September 2018

This publication was produced for review by the United States Agency for International Development. It was prepared by the Center for Advanced Economic Studies and Cardno Emerging Markets.

BASELINE STUDYBaseline Evaluation Report for the USAID/Serbia Cooperation for Growth Activity

Contents

.......................................................................................................................................... 1

.......................................................................................................................................... 1EXECUTIVE SUMMARY........................................................................................................6

Evaluation Purpose and Evaluation Questions................................................................6Project Background........................................................................................................6Evaluation questions, design, methods and limitations..................................................6Findings and conclusions................................................................................................6

PROJECT BACKGROUND.....................................................................................................8EVALUATION PURPOSE & EVALUATION QUESTIONS.........................................................10

Evaluation Purpose.......................................................................................................10baseline performance metrics......................................................................................10

EVALUATION METHODOLOGY...........................................................................................12Scope and Coverage.................................................................................................12Criteria for Selection.................................................................................................14Data Collection..........................................................................................................15Data Collection Tools................................................................................................16Serbian Business Survey...........................................................................................16Inspectorate Staff Survey..........................................................................................17Serbian Citizens Focus Group Discussions................................................................17Post-Fieldwork Activities...........................................................................................18

Baseline Limitations & Challenges................................................................................18Field Research Tool 2: Inspectorate Staff Survey......................................................19

FINDINGS.........................................................................................................................19Business demographic data......................................................................................20Inspector demographic data.....................................................................................22

Business Governance...................................................................................................24CFG Performance Indicator: Number of self-assessments conducted........................25

Inspections – changing regulation and changing behaviours........................................26Risk assessments......................................................................................................27Check lists.................................................................................................................28

Financing......................................................................................................................32CFG Performance Indicator: Percentage of SMEs using external sources of finance. 34Individual versus Societal Benefits............................................................................34State versus Market Economies................................................................................36Entrepreneurship, Governance and Society..............................................................36CFG Performance Indicator: Percentage of stakeholders with improved opinions of entrepreneurship......................................................................................................37

Cooperation Barometer -- Highest Level Outcome.......................................................37CFG Performance Indicator: Cooperation barometer.................................................37

ANNEXES..........................................................................................................................38Annex 1: Evaluation Statement of Work.......................................................................38

Annex 2: Statistical Annex............................................................................................40Tables: Business Survey Results, by Size and Trade Orientation..............................40

Annex 3: Data Collection Instruments..........................................................................73Individual Business Questionnaire.............................................................................73Inspector Questionnaire............................................................................................77

Annex 4: Disclosure of any Conflicts of Interest............................................................79

ACRONYMSADS Automated Directives System

AMELP Activity Monitoring, Evaluation and Learning Plan

CDCS Country Development Cooperation Strategy

CFG Cooperation for Growth Project

CLA Collaborating, Learning, and Adapting

COP Chief of Party

COR Contract Officer Representative

DCOP Deputy Chief of Party

DO Development Objective

GoS Government of Serbia

IPs Implementing Partners

IR Intermediate Result

LF Logical Framework

M&E Monitoring & Evaluation

MEL Monitoring, Evaluation, and Learning

MIS Management Information System

PIRS Performance Indicator Reference Sheet

PMP Performance Management Plan

RF Results Framework

SME Small and medium sized enterprise

SOW Statement of Work

ToT Training of Trainers

USAID United States Agency for International Development

USG United States Government

5

EXECUTIVE SUMMARYThe USAID Cooperation for Growth Project is designed to enhance the competitiveness of the Serbian private sector both by strengthening and deepening the implementation of business enabling environment reforms and broadening financing opportunities for small and medium enterprises (SMEs). These improvements will remove regulatory constraints to economic activity, thereby creating a stronger foundation for investment and private sector growth. CFG will focus on accomplishing results that open space for, and thereby drive opportunity and growth for SMEs, but the project will certainly produce benefits for the entire private sector in Serbia.

EVALUATION PURPOSE AND EVALUATION QUESTIONSThe overall objective of the evaluation is to provide baseline point estimates for key indicators the CFG Project aims to track (CFG Performance Indicators). By providing those point estimates, this Baseline Evaluation enables the CFG Project to track its progress throughout its lifetime. To measure and report on the achievement of the CFG results statements, CFG proposes to use six CFG Performance Indicators. These indicators look to capture the experience of government employees, specifically inspectors; the private sector, where the focus will be on SMEs; and the general public, whose confidence in the government and private sector when it comes to impacting economic growth is required.

PROJECT BACKGROUNDUSAID Cooperation for Growth Project in Serbia (USAID CFG) is a four-year activity that commenced in January 2018. The aim of the Project is to improve conditions for broad-based economic growth by ensuring that past and future legislation/regulation to improve Serbia’s business enabling environment is fully implemented and felt by firms throughout the country. The Project will enhance the competitiveness of the Serbian private sector both by strengthening and deepening the implementation of business enabling environment reforms and broadening financing opportunities for small and medium enterprises (SMEs). These improvements will remove regulatory constraints to economic activity, thereby creating a stronger foundation for investment and private sector growth. CFG will focus on accomplishing results that open space for, and thereby drive opportunity and growth for SMEs, but the project will certainly produce benefits for the entire private sector in Serbia

EVALUATION QUESTIONS, DESIGN, METHODS AND LIMITATIONS

The USAID Cooperation for Growth (CFG) Baseline Evaluation used a non-experimental, observational design, involving a mixed-methods approach, combining qualitative and quantitative research methods and analysis. This design, detailed below, provided for inquiries into the behaviors of business owners and inspectorate staff, while also providing point estimates for CFG Performance Indicators.

FINDINGS AND CONCLUSIONS

6

The CFG is expected to deliver a host of achievements around the Serbian business enabling environment. As a project intended to address the experience of inspections oversight and the role of financial accessibility for and by business, the CFG will use this Baseline Report to inform evidence-based decision making in the work planning process. These findings also inform the performance metrics by which CFG’s success will be measured. Key findings include:

Less than 15% of companies was aware that they can conduct a self-assessment, using publicly available checklists. Less than one-thirds of those who were aware have conducted at least one self-assessment during previous year. In average, those firms have conducted less than 5 self-assessments during previous year (standard deviation 9.6). Majority of self-assessments was equally distributed between tax, market and labor self-assessments.

There is an inadequate usage of financial instruments present on the Serbian market. Two fifths of companies used personal retail loans to finance their own businesses which is inefficient considering that retail loans are traditionally more expensive than business loans. Furthermore, 23.3% of companies stated that interest rates for any banking product are not favorable. Based on the data provided, there is a demand for microfinancing bearing in mind majority of companies (70.8%) stated they have a need for funds in the amount less than 25k EUR. Broadly speaking, the baseline data underlines a clear need for a wider offer of financial products for companies.

Data underlines an existent misunderstanding, or even ignorance, regarding financial leverage among companies. Fewer than 30% of companies use any sources of external financing. When it comes to both financing next year business and possibly having a need for additional funds in the future, almost 60% of companies stated that they would use their own/personal funds. Serbian companies should be educated on the use of leverage for business growth. The benefit of using leverage lays in increasing the potential return of an investment. For example, most small companies don't have available cash to invest, so the company will need to get a business loan. This loan is leverage to help the company do what it couldn't do without the loan. In order for Serbian companies to start using non-banking financial resources, they should become aware of the importance of financial leverage.

Inspectors who were trained have a much better understanding of the new discourse introduce by the law; that advisory functions of the inspectors are rarely implemented; and that inspectors feel overwhelmed by their new duties, without being relieved from the “old way of doing things”. From the CFG’s programmatic point of view, this section provides arguments for more training of inspectors and an intensive promotion of the main concepts of the reform that aims to turn inspectors into advisors and supporters of business growth and regulatory compliance; to foster preventive and advisory roles of inspectors; and to assist inspectorates in

7

full implementation of the risk management system that should provide a better work distribution and rationalize the use of inspectorates capacities.

The findings show that Serbian citizens’ understanding of entrepreneurs is mostly related to the individual aspects that entrepreneurs can achieve: independence in business, profit, venture, but also risk taking. A smaller number of people associated entrepreneurs with spill-over effects to the whole society - progress and growth, innovation and other aspects of business in a wider sense.

8

PROJECT BACKGROUNDUSAID Cooperation for Growth Project in Serbia (USAID CFG) is a four-year activity that commenced in January 2018. The aim of the Project is to improve conditions for broad-based economic growth by ensuring that past and future legislation/regulation to improve Serbia’s business enabling environment is fully implemented and felt by firms throughout the country. This is in line with the USAID/Serbia Development Objective 2 and espouses the Theory of Change described below:CFG Theory of ChangeThe guiding theory of change assumes that if public and private collaboration to improve the legal and regulatory framework for private sector growth is broadened and strengthened to cooperatively develop effective solutions for the transparent, predictable and accountable implementation of reforms to reduce regulatory burdens and improve access to finance, then private sector confidence in the regulatory environment will be increased, building a durable foundation for increased private sector investment and competitiveness.The Project will enhance the competitiveness of the Serbian private sector both by strengthening and deepening the implementation of business enabling environment reforms and broadening financing opportunities for small and medium enterprises (SMEs). These improvements will remove regulatory constraints to economic activity, thereby creating a stronger foundation for investment and private sector growth. CFG will focus on accomplishing results that open space for, and thereby drive opportunity and growth for SMEs, but the project will certainly produce benefits for the entire private sector in Serbia.To achieve these outcomes and goals, USAID’s design for CFG seeks to achieve two Core Objectives:

Objective 1: “Behavior-driven policy measures strengthened.” CFG will identify and facilitate implementation of improvements that have the greatest potential impact on the overall predictability and stability of the business environment. Since business and tax inspections are generally key points of government interaction for SMEs, the project will improve both administrative efficiency by simplifying and streamlining regulations, administrative instructions, procedures, and other legal requirements applied at both the national and municipal levels. CFG will also work to broaden the government’s comprehension of inspections as mechanisms to achieve regulatory objectives and results and, accordingly, seek to adjust the performance measures of selected market, labor, sanitary and agriculture inspectorates.

Objective 2: “Access to financial resources improved.” CFG will seek to expand the volume and diversity of financial services available to SMEs to enable them to invest in growth, expand operations, and increase their competitiveness. CFG will identify and support improvements in systems supporting SME access to finance by addressing both the demand for and supply of financial services, to include: (1) improving corporate governance, borrower practices and financial literacy of Serbian SMEs; and (2) expanding the availability of various financial products in the Serbian market.

9

CFG’s regulatory reform and access to finance initiatives will also serve as a platform for seeking a broader change in the attitudes and behaviors that govern the relationships between public and private stakeholders, which hinder the development of cooperation among them to meet regulatory objectives to support the public good. Consequently, CFG will support a third objective to strengthen public private dialogue (PPD) and changes in attitudes and behavior between regulators and the regulated.

Objective 3: “Public value of entrepreneurship encouraged.” CFG will strengthen public and private sector dialogue and cooperation through building a range of business and government capacities and supporting their mutual engagement on important issues. These linkages will allow peer-to-peer capacity building and experience sharing while direct project assistance will develop capacity for private sector advocacy, financial literacy and business skills as well as public sector regulatory service delivery and performance management practices. CFG will also work to improve communication, which will seek to strengthen interpersonal relationships between both sets of stakeholders. CFG has begun to explore various channels to engage private sector representatives throughout Serbia, which may involve working through business associations or more informal networks of SMEs based around common business environment improvement and access to finance goals. As CFG identifies these networks of SMEs, reform objectives will emerge, and CFG will jointly develop activities for advocacy and implementation.

The Logical Framework links to the USAID/Serbia Mission’s CDCS’s Development Objective 2, “Improved conditions for broad-based, inclusive economic growth are essential to Serbia’s democratic, free-market, and Western-oriented transformation” which will set forth the exit path of USAID from Serbia and leave behind sustainable results that will further the country’s Euro-Atlantic integration. Graphic presentation of the CFG Logical Framework outlines that, in order for “Cooperation within the Serbian business environment improved” (linked to USAID/Serbia’s IR 2.1 Key Components of Business Enabling Environment Improved), three mutually reinforcing objectives (O1, O2, and O3) should create necessary conditions for increased performance.Figure 1. Logical Framework

10

11

EVALUATION PURPOSE & EVALUATION QUESTIONSEVALUATION PURPOSEThe overall objective of the evaluation is to provide baseline point estimates for key indicators the CFG Project aims to track (CFG Performance Indicators). By providing those point estimates, this Baseline Evaluation enables the CFG Project to track its progress throughout its lifetime. The evaluation is based on rich data, created through face-to-face SME survey (800 SMEs), interviews with inspectorate staff (110 interviews), and focus group discussions (8 focus groups) with citizens.

