in a year. For comparison, in Lithuania, large firms employ less than 25 % of people and generate only 31.5 % of value added.

"Growing personal income is the main driver for small and medium-sized business growth. In Lithuania, the purchasing power has increased and this creates more opportunities to supply new goods and services as well as expand to foreign markets. Nevertheless, the pricing of payment solutions offered by banks is more attractive to larger firms. Often high-priced and inflexible conditions, to which SMEs are highly sensitive, restrict small businesses. In my opinion, enterprises would grow and develop faster if the uptake of the most advanced payment technologies by small and medium-sized sector is ensured," said Donatas Jankauskas, Lithuanian head of "myPOS", a smart payment solution targeting SMEs.

Although small business is the economic driver in Lithuania, businesspeople face a number of barriers. Administrative burden, taxation environment and lack of entrepreneurship education are the greatest obstacles to business as stated in review on entrepreneurship trends by Enterprise Lithuania. "Superfluous regulation costs additional 20 million euros to SMEs according to a recent study on bureaucracy index. Taxation environment is also an additional burden on SMEs, especially start-ups," Gytis Morkūnas, Director of Entrepreneurship Department of Enterprise Lithuania, underscored.

Small business lacks focus from financial institutions

The report states that Lithuania has the second highest proportion of rejected SME loan applications and this indicator substantially lags behind the EU average. Studies show that shadow economy is still persistent in small and medium-sized sector. Quite often, entrepreneurs want to make savings by concealing their revenue and not paying taxes, which consequently hinders getting a loan for business development.

"Often small and medium-sized business representatives are of the opinion that they gain by providing a possibility to pay in cash only and are proud of the fact that their customers do not have to pay for a receipt. Unfortunately, in the end, it turns against them as false accounting impedes receiving a loan for further development and improvement. I think that the main reasoning for this behaviour is insufficient interest in conditions proposed by other suppliers and assuming that only banks provide payment solutions by card. Currently, non-banking enterprises in Lithuania may offer smart payment solutions allowing inexpensive, convenient and honest accounting of earnings," Jankauskas said.

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