Formal versus informal sources of SME financing -the case of Republic of Macedonia
Formal versus informal sources of SME financing -the case of Republic of Macedonia

Summary/Abstract: SMEs play crucial role in the economy through promoting competition, technology transfer and regional trade. Their major advantages imposed by innovations, filling the unemployment gap and flexibility have been promoted through many practical examples in various economies. Yet, making decision regarding the input of formal and informal sources of financing SME operation has been a crucial topic for many researchers. The proper and adequate input of SME finance design the future operation, costs, development, ownership and other major questions in SME. The paper addresses the comparative analysis between various formal and informal sources of financing. Furthermore the empirical analysis of the explored SMEs in the Republic of Macedonia identify the current situation of employing formal versus informal sources of SME’s financing, deriving obstacles for wider use of formal sources of financing, which can be aligned to the traditional approach in SME’s financing in RM with the dominant role of informal financing sources.

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