BASELINE PERFORMANCE METRICSTo measure and report on the achievement of the CFG results statements, CFG proposes to use six CFG Performance Indicators. These indicators look to capture the experience of government employees, specifically inspectors; the private sector, where the focus will be on SMEs; and the general public, whose confidence in the government and private sector when it comes to impacting economic growth is required. Questionnaires were created in accordance with requirements of CFG Performance Indicators measurement. SMEs were primarily asked about their experience with inspections, their reliance on external financing and their plans for future growth; inspectors were primarily asked about their preventive activities, risk analyses they perform when creating their annual work plans (i.e. company visit plans) and the effectiveness of checklists; and citizens were asked about their perception of entrepreneurship, the state’s attitude towards entrepreneurship, and division of responsibility between the state and the economy. CFG Performance Indicators are explained below:

1. Cooperation Barometer. The sole Project purpose is measured by one composite indicator. This composite indicator is based on the theoretical framework outlined in the Theory of Change, whereby the structure of cooperation is being measured. This custom outcome indicator helps measure the fundamental expectation of the CFG Project, which is increased cooperation between CFG stakeholders in the Government of Serbia (GoS), private sector and public at large. The cooperation barometer is a dynamic, index indicator which captures data pertaining to both government and private sector behavior. Ultimately, this indicator is the culmination of behavior change expected from all relevant CFG stakeholders. The detailed composition of this indicator includes aspects pertaining to (a) level of compliance by SMEs that are subject to oversight of selected inspections, (b) level of risk-based assessments/advisory activities/preventative visits by inspectorates, (c) public perception of entrepreneurship’s importance for modern society development.

2. Number of inspections based on risk assessments. While the risk-based system was introduced by the umbrella Law on Inspections Oversight, its implementation remains weak across all inspectorates. Risk criteria are

12

poorly developed, and inspectorate check lists are often just a copy/pasted version of the direct legislation. This indicator follows, logically, the first indicator in this sub-purpose, whereby if inspectors received training and technical support to increase their knowledge of risk-based protocols, the inspections process from the government’s side will shift from complaint-based and "policing" oriented inspections toward a compliance based and partnership-oriented approach to inspections.

3. Percentage of SMEs conducting self-assessments. SMEs consistently struggle with a knowledge gap and overall capacity to manage regulatory requirements. Their access to information is limited, resulting in a lack of capacity to study numerous legislations and the ways in which their businesses will be impacted. Under Sub-Purpose 1, CFG activities will introduce SMEs to self-assessment processes as a means to increase awareness of regulatory requirements, culminating in a tool designed to have SMEs reach a higher level of inspection compliance. The self-assessment process would demonstrate that businesses have developed adequate internal processes that would ensure not only current but also future compliance. The expectation of the self-assessment process is to reduce irregularities found during inspections and minimize the fines ordered during inspections.

4. Person hours of USG funded technical assistance in business enabling environment provided to counterparts or stakeholders (EG5.1-1). Person hours of USG funded technical assistance in business enabling environment provided to counterparts or stakeholders (EG5.1-1). This standard indicator measures the results of CFG sub-activities and tasks focused on providing GoS and SMEs with much needed technical assistance. Focused technical assistance to the GoS would develop clear and understandable risk criteria, methodology for calculating inspections specific and generic risk, check lists revisions, and training of inspectors on risk inspections and their benefits is required. CFG tasks provide SMEs benefits from technical assistance related to the self-assessment process, as well as on all practical and procedural aspects of doing so. In order to achieve the expected outcomes under this sub-purpose, a strong foundation of technical assistance will be required.

5. Percentage of SMEs using external sources of finance for investments. The results of CFG sub-activities and tasks in this sub-purpose are focused on building the capacity of SME businesses to improve their ability to attract external financing. This indicator is expected to integrate with other finance focused USAID Serbia activities upon future contract awards.

6. Percentage of Serbian citizens with improved opinions of entrepreneurship. Mistrust is an overarching feature of the Serbian business environment. Reflecting the CFG causal logic, changing how communication occurs in Serbia could potentially initiate deeper behavioral changes and increase a level of mutual trust. CFG must work with GoS, businesses and the public as necessary to improve the content and visibility of information related to entrepreneurship in Serbia.

13

14

EVALUATION METHODOLOGYThe USAID Cooperation for Growth (CFG) Baseline Evaluation used a non-experimental, observational design, involving a mixed-methods approach, combining qualitative and quantitative research methods and analysis. This design, detailed below, provided for inquiries into the behaviors of business owners and inspectorate staff, while also providing point estimates for CFG Performance Indicators.

Scope and CoverageThe CFG Baseline Evaluation was carried out in a total of eight municipalities in Serbia and captured the experiences of Serbian businesses, Government of Serbia field inspectorate staff, and Serbian citizens. A variety of quantitative and qualitative survey instruments, each specifically designed to the targeted audience, were administered across the municipalities of Pirot, Zaječar, Čačak, Kragujevac, Šabac, Sombor, Niš, and Vranje. All business survey and FGD respondents were chosen at random, while all available inspectors per municipality were interviewing during the field data collection window. The quantitative questionnaires collected detailed information on business experiences and inspectorate practices, while the qualitative focus groups provided an opportunity for Serbian citizens to share their views on entrepreneurs. The following were the broad areas from which data was collected during the baseline survey:

Background characteristics of Serbian businesses; Serbian business’s governance structures and behaviours; Inspections experiences (business) and practices (inspectorates); Business finance characteristics and behaviours; Public perceptions of entrepreneurship; and Public views on state versus market orientated economic growth.

For the purposes of this study, a business and inspectorate questionnaires met the completion threshold if over half the questions were completed in each section of the questionnaire, while FGDs required at least six adult Serbian citizens per focus group. The evaluation team completed approximately 800 business and 110 inspector interviews and conducted eight focus group discussions with over 50 members of the general public.Sample DesignIn order to achieve the objectives of the CFG Baseline Evaluation, the study targeted all manner of Serbian businesses, the four principle Inspectorates under the CFG project and Serbian citizens to determine the baseline measurements. A two-stage cluster sample approach was used to determine the sample population.First Stage At the first stage, a cluster sampling method was applied to municipality selection. Eight municipalities were selected 1) for their geographic location and 2) for their heterogeneity as a sample cohort, best reflecting the different types

15

of economic and regional activities reflected in Serbia. Over half the municipalities were selected for their proximity to international borders and the other half were selected for their relevance to economic “centers” within the region. Where there is homogeneity between them, the sampled municipalities present above-average economic activity in their regions and serve as local capitals of their respective administrative districts.Municipality CoverageThe USAID CFG Baseline Survey was conducted in the urban centers and surrounding areas of 8 Serbian municipalities: Pirot, Zaječar, Čačak, Kragujevac, Šabac, Sombor, Niš, and Vranje. The following details a general overview of the characteristics of each city within its corresponding municipality.

A. Pirot is the administrative center of the Pirot District in southeastern Serbia, directly on the border with the EU in Bulgaria. The urban area of the city has a population of 38,785, while the population of the city administrative area is 57,928 inhabitants. The top employment sectors in Pirot are processing industry, wholesale/retail/repair, and healthcare/social work, with industry focused on manufacture of rubber and plastic products, trade, and services.

B. Zaječar is located in eastern Serbia and is the administrative center of the Zaječar District. Zaječar It is the largest city in eastern Serbia with a population of 59,461 inhabitants within city administrative area. The top employment sectors in Zaječar are wholesale/retail/repair, processing industry, and healthcare/social work. The municipality’s economy is dominated by manufacturing of electrical equipment, trade, and production of food products.

C. Čačak is the administrative center of the Moravica District in central Serbia. It is located in the geographical region of Šumadija. The city center has 73,331 inhabitants, while the administrative area has 115,337 inhabitants. Čačak is one of the main crossroads and economic centers of Central Serbia, bordering with the several municipalities, Požega (Zlatibor District) to the west, Knić (Šumadija District) to the east and the city of Kraljevo (Raška District) to the southeast. Core employment sectors include processing industry, wholesale/retail/repair and traffic/storage/communication, focused on the production of metal products, trade and the production of clothing/apparel.

D. Kragujevac is the fourth largest city in Serbia and the administrative center of the Šumadija District in central Serbia. It is situated on the banks of the Lepenica River. The city administrative area has a population of 179,417 inhabitants. Historically, Kragujevac was an important industrial and trading center of Serbia for more than two centuries, known for its automotive and firearms industries. Today, its core employment sectors include processing industry, wholesale/retail/repair, education and healthcare/social work. Clearly still influenced by its history, Kragujevac’s economic focus is in manufacturing of motor vehicles, metal products, and trade.

E. Šabac is located in the Mačva region of western Serbia. It is situated on the banks of the Sava river near the Cer mountain. It has a population of 118,347 inhabitants. Prior to 1990, Šabac had one of the best developed

16

economies in the former Yugoslavia. Today, the main industries of Šabac are trade, production of food products, and storage services with core employment coming from processing industry, wholesale/retail/repair, and education sectors.

F. Sombor is a city and the administrative center of the West Bačka District in the autonomous province of Vojvodina, Serbia. Sombor has a total population of 47,623, with an administrative area of 85,903 inhabitants. A predominantly rural municipality, economic activities are focused around agricultural, food and clothing production. Employment is dominated by the processing industry, wholesale/retail/repair, and healthcare/social work sectors.

G. Niš is the third-largest city in Serbia and the administrative center of the Nišava District. The urban area of Niš has a population of 187,544, while the administrative area has a population of 260,237 inhabitants. Niš maintains a strategically advantageous position in Serbia, at the intersection of a European highway and railway networks connecting Europe with Asia. Niš is an important industrial centers in Serbia, well known for its tobacco, electronics, construction, mechanical-engineering, textile, nonferrous-metal, food-processing and rubber-goods industries. Employment opportunities are provided in a diverse set of sectors with the processing industry, wholesale/retail/repair, healthcare/social work sectors, education and traffic/storage/ communication accounting for the majority of employment.

H. Vranje is the administrative center of the Pčinja District in southern Serbia. The urban center has 60,485 inhabitants, while the broader city expands toa population of 83,524 inhabitants. Vranje is the economic, political, and cultural center of the Pčinja District as it is located on the Pan-European Corridor X, close to the borders with Macedonia and Bulgaria. Vranje has a long tradition of industrial production, trade, and tourism and is rich in natural resources, such as forests and geothermal. The modern economy is organized around the manufacturing of furniture, textile, and leather goods. The local job market predominantly relies on the processing industry, wholesale/retail/repair, and healthcare/social work sectors for the majority of employment opportunities.

Second StageThe second stage sampling within each municipality varied by targeted population. Businesses and focus group discussion participants were selected through a simple random sample approach in each municipality. No systematic sampling approach was used to determine the inspector population; rather, every available inspector was interviewed at the municipal inspectorate headquarters during the course of the data collection effort.

Criteria for SelectionSerbian Businesses

The survey team endeavoured to systematically enumerate a wide swath of businesses in each municipality, targeting a circumference of at least 5 km from the center of each municipality, including industrial zones. Enumerators

17

blanketed the respective areas and randomly canvased businesses for interviews. No specific type of business was disqualified from the sample; businesses could perform any economic activity and could be of any size. Criteria for selection required that businesses be independent (branch offices were excluded from the survey, but not necessarily franchises) and that the businesses were operational for at least one year. A diverse range of businesses were sampled; daily reviews at each municipality insured that adjustments were made in real time to balance the selection of businesses providing a robust sampling of various types businesses. Examples of businesses in the sample included pet shops, boutiques, agricultural supply, import/export services and industrial production. Interviews were conducted only with executive personnel – owners or managers – with working knowledge of the firm’s inspections experience and investment expectations.Inspectorate Staff

The enumerator teams endeavoured to interview all available inspectors from the CFG targeted four inspectorates (Market, Agricultural, Sanitary, Labor), but included other inspectorates as their inspectors were available. The main conditions for interviewed inspectors were that they were the ones who come out on the field (i.e. conduct field inspections) and that they had been actively conducting these field inspections over the past two years. Supervisors who have not personally conducted inspections during last year were excluded from the sample. Such selection intends to filter out respondents whose opinions are not based on personal field experience with the new legislation requirements. Inspectors were approached through their inspectorates and interviews were conducted one-on-one in private offices.

Serbian Citizens FGDs

The survey effort returned eight FDGs, one per municipality. Each focus group consisted of six to eight participants who were individuals chosen at random from the central public square based on their availability during the visits to selected municipalities. The sole condition for participation was an age between 18 and 50; the FGD moderators maintained focus groups which were sensitive to age and gender-balance. The FGDs utilized an open-ended questionnaire specifically created to capture the nuances of economic systems experienced in Serbia, entrepreneurship and overall economic growth.

