The document summarizes the findings of the SME Policy Index assessment of bankruptcy and second chance policies in Western Balkan countries and Turkey. It finds that while insolvency laws are generally in line with international standards, bankruptcy procedures remain long and costly. Few countries have early warning systems for distressed companies or promote second chances for honest entrepreneurs. Moving forward, countries need to strengthen prevention measures, modernize bankruptcy procedures, and promote policies that support entrepreneurs after business failure. The assessment framework for bankruptcy and second chance policies will be updated in the next SME Policy Index to better reflect EU recommendations.

1. SMALL BUSINESS ACT ASSESSMENT
Main Findings of the SME Policy
Index for Western Balkans and
Turkey
“Bankruptcy and Second Chance
Policies”
Thursday, 14 September 2017
OECD Conference Centre, Paris
Room CC12
Co-funded by
the European Union

2.  Measure SME policy convergence in
non-EU member countries based on the
principles of the Small Business Act for
Europe (SBA).
 Assess the design, implementation and
monitoring and evaluation of SME
policies and institutions.
 Benchmarking within each policy area,
allows for comparisons across time
1. Entrepreneurial learning and
women’s entrepreneurship (ETF)
2. Bankruptcy and second chance for
SMEs (OECD)
3. Institutional and Regulatory
framework for SME policy making
(OECD)
4. Public Administration (OECD)
5. SME support services (OECD) and
public procurement (OECD/SIGMA)
6. Access to finance for SMEs (EBRD)
7. Technical standards (OECD)
8. Enterprise skills (ETF) and innovation
policy for SMEs (OECD)
9. SMEs in a green economy (OECD)
10. Internationalisation of SMEs (OECD)
SME Policy Index Dimensions
2
The SME Policy Index: Objective & Scope
OECD South East Europe

3. 1 2 3 4 5
9: SMEs in a green economy
1. Entrepreneurial learning and women's…
8a: Enterprise Skills
8b: Innovation Policy for SMEs
2: Bankruptcy and Second chance for SMEs
5a: Support Services for SMEs and Start-Ups
10: Internationalisation of SMEs
6: Access to Finance for SMEs
4: Operational Environment for SMEs
5b: Public Procurement
3: Institutional framework for SME Policy Making
7: Standardisation and technical regulation
2016 WBT average scores per dimension
2012 WBT average scores per dimension
3OECD South East Europe Regional Programme
Levels
The SME Policy Index: Performance of the WB&T per dimension
Level 1: No framework
Level 2: Draft/pilot, some signs of
government activity
Level 3: Solid framework in place
Level 4: Level 3 + concrete
indications of effective policy
implementation
Level 5: Level 4 + significant record
of concrete and effective policy
implementation
Overall, the region is further converging towards EU SME Policy standards and good practices.
Compared to the 2012 Small Business Assessment, progress has been made across nearly all
dimensions.

4. The SME Policy Index: «Bankruptcy and Second Chance» Performance
by economy
4OECD South East Europe Regional Programme
Weighted scores for Bankruptcy and Second chance compared to 2012
Source: OECD SME Policy Index 2016
*This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo declaration of independence.
*

5. The SME Policy Index: Assessment Framework for «Bankruptcy and
Second Chance»
5OECD South East Europe Regional Programme
The assessment framework of the dimension «bankruptcy and second chance»
took into account the following:
• Bankruptcy procedures – considers bankruptcy procedures both on paper
and in practice, and their alignment with international standards. It looks at :
• Alternatives to in-court bankruptcy processes;
• Establishment of an early warning systems;
• Out-of-court settlement mechanisms.
• Second chance – looks at the measures in place to facilitate second chance
for entrepreneurs and reduce stigma of business failure. It looks at:
• Measures to promote positive attitude towards giving entrepreneurs a
fresh start;
• Discharge from bankruptcy.

6. The SME Policy Index: Main findings of Bankruptcy Procedures
6OECD South East Europe Regional Programme
• Most economies lack institutional support for effective and efficient bankruptcy
procedures
• The time it takes to undergo bankruptcy procedures – typically two years in most economies – has
not changed since the 2012 assessment
• In Serbia, Turkey and Kosovo* the average cost of bankruptcy proceedings remains high, at 20%,
15%, and 14.5% of the value of the estate respectively. The other regional economies are more in
line with OECD average level of 9%; the average for the region stands at 12.4%.
• Recovery rates also remain relatively low in most economies; the average recovery rate in the region
is 36.9%, well below the OECD average of 72.3%.
• Most economies have not established formal early-warning system to identify
distressed companies although, in some cases banks assign a risk “rating”
Most economies in the region have relatively well-developed insolvency laws in place
that largely meet international standards, however, some issues still needs to be
addressed.

7. The SME Policy Index: Main findings of Second Chance
7OECD South East Europe Regional Programme
Across the region there is a lack of programmes to promote second chances among
entrepreneurs
• There is a region-wide lack of provision of government-supported programmes to promote
second chances among entrepreneurs who have had a failed business. Not one economy has
included provisions in any national strategy to establish an information campaign to raise
awareness about second-chance opportunities.
• Nor is there any evidence that support or training programmes are being targeted towards
honest entrepreneurs who have undergone non-fraudulent bankruptcy.

8. The SME Policy Index: The way forward
8OECD South East Europe Regional Programme
• Strengthen current insolvency laws by establishing prevention systems and
public insolvency registers. Putting early warning systems in place could help
to identify distressed companies and thus potentially prevent bankruptcy
altogether – minimising both costs to the enterprises, creditors, and the
government. Insolvency and bankruptcy registers should be made available to
the public.
• Promote second chances among entrepreneurs. The region faces a severe
shortfall of programmes that promote second chance for honest
entrepreneurs. Such programmes should support a fresh start and minimise
stigma against those who have had a failed businesses. In this regard, public
policy and legislation should progressively introduce a distinction between
honest and dishonest entrepreneurs to ensure that the former are able to re-
enter the market as soon as possible.

9. Changes for the next SME Policy Index 2019
9OECD South East Europe Regional Programme
The new framework will be built around three sub-dimensions:
1. Prevention measures – overall the aim is to asses measures that exist to prevent
bankruptcy, the first sub dimension will focus on the availability of Information
campaigns and web-based information for entrepreneurs facing difficulties; Training
and assistance procedures to entrepreneurs that fear failure and Early warning system
2. Survival and Bankruptcy Procedures – this sub-dimension will focus on the existence
and operative mod of Survival procedures; Out-of-court pre-bankruptcy; Laws and
procedures on distressed companies, receivership and bankruptcy, including debt
settlement
3. Second Chance – this sub-dimension will asses measures on Promoting positive
attitude towards giving entrepreneurs a fresh start; Discharge from bankruptcy;
Disabilities related to restrictions imposed during the period or bankruptcy.
In order to better reflect latest policies and EU recommendations to assess Bankruptcy
and Second chance policies, some changes have been introduced to the new
framework:

10. Marzena KISIELEWSKA
Head of OECD South East Europe Division
e-mail: marzena.kisielewska@oecd.org
Thank you for your attention!
Umur GOKCE
Policy Analyst
OECD South East Europe Division
e-mail: umur.gokce@oecd.org