Data CollectionThe baseline evaluation employed the efforts of key CEVES personnel, the whole of the CFG project team, and seven enumerators. The CEVES Team Lead and CFG Baseline Coordinator supervised the field data collection team during survey implementation, providing detailed oversight and quality control over all data collection activities. CFG project staff travelled with the CEVES team to each

18

municipality to provide operational support specifically when engaging Serbian government authorities. Prior to the commencement of field activities, enumerators were recruited by CEVES with an emphasis on recruiting university students and recent graduates from economics and political science faculties, with 60% distribution of female and 40% male represented in the final enumerator teams. The CFG Baseline Coordinator lead enumerator training to ensure data was gathered following strict quality-control, ethical, and confidentiality procedures. All training activities were conducted over a 4-day period in Belgrade and Zajecar, including two days of pilot testing and revising data collection instruments. The training consisted of questionnaire explanations and practice, engagement training and supervisor training. The training enabled the data collection team to provide:

Detailed explanation of the objectives of the survey, sampling design, and method of selecting businesses and respondents;

Proper interviewer deportment and respondent confidentiality; Detailed explanation of the questionnaire, question by question, with a

separate training for each survey tool; And protocols for routing and filtering, and a comprehensive discussion of

directive and nondirective probing. Classroom discussions of the questionnaire included practice interviews between interviewers with guided discussions led by the field managers and senior level USAID CFG staff designed to address any problems or respondent queries that arise. Pilot exercises were conducted in both Belgrade and Zajecar, where enumerators gave interviews to practice how to conduct the questionnaires. It was during the pilot exercise that problem areas were identified, such as whether the questions were easily understood, whether the sequence of questions was logical for respondents, whether questionnaires were clear in terms of both coding and instructions to enumerators, and whether any of the questions were particularly difficult or sensitive for the local context.The main fieldwork began on July 18, 2018 and was completed on August 10, 2018, taking approximately three weeks to complete. CFG’s Baseline Coordinator maintained close supervision of the field team through field visits and regular communications. The following table provides the detailed data collection schedule.Table 1. Baseline Evaluation Data Schedule

Activity Start Date End Date

Enumerator Training July 18 August 9Data Collection July 24 August 10

East Serbia: Pirot and Zaječar July 24 July 27Sumadija and West Serbia: Čačak, Kragujevac and Šabac July 30 August 9

Vojvodina: Sombor August 1 August 2

19

South Serbia: Niš and Vranje August 6 August 9Data Entry and Cleaning August 13 August 24

Data Collection ToolsThe CFG Baseline Evaluation relied on three different and distinct survey tools for the baseline effort: a Serbian business survey, an inspectorate staff survey and a citizen focus group questionnaire. The following details each unique survey tool.

Serbian Business SurveyThe aim of the business survey was to gain information on a variety of issues facing Serbian businesses today and to document certain business behaviors. The survey included components on the methods of internal business governance structures, exposure and knowledge regarding the oversight inspections process, their experience with various inspections, their reliance on external financing for investments. The Serbian Business Survey was designed to provide point estimates for the following three CFG Performance Indicators: Cooperation Barometer, Number of self-assessments conducted, and Percentage of SMEs using external sources of finance for investments. The complete Serbian Business Survey is provided in Annex 3.The survey effort returned 820 businesses across eight municipalities in all four regions of the country. The distribution of businesses averaged 100 surveys per municipality, with a size composition consistent with the National Serbian Business Registries distribution of firms (table XX). Table 2. Number of Business Interviews, by employee size and by region

East Serbia Sumadija and West Serbia Vojvodina

South Serbia

TotalPirot Zaječar

Čačak Kragujevac

Šabac Sombor Niš Vranje

MicroSole

proprietor 28 19 35 45 33 33 44 30 267

2-4 41 49 42 62 42 41 49 51 3775-9 14 11 13 8 12 10 10 12 90

Small10-19 11 6 5 4 5 7 5 1 4420-49 3 0 5 4 1 4 4 2 23

Medium & Large50-250+ 2 3 4 2 1 3 1 3 19

Total 99 88 104 125 94 98 113 99 820

The resulting distribution of the businesses collected during the baseline is consistent with the distribution of businesses reporting into the GoS Business Registry Agency (APR). Table 3 provides a detailed comparison of firm size, by employee number. The APR data provides an estimate share of businesses (excluding financial sector) for 2016. Official data provided by the APR and

20

Statistical Office of the Republic of Serbia details the share of micro, small, medium, and large enterprises. Certain assumptions were made about entrepreneur data; Entrepreneurs who do not submit financial reports are counted as micro, distributed with the highest weight in the sole proprietors group.

As seen in the table, the Baseline Sample is not systematically biased against medium and large firms. Indeed, the majority share of economic activity in Serbia is driven my micro and small firms.

Table 3. Comparison Statistics, Serbian Business Registry versus Baseline Sample

Firm size

(# of employees)

Business Registry

Baseline

Sample

Firm size

(# of employees)

Business Registry

Baseline Sample

Micro Small

Sole proprietor 54% 33% 10-19 2% 5%

2-4 37% 46% 20-49 1% 3%

5-9 5% 11% Medium & Large

Total Micro 96% 90% 50-250+ 1% 2%

Inspectorate Staff SurveyThe purpose of the inspectorate staff survey to assess the level and effectiveness of preventive measures taken by inspections, to evaluate the use of risk analyses in creating annual visit plans as well as the quality of undertaken methodologies for conducting risk analyses, determine the strengths and weaknesses inspectors experience in inspection processes and how these have changed since the implementation of the new legislation on inspection oversight, and finally evaluate the usage and effectiveness of inspection checklists. Specifically, the inspectorate staff survey helped evaluate the following CFG Performance Indicators: Cooperation Barometer and Number of inspections based on risk assessments. Inspectorate Staff Questionnaire is provided in Annex 3.In total 111 inspectors were interviewed, averaging 14 respondents per municipality. Table 3. Interviews, region by inspectorate

East Serbia Sumadija and West Serbia

Vojvodina South Serbia

Inspectorate Pirot Zaj

ečar Čačak Kragujevac Sabac Sombo

r Nis Vranje

Total

Market 3 3 4 3 3 3 13 3 35Labor 2 2 3 5 5 3 9 3 32Sanitary 3 0 4 2 2 0 7 1 19Phytosanitary 0 0 1 1 0 0 2 1 5

Agriculture 0 0 2 2 0 0 0 1 5

21

Other 2 4 1 0 3 5 0 0 15Total 10 9 15 13 13 11 31 9 111

Serbian Citizens Focus Group DiscussionsFGDs were organized with citizens of each selected municipality in order to identify supplementary qualitative explanations related to information gathered through the first two (quantitative) tools. FGDs have enabled drawing out of interesting disaggregation of qualitative data to provide more in-depth information of core themes tackled by the Baseline Evaluation. Within the FGDs, the participants were asked about their perception of entrepreneurship, the state’s attitude towards entrepreneurship, and division of responsibility between the state and the economy. More specifically, the FGDs provided information needed for assessment of the following indicators: Cooperation Barometer and Percentage of stakeholders with improved opinions on entrepreneurship. FGD questionnaire is available in Annex 4.Table 4. Focus Group Discussion ScheduleRegion East Serbia Sumadija and West Serbia Vojvodi

naSouth Serbia

Municipality Pirot Zajecar Čačak Kragujevac

Sabac Sombor Nis Vranje

Date July 27 July 25 Aug 7 Aug 9 July 31 Aug 2 Aug 09 Aug 07

Number of participants 7 6 7 7 7 6 6 6

Post-Fieldwork ActivitiesUpon completion of the data collection effort, a careful and systematic process to data entry commenced and safe data storage was ensured. Enumerators were trained for systematic data entry and their work on the respective task was closely supervised by CEVES’ project lead and CFG Baseline Evaluation Coordinator. Every activity in the post-fieldwork process was double-checked. All the hard-copies of filled questionnaires were securely kept, filed and then stored at the CFG Belgrade office.

BASELINE LIMITATIONS & CHALLENGESAs with all evaluations, several limitations and challenges emerged during the course of the field work. The baseline team made every effort to address the limitations as they presented themselves and to maintain best practices in identifying appropriate solutions.

Summer holiday season : The field team faced various logistical challenges related to the summer holiday travel season. For both inspectors and businesses, there was a reduction in the number of available stakeholders to interview. This affected the number of interviews with inspectors, in particular. Certain inspectorates only consisted of 1 or 2 inspectors, such

22

as agricultural, thus a reduction of even one inspector had a significant impact.

Self-selection bias : The risk of self-selection is a result of the sampling design and is most likely to influence the business sample. The business sample was determined at random: as such, firms were able to reject participation in the survey. There is a viable argument of self-selection for firms which did not operate in line within established regulations or whose financial health was in question and were probably less likely to accept to take part in interviews. Secondly, the random sampling favored micro firms as they are more readily available to approach for interviews; larger firms, where multiple divisions are responsible for management, finances, administration posed a challenge in approaching in an ad hoc fashion.

Intimidation bias : Inspectorate staff ran the risk of bias and lack of confidentiality by the simple nature of working in shared rooms and buildings. The enumerator team encountered situations where inspectors did not want to participate in interviews due to concerns over perceptions within the office. To reduce this risk, enumerators where trained to provide clear guidance of the Baseline confidentiality requirements, including but not limited to conducting one-on-one interviews in private, closed door offices.

Field Research Tool 2: Inspectorate Staff SurveyThe aim of the Inspectorate Staff Survey was to assess the level and effectiveness of preventive measures taken by inspections, to evaluate the use of risk analyses in creating annual visit plans as well as the quality of undertaken methodologies for conducting risk analyses, determine the strengths and weaknesses inspectors experience in inspection processes and how these have changed since the implementation of the new legislation on inspection oversight, and finally evaluate the usage and effectiveness of inspection checklists. Specifically, the Inspectorate Staff Survey helped evaluate the

FINDINGSThis chapter presents the evaluation findings for each of the main evaluation segments – (i) business governance, (ii) inspections oversight experience, (iii) business financing and financial management, and (iv) public perception about entrepreneurship. Each of these main evaluation segments is described and discussed in separate corresponding section. For ease of reference, CFG performance indicators are presented at the end of each corresponding section. The high-level outcome indicator – cooperation barometer, is presented in final section (v), as the final synthesis of the all previous sectional data.

Business Governance section outlines findings related to the policies, procedures and management processes that set the way that the organisation's business is run. Focus of this section is on the overall

23

capacity of businesses to manage regulatory requirements, particularly through self-assessment processes. Self-assessment processes are means to increase awareness about regulatory requirements and to help SMEs reach a higher level of inspection compliance. Business survey is key data source for findings that are presented in this section.

Inspections section discusses findings relates to inspection experience, from two different perspectives. Inspector perspective covers their impressions regarding effectiveness of planning process, importance and reliability of risk assessments, and usefulness and usability of checklists. SMEs perspective refers to the experience of firms with different types of inspections, especially in the light of the new umbrella Law on Inspections Oversight. In addition, both perspectives provide insights regarding level of cooperation between businesses and inspections. Both business and inspector surveys are equally important data source for findings that are presented in this section.

Business Financing section provides findings on SMEs access to sources of finance, as well as on SMEs’ future financial and investments plans. Except well-known fact that Serbian SMEs are constrained by lack of external finance, this section also focuses on examination of presence and level of distrust and scepticism among business owners toward obtaining outside capital, as a possible important determinant of low level of external financing. Business survey is key data source for findings that are presented in this section.

Public Perception on Entrepreneurship section gives insight into publics’ opinion on different topics that are important for building of healthy business environment. These topics cover understanding of entrepreneurship concept, entrepreneurs’ social status, desirability of entrepreneurs’ career, relationship between entrepreneurs and authorities, and contribution of entrepreneurship to economic and overall modern society development. FGDs are key data source for findings that are presented in this section.

Cooperation Barometer Indicator section is synthesis of the all previous sectional data that are important for cooperation between stakeholders in one business community. This section presents high-level outcome indicator that measures level of cooperation between CFG stakeholders in the Government of Serbia, private sector and public at large. All data sources (SME survey, Inspector survey, FGDs) have been used to calculate this indicator.

Before evaluation findings are presented, business and inspector demographic data will be described and discussed, in order to better understand the population characteristics and structure.

Business demographic dataThe business survey was conducted with 797 businesses throughout eight municipalities in Serbia. The focus of the business survey was to detail firm experience in the corporate governance, inspection oversight, and access to finance. Gender structure of respondents has been equally distributed between men and women – this also applies to municipalities, with an exception of Vranje and Zajecar, in favour of men executives. However, gender structure is changing, in favour of men executives, as firms’ size grows. Women were respondents in 50% of micro firms with less than 5 employees – but in micro firms with more than 5

24

employees, only 35.6% of respondents were women. That share continues to drop, as size continues to grow – women make up 30.4% of respondents in small, 28.6% in medium, and 0% in large firms (only 2 large firms have been interviewed).Majority of the surveyed companies are entrepreneurs (82.8%), operating in services or retail/wholesale sector (94% of surveyed firms operate in these two sectors). However, as expected, larger firms tend to be business organizations and industry as main economic activity is much more frequent at small, medium and large firms.Almost half (48%) of surveyed firms has been established after 2010, 29% in period from the start of democratic changes (2000) until strike of the economic crisis (2009), while remaining has been established before 2000.Similar to overall structure of entire Serbia’s economy, vast majority of firms (91%) employed between 0 and 9 employees, with an average of 7 employees and standard deviation of 51. Average number of employees differs between municipalities, ranging from 3 in Sabac to 20 in Vranje. However, difference in average is a determinant of presence of large companies in population – size of the median surveyed companies is same across all municipalities.Only 5.6% of firms have been exporting during previous year, share comparable to overall Serbia’s picture. Exporting is clearly correlated with size of the firms, with higher probability of export at larger firms. In average, exporters are larger than non-exporters. Average number of employees at exporters is 64 (median 6), while same average at non-exporters is 4 (median 2). In addition, majority of exporters are business organization, and almost 40% of them belong to industry sector. Relatively high presence of firms from retail and wholesale sector among exporters is owed to the fact that those firms are represented to a greater extent in a sample. Also, four of surveyed municipalities are border municipalities, and export of services and cross-border trade in such municipalities tend to be higher.It is worth noting that in all municipalities besides Pirot (24.5%), less than 15% of surveyed businesses were members of a business association – with both absolute (1) and relative (1%) minimum in Sabac. Larger firms tend to be a part of business associations – 100% of large firms are members, 50% of medium, and 33% of small. On the other side, only 6% of micro firms with less than 5 employees were members of some business association.

25

Table 5 below provides further business demographic data.Table 5. Business Demographic Data

Business Demographic Data Total Sombor Cacak Kragujevac

Sabac Nis Piro

tVranj

eZajec

ar

Gender of respondent (%) (B1) 797 responsesMale 53.5 50.0 50.0 55.7 51.

147.

751.

162.5 60.2

Female 46.5 50.0 50.0 44.3 48.9

52.3

48.9

37.5 39.8Are you registered as a business organization or as an entrepreneur? (%) (B2) 797

responsesBusiness organization (%) 14.6 19.8 15.0 9.8 10.9

10.1

21.3

12.5 19.3Entrepreneur 82.8 78.1 83.0 89.3 88.

083.

577.

780.2 80.7

Other 2.6 2.1 2.0 0.8 1.1 6.4 1.1 7.3 0.0In which year was your business established? (%) (B3) 771 responses<1990 5.3 3.4 5.3 5.1 6.8 8.3 6.4 2.1 4.71990-1999 17.1 13.5 20.0 23.1 14.

814.

719.

110.6 20.0

2000-2004 13.5 14.6 20.0 7.7 14.8

11.0

12.8

11.7 17.62005-2009 16.1 29.2 8.4 8.5 11.

415.

620.

218.1 20.0

2010-2014 22.6 21.3 20.0 23.9 22.7

22.9

22.3

30.9 15.3>2015 25.4 18.0 26.3 31.6 29.

527.

519.

126.6 22.4

What is the business sector you predominantly / mainly operate within? (%) (B4)

795 responsesServices 45.2 49.5 35.4 52.5 47.

833.

051.

143.8 48.9

Construction 0.4 0.0 0.0 0.8 1.1 0.0 0.0 0.0 1.1Agriculture 0.3 1.1 0.0 0.0 1.1 0.0 0.0 0.0 0.0Industry 4.8 5.3 3.0 4.9 3.3 8.3 5.3 6.3 1.1Retail / Wholesale 49.4 44.2 61.6 41.8 46.

758.

743.

650.0 48.9

Approximately, how many people do you currently employ? (B5) 797 responsesTotal # of employees 5,876 689 545 475 300 45

973

81,89

7773

Female (%) 50 42 54 49 62 43 48 61 32Average 7 7 5 4 3 4 8 20 9SD 51 20 13 7 4 11 25 135 38Median 2 2 2 2 2 2 3 2 2Size class (% of firms, by # of employees) (B5) 797 responses0-1 33.0 34.4 35.0 36.1 35.

939.

427.

731.3 21.6

2-9 58.0 53.1 55.0 56.6 57.6

53.2

57.4

64.6 68.210-19 5.3 6.3 5.0 3.3 5.4 4.6 10.

61.0 6.8

20-49 1.8 3.1 3.0 2.5 1.1 1.8 2.1 0.0 0.050-249 1.8 3.1 2.0 1.6 0.0 0.9 2.1 2.1 2.3250+ 0.3 0.0 0.0 0.0 0.0 0.0 0.0 1.0 1.1Respondents that are members of a business association (%) (B6)

797 responsesMembers (#) 84 14 10 9 1 11 23 7 9Members (% of total) 10.5 14.6 10.0 7.4 1.1 10.

124.

57.3 10.2

Respondents that are exporters (% of total) (G9) 797 responses# of exporters (% of total) 5.6 8.3 7.0 4.1 3.3 4.6 4.3 8.3 5.7

Total observations 797 96 100 122 92 109

94 96 88

26

Inspector demographic dataThe inspector survey was conducted with 111 inspectors throughout eight municipalities in Serbia. The focus of the inspector survey was to detail inspector experience in the planning process, risk assessment, checklists and cooperation with businesses. Gender structure of respondents has been equally distributed between men and women – ranging between 40% and 60%, with an exception of Vranje (33% of female inspectors) and Zajecar (67% of female inspectors). Table6 below provides further inspector demographic data.Table 6. Inspector Demographic Data

Inspector Demographic Data Total Somb

orCaca

kKraguje

vacSabac Nis Pirot Vra

njeZajecar

Gender of respondents (A7) 111 responsesFemales (% of total) 51 55 60 62 62 42 40 33 67Which inspectorate do you work for? (% of total) (X1) 111 responsesMarket 31.5 27.3 26.7 23.1 23.

141.

930.

033.

333.

3Labor 28.8 27.3 20.0 38.5 38.5

29.0

20.0

33.3

22.2Sanitary 17.1 0.0 26.7 15.4 15.

422.

630.

011.

10.0

Environment 4.5 9.1 6.7 0.0 15.4

0.0 0.0 0.0 11.1Phytosanitary 4.5 0.0 6.7 7.7 0.0 6.5 0.0 11.

10.0

Agriculture 4.5 0.0 13.3 15.4 0.0 0.0 0.0 11.1

0.0Veterinary 1.8 18.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 7.2 18.2 0.0 0.0 7.7 0.0 20.

00.0 33.

3Approximately how many unique inspections did you personally conducted in the past year? (X2)

111 responsesTotal 21,1

092,55

23,06

82,820 3,3

155,132

1,792

1,419

1,011Average 190 232 205 217 255 166 179 15

8112

SD 136 144 150 118 170 125 110 84 98Did you receive any training on the implementation of inspections oversight? (%) (X3)

111 responsesYes 70.3 45.5 53.3 76.9 76.

990.

370.

055.

655.

6If you received a training, did this training improve your ability to conduct inspections? (%) (X4)

78 responsesYes 84.6 80.0 100.

080.0 90.

078.

671.

410

0.0100

.0Have you conducted any preventative inspections in the past year? (X5; X6) 111 responsesYes (%) 49 45 60 62 46 42 60 56 22

Average # of preventive inspections 25 7 11 51 35 19 41 15 5SD 42 3 8 64 52 18 66 15 1Did you conduct any other types of preventative oversight activities in the past year? (%) If yes, what types and how many? (X7; X8)

111 responses

Yes (%) 59.5 63.6 33.3 61.5 61.5

67.7

50.0

66.7

66.7Average (if yes) 13.2 15.6 8.0 18.5 7.8 12.

431.

811.

53.7

SD 14.4 16.8 3.1 14.8 9.0 11.5

25.8

5.0 3.0o/w Advisory (planned) (% of total prev) activities)

37 17 73 22 53 53 26 41 14o/w Advisory (requested) (% of total prev) activities)

26 6 28 45 40 31 4 22 73o/w Educational activities (% of total prev) activities)

37 78 0 34 6 16 70 38 14Has the overall inspection process been simplified and shortened in the last year? (%) (X9)

111 responsesSimplified 14 27 0 8 8 16 20 22 11

Shortened 6 0 0 0 8 10 20 11 0Both 10 9 13 15 0 13 10 11 0Neither 70 64 87 77 85 61 50 56 89

27

Total observations 111 11 15 13 13 31 10 9 9Market, labor and sanitary inspectors comprises two-thirds of all surveyed inspectors. Market and labor inspections are the ones with the highest number of inspectors, so it is expected that share of respondents from these inspectorates is in range 50%-70% in majority of municipalities. Environment, phytosanitary and agriculture inspectors are represented with 5% of inspectors each.Surveyed inspectors have conducted 21,109 inspections during last year, averaging 190 per inspector, with standard deviation of 136. One of the main criteria for conducting interviews was that inspector was active in the field during observed year and, therefore, minimum number of conducted inspections per inspector was 10. On average, the highest number (240-280) of inspections was conducted by labor, sanitary and phytosanitary inspections, while the lowest average number of inspections (80) was in market inspectorate. From the point of view of municipalities, the highest workload per inspector was in Sabac (255), while the lowest was in Zajecar (112).Almost 60% of inspectors stated that they have both received training on the implementation of inspections oversight and that training has improved their abilities to conduct inspections. Thirty percent (30%) of inspectors were not covered by training on implementation of new law, while vast majority (85%) of those who were covered (70%) stated that they have benefited from training. In three municipalities coverage of inspectors by trainings was full (100%), while the lowest coverage was in Pirot (71%).Half of inspectors have conducted preventive inspections during previous year. Zajecar is the only municipality with share of inspectors with preventive inspections below 25%, while in remaining municipalities share was between 40% and 60%. Average number of preventive inspections was 25 (standard deviation 49), ranging from 5 in Zajecar to 41 in Pirot and 51 in Kragujevac. However, even though half of surveyed inspectors have conducted preventive inspections, those inspections have contributed to total number of inspections with only 6%. In addition, 60% of inspectors stated that they had other preventive activities (13 such activities in average). Same as distribution at preventive inspections, the highest average number was in Kragujevac and Pirot, while the lowest level was exhibited in Zajecar. Planned advisory and educational activities contributed to preventive activities with three-fourths, while remaining fourth belongs to requested advisory visits.Majority (70%) of inspectors consider that overall inspection process has not been simplified, nor shorted. That figure is above 50%, regardless of municipality, type of inspection, or training received.

28

BUSINESS GOVERNANCECorporate governance covers processes through which enterprises are managed and controlled. Well-established corporate governance contributes to efficiency of companies’ operations, improves access to capital, mitigate risks and protect company against mismanagement. It makes companies more accountable and transparent to banks and investors. Corporate governance also contributes to development by helping facilitate new investment, access to capital, access to information, and long-term sustainability for firms, leading to growth and development. In this section of the report, focus is on one segment of corporate governance – firms’ strategies and efforts to comply with regulative requirements, especially through self-assessments (SA) and preventive or advisory inspections. In addition, this section covers questions regarding firms’ past experience, as well as willingness to train its employees in order to improve financial management. Less than 15% of companies was aware that they can conduct a self-assessment, using publicly available checklists. Less than one-thirds of those who were aware have conducted at least one self-assessment during previous year. In average, those firms have conducted less than 5 self-assessments during previous year (standard deviation 9.6). Majority of self-assessments was equally distributed between tax, market and labor self-assessments. Table 7 below provides further business governance data.Table 7. Business Governance

Business Governance Total

Sombor Cacak

Kragujevac Sabac Nis Pirot Vranje Zajecar

Are you aware that you can conduct a self-assessment (%) (G1)       797 responses

Yes 14.6 15.6 9.0 7.4 14.1 12.8 18.1 21.9 20.5

No 85.4 84.4 91.0 92.6 85.9 87.2 81.9 78.1 79.5How many self-assessments (SA) did you conduct in the last year? (G2)     116 responsesFirms that have conducted SA (% of total)

4.6 6.3 3.0 0.8 4.3 4.6 7.4 7.3 4.5

Firms that have conducted SA (% of those aware)

31.9 40.0 33.3 11.1 30.8 35.7 41.2 33.3 22.2

Average per firm 4.5 9.3 22.0 3.0 1.3 1.4 1.6 1.7 1.5

SD 9.6 17.3 9.9 0.0 0.4 0.5 0.7 1.0 0.5Type of self-assessments (% of # of self-assessments) (G2)         37 responses

Tax 22.3 23.2 25.8 0.0 20.0 14.3 36.4 8.3 0.0

Market 21.7 23.2 24.2 66.7 0.0 28.6 0.0 8.3 33.3

Labor 25.9 25.0 25.8 33.3 0.0 28.6 18.2 41.7 33.3

Sanitary 7.2 21.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Phytosanitary 9.0 3.6 9.1 0.0 80.0 0.0 18.2 8.3 0.0

29

Agriculture 13.9 3.6 15.2 0.0 0.0 28.6 27.3 33.3 33.3

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Are you aware that you can request preventative / advisory assistance from any inspectorates? (%) (G3) 797 responses

Yes 24.6 25.0 16.0 11.5 22.8 22.0 34.0 33.3 37.5Have you requested at least one preventative activity in the last year? (G4)     797 responses

Yes 4.4 6.3 3.0 0.8 4.3 2.8 4.3 7.3 8.0Does your business have internal procedures that should ensure your compliance with the requirements posed by inspections? (G6) 797 responses

Yes 38.1 29.2 20.0 23.0 51.1 55.0 37.2 52.1 40.9Do you have an external professional assist with your business finances and/or planning? (G7) 797 responses

Yes 73.5 69.8 68.0 70.5 70.7 82.6 84.0 75.0 67.0Has anyone from your business participated in any training to develop financial management skills in the past year? (%) (F18) 797 responses

Yes 10.9 11.5 12.0 7.4 4.3 15.6 17.0 12.5 6.8Would you be interested in receiving financial management training? (%) (F19)     797 responses

Yes 38.4 33.3 34.0 28.7 32.6 45.9 45.7 43.8 45.5

Total observations 797 96 100 122 92 109 94 96 88

30

Exporters (29% aware, 46% of those conducted SA, 13% in total), member of business associations (31% aware, 42.5% of those conducted SA, 15% in total), as well as larger companies (100% of large and 29% of medium aware, 100% of those conducted SA), proved to be better informed, organized, and managed in this field, since higher percentage of those companies was aware that they can conduct self-assessment and have conducted self-assessment. The lowest percentage of aware companies (7.4%), as well as those who have conducted assessments (31% of those aware) was in Kragujevac – in total, less than 1% of interviewed firms from this city have conducted self-assessments. In addition, only every fourth company was aware that they can request preventative / advisory assistance from any inspectorates. Out of those, only 18% of firms have requested preventive or advisory inspections (4.4% of all firms). Less than 40% of firms have stated that they have internal procedures that should ensure their compliance with the requirements posed by inspections.Almost three-fourths of surveyed companies have stated that they have an external professional assist with their business finances and/or planning. It is unexpectedly high share, and it is paradoxical that smaller firms have higher shares of such external professional assist. Explanation can be found in anecdotal evidence that these external professionals usually refer to outsourced accountants – that are not actively included in management of business finances and/or planning. They are usually only providing low-cost and basic services to small firms, while financial planning – if exist, is performed by the owner of micro company. Larger firms have professional finance departments, and that is usually the reason why they do not have external professional assist.Firms were not investing in professional education of financing management staff, since only 11% of firms have stated that someone from their firms has participated in any training to develop financial management skills. Since population of surveyed firms is mostly consisted from tiny companies (less than 5 employees), owners or relatives are those who are responsible for financial management and planning – but without formal training for that task. In addition to low number of those who attended trainings to develop financial management skills, only 38.4% of respondents would be interested to receive such training.

CFG Performance Indicator: Number of self-assessments conductedOnly 4.5% of surveyed firms conducted self-assessments, totalling 166 self-assessments (4.5 per firms).

31

INSPECTIONS – CHANGING REGULATION AND CHANGING BEHAVIOURSInspections reform was launched in Serbia through adoption of new Law on Inspection Oversight (2015) primarily aimed to find ways to improve effectiveness and efficiency of inspectorates, foster their cooperation, and underline the preventive role that inspectorates are playing in modern societies. The Law on Inspection Oversight was instrumental in transforming inspections into services to help businesses, rather than hinder their operation. The Law introduced a preventive and advisory role for inspectors when dealing with compliant firms, while empowering them to much more strictly discipline those who choose to remain outside the law and so do not contribute to public revenue. Prior to this reform, inspections in Serbia has been functioning without required cooperation or coordination and there was overlapping and duplication of functions among inspectorates, which represented a source of additional burdens and difficulties for business operations. In addition, the culture of inspections in Serbia was such that it was focused primarily on punishing businesses, rather than preventing violations and educating businesses on complying with regulations. Such attitude is still applicable to Serbian public administration as a whole, creating an environment that impedes and disables the economic growth and entrepreneurship. Thus inspections’ reform, encompassing around 6000 inspectors in 40 inspections of 13 line ministries served as an example of public services and public officials’ transformation into services and people implementing a culture of cooperation, fairness and compliance for the greater benefits of the society. CFGs interventions with the four inspectorates – Agriculture, Sanitary, Market Surveillance and Labor, thus is to achieve a higher level of compliance of businesses, through cooperation between the regulators and businesses and through support and promotion of compliance instead of focusing on non-compliance and repressive measures. Increasing inspection efficiency is another focus of the CFG project’s support to Serbian Inspectorates. One of the unintended consequences of the Law on Inspection Oversight was the transfer of work requirements from businesses to inspectors, as it relates to inspections; enhancing efficiency in the inspections process would reduce the workloads most inspectors’ experience, and the only meaningful way to enhance efficiency is to fully apply risk based inspections.

The CFG Baseline Survey identified risk assessments/ the planning process and checklist relevance and utilization as key elements of a functional risk management. Inspections’ Survey focuses on assessment of impact of inspection reform on efficiency, effectiveness and level of preventive activities and cooperation of inspectorates. It measures and discusses adoption rate and usefulness of specific instruments introduced by new law, from the point of view of inspectors. These instruments are risk-based inspections, check lists, announcements and warrants, and a range of preventive measures, such as advisory visits, as well as the attitudes, or rather the change of attitudes and willingness for cooperation of businesses, as perceived by inspectors. In addition, inspection experience is also assessed from the point of view of businesses, in order to understand impact of new law on their day-to-day operations.

32

The results of this section are presented below in details. For the purpose of this analysis, the findings will be discussed in both aggregate form, by inspectorate, as well as against inspectors who received training in the Law and those who did not. While these disaggregates do not change the nature of the CFG performance indicators, they do provide a level of granularity to improve project management. inspectors who were trained are having much better understanding of the new discourse introduce by the law; that advisory functions of the inspectors are rarely implemented; and that inspectors feel overwhelmed by their new duties, without being relieved from the “old way of doing things”. From the CFG’s programmatic point of view, this section provides arguments for more training of inspectors and an intensive promotion of the main concepts of the reform that aims to turn inspectors into advisors and supporters of business growth and regulatory compliance; to foster preventive and advisory roles of inspectors; and to assist inspectorates in full implementation of the risk management system that should provide a better work distribution and rationalize the use of inspectorates capacities.

Risk assessmentsOne of the major problems of inspections efficiency in Serbia was that inspectorates were focused on attempting to control all businesses without taking into consideration the risk of the particular business for the health, environment and society as a whole. Inspections in Serbia were not focused on high risk businesses that are unlikely to comply with regulations, thereby increasing administrative burden on those businesses that comply with regulations, resulting in reduced competitiveness.

Risk-based planning is now a compulsory activity, required for each inspectorate, as mandated by the Law. Currently, 84% of inspectors consider that their inspectorate conducts risk assessments to determine which businesses they should inspect. Weighted by number of inspections conducted by those inspectors, roughly 78% of inspections was conducted by inspectorates which conduct risk assessments. Inspectors were asked if their inspectorates utilized quantified data to determine risk as part of the planning process. Of those whose inspectors who reported their inspectorates conducted risk assessments, 53% stated that the risk analysis process used the correct criteria to identify business risk profiles. If three previously presented findings are intersected, it can be concluded that only 33% of inspectors consider that their inspectorates conduct risk assessments based on quantified data used in formulas and use proper and correct criteria to identify risk. The worst percentage was in Kragujevac, where only 15% of inspectors stated that their inspectorate conduct formula-based risk-assessments using correct criteria. The majority of inspectors (58%) stated that risk analysis has contributed to improvements in inspection planning. Additionally, just over half of inspectors (53%) reported that the overall planning process has been improved since the passage of the Law. These opinions, however, vary among municipalities. The lowest level of improvement in planning process was reported in Sombor (36%), while the highest levels were reported in Pirot (70%).

33

Related to the quality of planning and risk-assessments, majority of inspectors stated that they are increasingly inspecting more higher risk businesses, compared to last year. Also, almost half of the inspectors stated that they have experienced a reduction in the number of inspections conducted in the past year. However, reduction was not equally distributed among inspectorates, according to surveyed inspectors. As much as 75% of market inspectors stated that they had a reduction in number of inspections thanks to the new law, while that percentage among labor inspectors was only 12%.Issuance of warrants has generally improved cooperation between inspectors and businesses. It seems market inspection had the highest benefit of introduction of warrants, since 85% of surveyed inspectors stated that they are better received now, compared to previous years. In terms of distribution among municipalities, similar to opinion on planning process improvements, the highest share of those who benefited from introduction of warrants is in Pirot (90%), while the lowest number is in Sombor (27%).Error: Reference source not found below provides a full breakdown of risk planning components risk by municipality.

34

Table 8: Risk Planning Behavior (percentages)Risk Planning Total Somb

or Cacak Kragujevac Sabac Nis Pirot Vranje Zajeca

rDoes your inspectorate conduct risk assessments to determine which businesses you should inspect? (%) (Y1)

110 responses% of inspectors

(Yes)83.8 90.9 86.7 69.2 76.9 83.9 90.0 88.9 88.9

% of inspections (Yes)

78.4 96.9 83.7 64.5 61.4 81.3 94.4 78.9 65.4If Y1=yes, does the risk assessment use quantified data in some kind of formula to determine risk? (%) (Y2)

93 responsesYes 60.2 60.0 61.5 33.3 70.0 50.0 88.9 87.5 50.0

If Y1=yes, does the risk analysis use the correct criteria to identify business risk profiles? (%) (Y4)

93 responsesYes 52.7 70.0 30.8 33.3 60.0 53.8 44.4 75.0 62.5

If Y1=yes, has risk analysis contributed to improvements in inspection planning in the past year? (%) (Y5)

93 responsesBetter 58.1 40.0 38.5 66.7 50.0 73.1 66.7 62.5 50.0

Worse 4.3 10.0 7.7 11.1 0.0 0.0 0.0 0.0 12.5Same 37.6 50.0 53.8 22.2 50.0 26.9 33.3 37.5 37.5Do you find you are increasingly inspecting more higher risk businesses compared to last year? (%) (Y6)

93 responsesYes 59.1 40.0 61.5 77.8 50.0 46.2 77.8 87.5 62.5

Who determines which businesses you visit? (%) (Y7) 111 responsesRisk sector 2.7 0.0 0.0 7.7 0.0 6.5 0.0 0.0 0.0

Chief Inspector 77.5 72.7 66.7 69.2 100.0 87.1 80.0 77.8 44.4Inspector him/herself

17.1 18.2 33.3 23.1 0.0 6.5 20.0 11.1 44.4Does the issuance of warrants improve how you are received by businesses? (%) (Y8)

111 responsesYes 65.8 27.3 53.3 53.8 76.9 77.4 90.0 66.7 66.7

Have you experienced a reduction in the # of inspections conducted in the past year? (%) (Y9)

111 responsesYes 47.7 27.3 33.3 53.8 61.5 48.4 60.0 44.4 55.6

Have the inspections planning process improved in the last year? (% of total) (Y10)

111 responsesBetter 53.2 36.4 53.3 38.5 53.8 64.5 70.0 66.7 22.2

Worse 9.9 18.2 6.7 15.4 7.7 3.2 0.0 11.1 33.3Same 36.9 45.5 40.0 46.2 38.5 32.3 30.0 22.2 44.4

Check listsThe lack of formal procedures defined by previous law, led to the non-existence of formal compliance checklists, important for legal security and reducing the discretion of inspectors in interpreting requirements. Due to the non-existence of formal procedures, a number of inspections lack the obligation to conclude the inspections by a formal written document, which opens space for conducting more frequent inspections without formal record that the inspection has been carried out. New law has introduced changes in these areas, reflecting through mandatory use of check lists and delivery of formal and written conclusions to businesses.Two-thirds of inspectors consider that overall field efficiency has been improved through use of check lists – and this share is stable among different municipalities and inspections. Inspectors report they generally do not deviate from check lists, but if they do, deviation is usually minor, caused by incompleteness of check lists. Although inspectors find check lists useful and consider that they are able to provide useful inputs to their superiors that could influence the requirements on the checklist, there is no real internal review processes where they could provide a on quality of check lists.Table 9 below provides further details on checklist data.

35

Table 9. ChecklistsChecklists Total Somb

or Cacak Kragujevac Sabac Nis Pirot Vranj

eZajec

ar

Do checklists improve efficiency? (%) (Z1)111

responsesYes 67.6 63.6 66.7 53.8 61.5 74.2 90.0 66.7 55.6

How much do you deviate from the checklist? (%) (Z2)110

responsesNot at all 67.6 63.6 60.0 69.2 69.2 83.9 60.0 66.7 33.3Some, but not much 30.6 36.4 33.3 30.8 30.8 16.1 40.0 33.3 55.6Significantly 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1If you deviate, is it your experience that the requirements on the checklists are inadequate or incorrect? (%) (Z3)

35 responses

Incomplete 57.1 50.0 60.0 50.0 0.0 60.0 75.0 66.7 83.3Inaccurate 11.4 25.0 0.0 0.0 25.0 20.0 0.0 33.3 0.0Both 31.4 25.0 40.0 50.0 75.0 20.0 25.0 0.0 16.7Is there an internal review process where you could provide feedback on checklist quality? (%) (Z4)

111 responses

Yes 21.6 9.1 6.7 23.1 15.4 19.4 50.0 33.3 33.3Are you able to provide inputs to your superiors which influence the requirements on the checklist? (%)

111 responses

Yes 73.9 81.8 86.7 76.9 53.8 71.0 90.0 66.7 66.7

Has the field inspection process become more efficient in the last year? (%) (Z6)111

responsesBetter 48.6 0.0 33.3 53.8 46.2 74.2 60.0 77.8 0.0Worse 14.4 9.1 26.7 7.7 15.4 9.7 10.0 0.0 44.4Same 36.9 90.9 40.0 38.5 38.5 16.1 30.0 22.2 55.6Have enhanced inspections procedures increased the total amount of work you must do? (%) (Z7)

111 responses

Yes 82.0 90.9 100.0 76.9 84.6 80.6 60.0 55.6 100.0Have small businesses responded more favorably to the inspection process in the past year? (%) (Z8)

111 responses

Yes 50.5 27.3 40.0 46.2 46.2 64.5 60.0 66.7 33.3Did your inspectorate conduct campaigns to inform businesses on the inspection oversight process? (%) (Z9)

111 responses

Yes 62.2 54.5 26.7 53.8 53.8 90.3 80.0 66.7 33.3Do you feel that businesses are more cooperative in engaging in the inspection oversight process? (%) (Z10)

111 responses

Yes 52.3 18.2 53.3 61.5 38.5 58.1 70.0 55.6 55.6

Vast majority of inspectors (82%), regardless of municipality or inspectorate, stated that enhanced inspections procedures increased the total amount of work they must do – especially paperwork and bureaucratic work. Therefore, despite they find checklists and warrants useful in their field work, majority of inspectors consider that overall efficiency of field inspections has stayed the same (37%) or worsened (14%), compared to previous year.Time and resources to invest efforts in communicating the requirements to businesses, in a simple and comprehensive way, was an issue for inspectorates during previous years. Currently, 62% of inspectors stated that their inspectorates have conducted some sort of campaigns or activities to inform businesses on the inspection oversight process. However, coverage and impact of such campaigns has not been assessed.In general, half of surveyed inspectors consider that businesses – especially SMEs -- are more cooperative in engaging in the inspection oversight process. Inspectors’ impressions on that topic vary among municipalities. The most negative impressions in terms of improvement of cooperation with businesses is noticed in Sombor, where only 18% of inspectors stated that cooperation is now

36

better. Opposite case is in Pirot, where 70% of inspectors noted that the level of cooperation is enhanced.

37

Training A key management finding from this Baseline effort is the impact training has on inspectors. Graph XX illustrates the significant difference in inspection efficiency between inspectors trained on the Law and its new requirements, and those inspectors with no training. Over half of trained inspectors (58%) reported improved efficiency in the inspection process compared to those with no formal training on the new requirements (27%).

When the data is reviewed by inspectorate and training experience, and against the components necessary to develop risk-based planning (Table XX), it is evident that there is a significant disconnect with the self-reported values provided above. Inspectors who received training are report higher levels of quantifiedTable XX : Components of risk-based planning, by inspectorate and training (percentages)

Market Labor Sanitary Agriculture OtherTraine

dNone Traine

dNone Traine

dNone Traine

dNone Traine

dNone

Inspectors who report using quantified data to determine business risk (Y2)50 33 71 86 67 50 60 33 71 67

Inspectors who report that risk analysis uses the correct criteria to determine business risk profiles (Y4)

42 50 64 42 53 0 80 67 71 50Inspectors who report the risk analysis improves the inspection planning process (Y5)

Better 67 33 71 71 60 0 40 67 43 33Worse 4 0 7 14 0 0 0 0 0 17Same 29 67 21 14 40 100 60 33 57 50

Observations

29 6 20 12 16 3 6 4 7 8

Furthermore, differences in experiences of trained and non-trained inspectors is significant when applied to the use of checklists. Nearly 60% of trained inspectors consider that overall field efficiency has been improved, while that percentage among non-trained is below 30%; the share of inspectors that consider that check lists improve efficiency is 19 pp higher among trained inspectors (73% vs 54%) on average. Table XX details this distribution by inspectorates. On the whole, trained inspectors were twice as likely as untrained inspectors to report improved field efficiency. The majority the trained inspectors did not deviate from the checklists, with 100% of Agriculture inspectors reporting the highest level of satisfaction in the quality of the checklists. The internal review process, systematically, requires attention for the two largest inspectorates in the sample cohort. Less than 20% of Market and Labor inspectors reported having any capabilities to contribute to the internal review process, irrespective of their level of training. Table XX : Checklist responses, by inspectorate and training (percentages)

38

Market Labor Sanitary Agriculture OtherTraine

dNone Traine

dNone Traine

dNone Traine

dNone Traine

dNone

Deviate from checklist (Z2)Not at all 75.9 83.3 75.0 50.0 56.3 66.7 100.0 50.0 85.7 25.0

Some 24.1 16.7 25.0 50.0 43.8 0.0 0.0 50.0 14.3 62.5Significan

tly0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5

Checklist requirements (Z3)Incomple

te71.4 100.0 60.0 33.3 42.9 - - 50.0 100.0 66.7

Inaccurate

0.0 0.0 60.0 16.7 14.3 - - 0.0 0.0 16.7

Both 28.6 0.0 20.0 50.0 42.9 - - 50.0 0.0 16.7Internal review process (Z4)

13.8 0.0 15.0 16.7 43.8 33.3 33.3 0.0 28.6 37.5Efficiency of field inspection (Z6)

Better 72.4 50.0 60.0 33.3 31.3 0.0 66.7 25.0 42.9 12.5Worse 6.9 16.7 5.0 25.0 25.0 33.3 0.0 25.0 0.0 37.5Same 20.7 33.3 35.0 41.7 43.8 66.7 33.3 50.0 57.1 50.0

Observations 29 6 20 12 16 3 6 4 7 8

Lastly, Table XX provides a breakout, in percentages, of the preventative activities trained and untrained inspectors conducted in the prior year. At first glance, it is unexpected that untrained inspectors would report higher levels of preventative inspections. It would appear that training was the antithesis to enhancing preventative oversight. While the scope of the study did not provide for a qualitative response to this series of questions, the field research team believes these findings reflect that fact that trained inspectors now have the knowledge to properly define, and thus conduct, true preventative activities. These conclusions are drawn, in part, from the Baseline business data, where only 1.7% of businesses experienced any such preventative activities, and findings from 2017 USAID BEP Outcome Study qualitative inspector data. Table XX : Preventative activities, by inspectorate and training (percentages)

Market Labor Sanitary Agriculture OtherTraine

dNone Traine

dNone Traine

dNone Traine

dNone Traine

dNone

Conduct preventative oversight (X5:X6)Yes 28 83 55 42 63 100 33 25 43 75Other preventative (X7:X8)Yes 48.3 66.7 50.0 58.3 93.8 66.7 50.0 25.0 42.9 87.5Advisory

(planned) 81 64 0 10 30 85 71 100 11 32

Advisory (requeste

d)

17 0 65 31 32 15 29 0 7 18

Educational

1 36 35 60 38 0 0 0 82 50

Observations

29 6 20 12 16 3 6 4 7 8

39

40

FINANCINGUnderstanding the drivers of both supply of financial products and demand for better financing options is a corner stone issue for CFG programming. Seven out of ten businesses in Serbia did not use any source of external sources of financing, as they consider that they have no need for a loan or that interest rates were not favourable. Access is traditionally weakest among the sole proprietors and micro firms, women-owned SMEs and SMEs in some key sectors, such as agriculture, despite these groups being viable, profitable borrowers and offer great potential for contributing to economic development. Weak access to finance and its impact on SME growth may have implications as Serbia continues to move through an economic recovery and looks to future development opportunities. SMEs are hindered in their competitiveness, are not growing as fast as they could, and the larger impacts this has on employment and jobs which Serbia urgently needs. Without a better understanding of how demand for and access to finance is experienced by business, the lack of SMEs growth undermine macroeconomic stability and counter the gains being made with painful fiscal reforms.

While in previous sections of this report municipalities were used to disaggregate and frame the data, the following section’s data is analysed according to company size – since the average could be more influenced by sample composition than by underlying trend. Company size is determined solely by number of employees, with the traditional micro and small disaggregates further broken down into micro (0-1 employee), micro (2-4 employees), micro (5-9 employees), small (10-19 employees), small (20-49 employees), and medium and large firms aggregated into one statistic.

Business FinancingTable 11 details business behaviors regarding investment and financing in the past year. On the whole, approximately three out of ten businesses reported that they use external sources of finances; however, the distribution of external financing clearly favors larger firms. Fewer than 19% of sole proprietors accessed external sources of finance in the past year. Nearly 100% of all firms sampled relied on traditional banking to finance their business needs last year. Equity financing, which was defined for this study as any form of business sharing such as taking on a partner or issuing formal equity shares, accounted for only 2% of financing. Of interest here is that micro firms appear to have some degree of appetite for equity financing. Micro firms with 2-4 employees had a small share of equity activity, while medium and large firms were no more enthusiastic about equity financing at 8% of the sampled population.

The average amounts of borrowing are usually small, and little is used for investment. The majority of external financing was used to purchase inventories and fixed assets; this was not systematically different irrespective of firm size. Smaller firms also utilized their external financing to smooth the financial burdens in their personal expenditures, but this behaviour accounts for less than 18% in the entire sample. New business opportunities did not feature heavily as a prime motivation for taking on debt, with only 7% of businesses reporting the opportunity to grow a new business.

41

Table 8. Businesses’ financing (percentages)

TotalMicro (0-1)

Micro(2-4)

Micro(5-9)

Small(10-19)

Small+ (20-49)

M&L(50+)

Today, does your business carry any external source of finance? (F1)Yes (%) 28.4 18.7 28.4 31.1 47.7 68.2 63.2If yes, what type of external source of finance did you use in the last year? (F2)Bank 97.4 100.0 95.3 100.0 100.0 100.0 91.7Equity 2.1 0.0 3.7 0.0 0.0 0.0 8.3Both 0.4 0.0 0.9 0.0 0.0 0.0 0.0If you have used bank loans, what did you primarily need to borrow money for? (up to two answers per firm that used bank loan) (F3)Personal / Household expenses 18.1 26.0 18.6 10.7 19.0 13.3 0.0Purchase inventories / fixed assets 72.2 74.0 74.5 64.3 76.2 60.0 72.7New business opportunity 7.0 8.0 6.9 7.1 0.0 6.7 18.2Expansion of existing business 17.2 10.0 14.7 14.3 4.8 53.3 54.5If you have used bank loans, what type of banking products did you receive in the last year? (multiple response) (F4)Personal / business loan 43.6 48.0 52.0 39.3 38.1 6.7 18.2Overdraft 14.1 8.0 14.7 17.9 23.8 13.3 9.1Short-term loan (up to 2 years) 46.3 42.0 44.1 32.1 66.7 66.7 54.5Long-term loan (2-5 years) 22.5 30.0 14.7 39.3 9.5 26.7 36.4Has your business made any request for external non-banking financing in the past year? (F7)Yes 6.2 4.5 6.6 6.7 2.3 13.6 21.1No 93.8 95.5 93.4 93.3 97.7 86.4 78.9

Future investment expectationThe majority for firms, irrespective of size, have a need to invest in their firms in the coming year. As firm size grows, so too does the need to invest. The smallest firms report a 54% need to invest, with 90% of medium and large firms reporting next year’s investment needs. Following this trend smaller firms have smaller investment needs; the majority of micro and small firms would look to invest less than €25,000, with a third of medium and large firms looking to invest over 1 million euros.

Table 12, below, provides a breakout of future investment expectations by firm size and the euro values these firms would anticipate looking to invest.

Table 12. Future investment expectations (percentages)

TotalMicro (0-1)

Micro(2-4)

Micro(5-9)

Small(10-19)

Small+ (20-49)

M&L(50+)

Today, do you have a need to invest in your firm? (%) (F11)Yes 59.7 53.6 56.8 68.9 81.4 77.3 89.5If yes, how much would you want to invest? (%) (F12)<25k € 69.9 84.0 75.7 58.8 51.4 5.9 5.925-99k € 17.8 10.3 17.2 25.0 27.0 35.3 29.4100-249k € 7.7 3.8 5.0 11.8 10.8 41.2 23.5250-1M € 2.4 1.3 1.7 4.4 2.7 5.9 11.81M+ € 2.2 0.6 0.4 0.0 8.1 11.8 29.4

42

Lastly, as CFG looks to change firm behaviour around financing, graph X was generated to determine if the age of the firm would help determine the risk willingness of a firm. The graph plots the amount of investment desired by the period in which the firm was established. The firms were allocated to four time periods in Serbia’s recent history (a) the socialist economy/ war period (pre-1996), (b) the period where economy began to open to private sector (1997-2008), (c) the post-financial crisis period (2009-2016) and lastly (d) the most recent economic growth period of 2017 and 2018.

As shown in the table data, demand for small scale investment is universal in Serbia, with the youngest firms showing the highest appetite for small incremental investment, in the form of inventory (see Table 11). This finding is reinforced by other research which suggests the development of a micro-loan environment would enable a large share of firms in Serbia. Interest in mid-size investment, between 100-250k euros, is largely driven by demand from bigger small and medium size firms. Regarding behavioural trends, the oldest firms, those which have weathered the economic and political storms of the last three decades, show the most diversity in their investment profiles where as firms born out of the financial crisis appear to maintain a lower risk profile, demonstrating an appetite only for smaller scale investment.

CFG Performance Indicator: Percentage of SMEs using external sources of financeLess than a third (28%) of SMEs used external sources of finance in the past year.

Individual versus Societal BenefitsParticipants from all municipalities were able to provide at least a basic definition of an entrepreneur - a person who sets up a business, taking on financial risks in the hope of profit. The most frequently used words or syntax were related to independence, effort, risk and profit / benefit. However, it should be noted that broader concept of entrepreneurship were rarely mentioned or discussed. Such broader concept implies creation of new products, through innovation, inventions and new technology, as well as growth and development, from a micro firm to larger enterprise. Therefore, participants’ understanding of entrepreneurship was

43

limited to individual benefits gained rather than a richer definition which would have included societal gains, such as development of new products/services and entrepreneurship as a driver of economic growth. This could be summarized as participants were more likely to talk about necessity than opportunity entrepreneurship.The results show how the understanding of entrepreneurs is mostly related to the individual aspects that entrepreneurs can achieve: independence in business, profit, venture, but also risk taking. A smaller number of people associated entrepreneurs with spill-over effects to the whole society - progress and growth, innovation and other aspects of business in a wider sense. Graph XX provides a relative, visual representation where blue color blocks are associated with individual benefits, while purple color blocks represent societal benefits.

Participants’ opinions on entrepreneurs’ social status and desirability of such career were favourable. Two-thirds of participants’ statements on this topic were positive – which means that they would support their friends or family members to start entrepreneurial career, or they would start one on their own. The following quotes demonstrate the range of responses, from absolute to conditional support:

~ Every parent’s dream is that his/her child be independent, ambitious and successful ~

~ I would support my child to be an entrepreneur, if we are able to accumulate minimal amount of initial resources, that are critical ~

Only 13% of statements could be considered as clearly negative, with the remaining opinions looked to abstain from a strong position all together:

44

~ I would not recommend that [entrepreneurship] neither to my child nor to anyone else ~

~ It is nice to be an entrepreneur, but only if you are successful and that is very hard to achieve ~

Fear of failure, insufficient motivation and education, as well as low confidence in the rule of law, influenced the opinions for some participants who had never engaged in entrepreneurship. These fears fed into pre- established negative opinions on the notion of entrepreneurs and entrepreneurship.

45

State versus Market EconomiesWhen it comes to decision between job in public sector or starting an entrepreneurial career / job at entrepreneur, opinions are clearly divided. Half of the people consider that state job – as one with less risk, stable and regular wage – is more attractive. People that prefer state job for them or their family tend to be older than the other half, that prefer entrepreneurship as a career path. That other half is aware that entrepreneurship is riskier, but potential benefits – both social and material – are greater than in static public sector. Some participant even stated that the best option is that one spouse should be employed in public sector, while the other one should build his or her career in private sector. In any case, the key word is security. Those participants who prefer a state-owned company did so as they see a secure income, with a regular, albeit small, pay check. Earning level was not a key factor. On the other hand, participants who prefered to run their own businesses expressed security in their ability to work for themselves. These respondents expressed an understanding that sometimes you earn less, sometimes more, but at least you always for yourself. This sense of ownership was the motivating factor.

Entrepreneurship, Governance and SocietyRegarding entrepreneur’s reputation in today’s society, compared a hypothetical professor’s reputation, for example, or related to business sector in which he operates, majority out of 120 statements were favourable. Majority of participant stated that a diploma for the business sector was not crucial for someone’s reputation. Respondents indicated that obeying the law and good quality in relationships with employees and other stakeholders were critical factors that define someone’s reputation. However, even if not clearly stated, such strong linkage between entrepreneurs’ reputation, obeying the law, and relationship with stakeholders, could indicate underlying trend – that participants consider that there are many of those entrepreneurs who do not obey the law and do not provide decent employment to their employees.As much as 97% of statements on state support to entrepreneurship indicate that state authorities should support entrepreneurship. Majority of participant stated that state authorities should support entrepreneurs through direct financial instruments – either subsidies or tax reliefs. Third most frequent mean of support was strengthening rule of law and equal rules for all participants. Educational support – especially one through information dissemination and trainings, was not frequently mentioned. However, when participants were asked if they would pick direct financial support or valuable information and training on specific business sector, in the same amount as financial support, they would opt for educational aspect – even if they did not mention or recognize it as important in their original statements.The vast majority of participants consider that entrepreneurship has an important role in the development of a modern society. However, majority of statements indicated that participants considered entrepreneurship important only because entrepreneurs generate jobs and pay taxes. Smaller number of participants considered that entrepreneurship was important because it offered new products

46

or services to society members, it creates independent, more resilient and active society and/or contributed to more positive economic outlook by providing positive examples to younger generations. A minority of negative attitudes were expressed for entrepreneurs who engage in illegal business, as well as the risk of inequalities in society. These participants can be those who have had bad experiences with their own entrepreneurial ventures, which have failed; or they are those who have a predominantly negative attitude, based on anecdotes, although they have never dealt with entrepreneurship.

47

CFG Performance Indicator: Percentage of stakeholders with improved opinions of entrepreneurshipOut of 314 assessed statements, 70% had favourable or affirmative connotation towards entrepreneurship – which included social status and reputation of an entrepreneur, desirability of such career, state support to entrepreneurship, and contribution of entrepreneurship to development of modern society.

COOPERATION BAROMETER -- HIGHEST LEVEL OUTCOME

CFG Performance Indicator: Cooperation barometerCooperation barometer is a high-level outcome indicator that measures level of cooperation between CFG stakeholders in the Government of Serbia, private sector and public at large. It is a composite index, ranging from 0 (min) to 100 (max), and consisting of three components (Business Survey Score, Inspector Survey Score, Public Engagement Score). Majority of the weight has been allocated to first two components -- the business and inspectorate experience, as it is impacted by CFG. Five questions were used to determine Business Survey Score, four to determine Inspector Survey Score, and one to determine Public Engagement Score.Value of cooperation barometer index is 54, with the lowest level of cooperation reported in Sombor and Sabac, and the highest level reported in Pirot, Vranje and Nis.Cooperation barometer index score, composition, and results per municipalities are shown in the table below.Table 9. Cooperation Barometer

Cooperation Barometer Total Sombor

Cacak

Kragujevac

Sabac Nis Pirot Vranj

eZajecar

Cooperation Barometer Index (2/5 A + 2/5 B + 1/5 C)/100 47.6 41.1 45.9 47.9 41.5 50.2 51.1 50.6 49.5

A. Business Survey Score (1/5 A1 + 1/5 A2 + 1/5 A3 + 1/5 A4 + 1/5 A5)

18.8 20.1 16.6 14.8 14.4 17.1 22.3 20.6 26.1

A1 % of firms who are members of a business association (B6)

10.5 14.6 10.0 7.4 1.1 10.1 24.5 7.3 10.2

A2 % of firms who received prior notice of last inspection visit (C4)

13.4 12.1 6.1 11.5 6.7 10.4 19.1 17.6 25.0

A3 % of firms conducting self-assessments (G2) 4.6 6.3 3.0 0.8 4.3 4.6 7.4 7.3 4.5A4 % of firms that requested at least one preventative visit in the last year (G4)

4.4 6.3 3.0 0.8 4.3 2.8 4.3 7.3 8.0

A5 % of firms who would consider utilizing external finance for their investment needs (F5)

61.0 61.5 61.0 53.3 55.4 57.8 56.4 63.5 83.0

B. Inspector Survey Score (1/2 B1 + 1/4 B2 + 1/4 B3)

65.0 46.4 59.6 74.4 56.7 71.5 69.2 68.4 65.3

B1 % of inspectors conducting preventative inspections and other activities (X5+X7)

74.8 63.6 73.3 84.6 69.2 77.4 70.0 77.8 77.8

B2 % of inspectors reporting the risk-based system leading to better inspections planning (Y5)

58.1 40.0 38.5 66.7 50.0 73.1 66.7 62.5 50.0

B3 % of inspectors who report more 52. 18.2 53.3 61.5 38.5 58.1 70.0 55.6 55.6

48

cooperation from businesses in the inspections process (Z10) 3C. Public Engagement Score (Rank Score)

70.4 72.7 77.2 61.4 65.1 73.5 72.5 75.0 64.5

49

ANNEXESANNEX 1: EVALUATION STATEMENT OF WORKThe purpose of this Scope of Work is to conduct a baseline evaluation of the CFG project implemented through Cardno Emerging Markets. The Subcontractor will conduct the required Baseline Evaluation, providing point estimates of key outcome level indicators -- CFG Performance Indicators (CFG PI), through face-to-face SME survey (600 SMEs), interviews with inspectorate staff (200 interviews), followed by computer-assisted web interviewing (CAWI) of all inspectors, and focus group discussions (8 focus groups) with citizens.In order to objectively assess CFG PI, Baseline Evaluation will employ a mixed methods approach, combining both quantitative and qualitative research. The assignment will be conducted through both desk and field research, in close cooperation with Cardno’s Baseline Evaluation Coordinator. Key deliverable will be the Baseline Evaluation Report, that will comprise the main findings of the desk and field research, detailed data analysis of all relevant data, both qualitative and quantitative, and visual presentations of data and graphical visualization of all research, in a line with USAID evaluation best practices for data quality. The Baseline Evaluation Report is expected to be up to 25 pages, excluding annexes with the entire baseline effort being conducted over a period of three months from July 9th – September 30th , 2018.The following presents the three key deliverables required for successful completion of this subcontract:Deliverable 1: Technical Approach, Methodology and Detailed Work PlanThe overall timeline for completing the evaluation is 11 weeks from the award date. During the initial phase, the detailed evaluation design and work plan will be submitted and finalized with CFG staff and consultants by the team leader and deputy team leader, with inputs from the baseline team members. During the initial phase, the team will conduct interviews with CFG staff and Belgrade based stakeholders and review CFG background documents and relevant literature in Belgrade. Once the work plan and evaluation design are approved, the team will travel to 8 municipalities and is expected to complete 600 SME interviews, 200 inspector interviews and 8 public engagement focus group discussions. During the design process, the evaluation team will coordinate with CFG to finalize the field site visit strategy.Deliverable 2: First draft reportAfter finalizing the evaluation work plan, the subcontractor will begin with piloting the baseline tools and enumerator training. Given the baseline time constraints, the subcontractor may consider breaking the baseline team into two sub-teams consisting of one senior team member, one junior team member and 3 enumerators. The teams will be led by the Team Leader and Deputy Team Leader respectively, or an previously agreed upon alternative. By dividing the team, the subcontractor will have more time to gather data in each municipality, conduct sufficient numbers of interviews and discussions, and travel to remote sites that are important for the baseline. Field site visits to all eight municipalities will be completed within four weeks, and the location and itinerary of site visits will be determined in consultation CFG.

50

Each evaluation team will meet at the end of the day to begin data entry and preliminary analysis, and team leaders will check in weekly to provide progress updates to the CFG Chief of Party or her designated representative.Following field visits, the team will return to Belgrade to compile and analyze data, prepare preliminary evaluation findings and conduct a de-brief with CFG. The Team Leader will produce the first draft of the evaluation report with inputs from the baseline senior advisors and field teams and submit it to CFG for review. Included with the draft report will be an excel file containing all the quantitative data entry and all hard copies of surveys collected during the field visits.Deliverable 3: Final reportAfter receiving USAID/Serbia and CFG’s comments and feedback on the first draft, the subcontractor will submit a revised draft final evaluation report to CFG. The subcontractor may need to conduct a final roundtable discussion with USAID and CFG in Belgrade, deliver any final presentations of the evaluation report that are agreed to in the work plan, and submit the final evaluation report once final comments and feedback are received from USAID/Serbia.

51

ANNEX 2: STATISTICAL ANNEX

Tables: Business Survey Results, by Size and Trade OrientationTable 1: Business Demographic Data, by Municipality

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Total Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

Total # of interviewed firms 820 99 88 104 125 94 98 113 99Total # of interviewed firms (%)

100.0 12.110.7 12.7 15.2 11.5 12.0 13.8 12.1

Gender of respondent (%) (B1) 820Male 54.3 51.5 60.2 51.0 56.0 52.1 51.0 49.6 63.6Female 45.7 48.5 39.8 49.0 44.0 47.9 49.0 50.4 36.4Are you registered as a business organization or as an entrepreneur? (%) (B2) 820Business organization 16.5 23.2 19.3 18.3 12.0 11.7 21.4 13.3 14.1Entrepreneur 81.0 75.8 80.7 79.8 87.2 87.2 76.5 80.5 78.8Other 2.6 1.0 0.0 1.9 0.8 1.1 2.0 6.2 7.1In which year was your business established? (%) (B3) 794<1990 5.4 7.1 4.7 5.1 5.0 7.8 3.3 8.0 2.11990-1999 17.6 19.2 20.0 22.2 23.3 14.4 14.3 15.0 11.32000-2004 13.4 12.1 17.6 19.2 7.5 15.6 15.4 10.6 11.32005-2009 16.2 20.2 20.0 9.1 8.3 11.1 28.6 15.9 19.62010-2014 22.7 23.2 15.3 19.2 25.0 22.2 20.9 23.9 29.9>2015 24.7 18.2 22.4 25.3 30.8 28.9 17.6 26.5 25.8What is the business sector you predominantly / mainly operate within? (%) (B4) 817Services 44.7 51.0 48.9 35.9 51.2 46.8 48.5 33.6 42.4Construction 0.5 0.0 1.1 0.0 0.8 2.1 0.0 0.0 0.0Agriculture 0.2 0.0 0.0 0.0 0.0 1.1 1.0 0.0 0.0Industry 5.0 5.1 1.1 3.9 4.8 3.2 6.2 8.0 7.1

52

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Retail / Wholesale 49.6 43.9 48.9 60.2 43.2 46.8 44.3 58.4 50.5Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

53

MunicipalityEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Total Pirot Zaječar Čačak Kragujevac Šabac Sombor Niš Vranje

Approximately, how many people do you currently employ? (B5) 820Total # of employees 6,386 782 773 740 501 365 725 520 1,980Female (%) 49 48 32 44 50 55 42 43 60Average 8 8 9 7 4 4 7 5 20SD 50 24 38 16 7 7 19 11 133Median 2 3 2 2 2 2 2 2 2Size class (% of firms, by # of employees) (B5) 8200-1 32.6 28.3 21.6 33.7 36.0 35.1 33.7 38.9 30.32-9 57.0 55.6 68.2 52.9 56.0 57.4 52.0 52.2 63.610-19 5.4 11.1 6.8 4.8 3.2 5.3 7.1 4.4 1.020-49 2.8 3.0 0.0 4.8 3.2 1.1 4.1 3.5 2.050-249 2.1 2.0 2.3 3.8 1.6 1.1 3.1 0.9 2.0250+ 0.2 0.0 1.1 0.0 0.0 0.0 0.0 0.0 1.0Respondents that are members of a business association (%) (B6) 819Members (#) 91 25 9 12 9 2 14 11 9Members (%) 11.1 25.5 10.2 11.5 7.2 2.1 14.3 9.7 9.1If B6 = yes, do you have benefits from the association? (B7) 91Yes (%) 62.6 40.0 66.7 91.7 77.8 100.0 78.6 45.5 55.6Do the benefits associated with membership justify the costs associated with membership? (B8) 88Benefit > Costs 34.1 24.0 44.4 25.0 22.2 100.0 50.0 36.4 33.3Costs > Benefit 38.5 52.0 22.2 33.3 44.4 0.0 28.6 27.3 55.6No payment is required 24.2 16.0 33.3 41.7 33.3 0.0 21.4 36.4 0.0# of obs 820 99 88 104 125 94 98 112 99 820

Table 2: Business Demographic Data, by Size and Export Status

Size Exporter # of obs

54

Total Micro (0-1)

Micro (2-4)

Micro (5-9)

Small (10-19)

Small+ (20-49)

M&L (50+)

Yes No

Total # of interviewed firms 820 267 377 90 44 23 19 53 766Total # of interviewed firms (%)

100.032.6 46.0 11.0 5.4 2.8 2.3 6.5 93.4

Gender of respondent (%) (B1) 820Male 54.3 46.1 53.1 64.4 68.2 87.0 73.7 79.2 52.5Female 45.7 53.9 46.9 35.6 31.8 13.0 26.3 20.8 47.5Are you registered as a business organization or as an entrepreneur? (%) (B2) 820Business organization 16.5 6.0 10.1 30.0 43.2 73.9 94.7 64.2 13.1Entrepreneur 81.0 89.5 88.3 67.8 54.5 26.1 5.3 35.8 84.2Other 2.6 4.5 1.6 2.2 2.3 0.0 0.0 0.0 2.7In which year was your business established? (%) (B3) 794<1990 5.4 5.4 4.1 2.3 11.9 17.4 15.8 11.3 5.01990-1999 17.6 12.4 16.7 22.1 23.8 47.8 36.8 30.2 16.82000-2004 13.4 11.2 13.7 15.1 23.8 4.3 15.8 9.4 13.62005-2009 16.2 17.1 15.8 16.3 11.9 21.7 15.8 11.3 16.52010-2014 22.7 22.5 23.0 30.2 21.4 4.3 10.5 22.6 22.7>2015 24.7 31.4 26.8 14.0 7.1 4.3 5.3 15.1 25.4What is the business sector you predominantly / mainly operate within? (%) (B4) 817Services 44.7 49.1 42.3 51.1 47.7 30.4 10.5 15.1 46.7Construction 0.5 0.4 0.3 0.0 2.3 0.0 5.3 1.9 0.4Agriculture 0.2 0.0 0.5 0.0 0.0 0.0 0.0 1.9 0.1Industry 5.0 0.4 4.3 3.3 13.6 26.1 47.4 37.7 2.8Retail / Wholesale 49.6 50.2 52.7 45.6 36.4 43.5 36.8 43.4 50.1Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Approximately, how many people do you currently employ? (B5) 820Total # of employees 6,386 267 998 575 582 612 3,352 3,211 3,145Female (%) 49 58 59 49 48 36 48 48 51Average 8 1 3 6 13 27 176 61 4SD 50 0 1 1 3 7 279 185 10Median 2 1 2 6 13 25 85 15 2Size class (% of firms, by # of employees) (B5) 8200-1 32.6 100.0 0.0 0.0 0.0 0.0 0.0 7.5 34.3

55

2-9 57.0 0.0 100.0 100.0 0.0 0.0 0.0 35.8 58.510-19 5.4 0.0 0.0 0.0 100.0 0.0 0.0 9.4 5.120-49 2.8 0.0 0.0 0.0 0.0 100.0 0.0 24.5 1.250-249 2.1 0.0 0.0 0.0 0.0 0.0 89.5 18.9 0.9250+ 0.2 0.0 0.0 0.0 0.0 0.0 10.5 3.8 0.0Respondents that are members of a business association (%) (B6) 819Members (#) 91 8 32 18 12 10 11 17 73Members (%) 11.1 3.0 8.5 20.0 27.3 43.5 57.9 32.1 9.5If B6 = yes, do you have benefits from the association? (B7) 91Yes (%) 62.6 37.5 65.6 77.8 75.0 50.0 45.5 47.1 65.8Do the benefits associated with membership justify the costs associated with membership? (B8) 88Benefit > Costs 34.1 12.5 37.5 22.2 58.3 40.0 27.3 35.3 32.9Costs > Benefit 38.5 50.0 31.3 33.3 25.0 50.0 63.6 64.7 32.9No payment is required 24.2 37.5 28.1 38.9 16.7 0.0 9.1 0.0 30.1# of obs 820 267 377 90 44 23 19 53 766 820

56

Table 3: Inspection Experience: Businesses, by Municipalits

Municipality # of obs

East Serbia Šumadija and West Serbia Vojvodina South Serbia

Total Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

Total # of interviewed firms 820 99 88 104 125 94 98 113 99Total # of interviewed firms (%) 100.0 12.1 10.7 12.7 15.2 11.5 12.0 13.8 12.1How many unique inspections have you had in the past year? (C1) 781Average 2.7 4.1 2.9 2.3 2.1 2.9 2.4 2.8 2.6SD 2.6 3.5 3.1 2.1 1.4 3.2 2.4 1.9 2.5What was the last inspection you received? (C2) 803Tax 9.3 9.1 13.6 3.8 13.6 0.0 14.3 9.7 9.1Market 27.9 25.3 39.8 29.8 19.2 23.4 37.8 18.6 34.3Labor 33.3 31.3 27.3 30.8 43.2 47.9 11.2 54.0 15.2Sanitary 13.2 29.3 4.5 11.5 5.6 20.2 14.3 7.1 15.2Agriculture 0.1 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0Phytosanitary 0.7 0.0 0.0 1.9 0.8 0.0 1.0 0.0 2.0Agriculture 13.4 5.1 14.8 18.3 16.8 5.3 19.4 8.0 19.2Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0What was the purpose of the last inspection? (%) (C3) 804Regular 73.9 66.7 71.6 89.1 91.2 62.6 79.2 60.9 64.9Irregular 24.4 33.3 27.3 6.9 8.0 36.3 17.7 39.1 30.9Advisory 1.7 0.0 1.1 4.0 0.8 1.1 3.1 0.0 4.3Were you given prior notice of an inspection visit? (%) (C4) 801Yes 13.9 19.2 25.0 6.9 12.0 7.7 11.8 11.8 18.1No 86.1 80.8 75.0 93.1 88.0 92.3 88.2 88.2 81.9How much prior notice were you given before the inspection visit? (C4) 111Average # of days 3.0 3.0 2.6 3.6 3.3 2.7 3.4 2.8 3.2SD 1.9 2.2 1.7 2.0 1.2 2.1 2.3 1.3 2.0

Where you provided with an inspection checklist prior to the inspection visit? (%) (C5) 804

57

Yes 8.3 13.1 14.8 1.0 2.4 8.8 9.4 8.2 11.7No 91.7 86.9 85.2 99.0 97.6 91.2 90.6 91.8 88.3If no, did you know where to find the necessary checklist? (%) (C6) 737Yes 11.8 18.6 12.0 4.0 8.2 20.5 4.6 12.9 16.9No 88.2 81.4 88.0 96.0 91.8 79.5 95.4 87.1 83.1If yes, was the checklist effective in reducing the workload (%) (C7) 67Yes 68.7 84.6 61.5 0.0 100.0 87.5 33.3 55.6 72.7No 31.3 15.4 38.5 100.0 0.0 12.5 66.7 44.4 27.3Was the inspector knowledgeable about your company’s characteristics such as business/risk profile? (%) (C8) 803Yes 86.2 92.1 89.8 86.1 92.0 83.5 90.6 72.5 81.9No 13.8 7.1 10.2 13.9 8.0 16.5 9.4 27.5 18.1How long did it take to complete the inspection process? (C9) 756Average days 1.4 1.4 1.8 1.3 1.2 1.2 1.2 1.6 1.4SD 1.6 0.9 2.0 1.1 0.8 0.9 0.8 3.4 1.0Prior to this inspection, when was your last inspection? (%) (C10) 752Before 2015 4.4 1.0 3.6 9.6 2.5 7.1 7.0 2.9 2.42015-2016 14.2 6.1 21.7 19.1 20.2 9.4 19.8 6.9 10.72017 39.0 11.1 43.4 34.0 46.2 40.0 44.2 49.0 44.02018 42.4 81.8 31.3 37.2 31.1 43.5 29.1 41.2 42.9How would you characterize this inspection compared to your previous inspection? (% of total) (C11) 753More efficient 13.5 18.2 18.3 13.8 9.2 10.5 19.8 6.9 14.1Less efficient 4.5 3.0 6.1 5.3 0.8 5.8 2.3 9.8 3.5About the same 81.9 78.8 75.6 80.9 89.9 83.7 77.9 83.3 82.4# of obs 781 95 85 94 125 87 93 109 93 781

58

Table 4: Inspection Experience: Businesses, by Size and Export Status

Size Exporter # of obs

Total Micro (0-1)

Micro (2-4)

Micro (5-9)

Small (10-19)

Small+ (20-49)

M&L (50+)

Yes No

Total # of interviewed firms 820 267 377 90 44 23 19 53 766Total # of interviewed firms (%) 100.0 32.6 46.0 11.0 5.4 2.8 2.3 6.5 93.4How many unique inspections have you had in the past year? (C1) 781Average 2.7 1.9 2.5 3.7 4.4 4.8 6.7 4.1 2.6SD 2.6 1.4 2.1 3.5 3.7 4.2 5.4 3.9 2.5What was the last inspection you received? (C2) 803Tax 9.3 7.1 6.6 18.9 15.9 26.1 10.5 26.4 8.1Market 27.9 28.5 28.6 30.0 22.7 21.7 15.8 24.5 28.2Labor 33.3 37.8 35.0 22.2 22.7 17.4 31.6 26.4 33.8Sanitary 13.2 10.9 14.9 17.8 11.4 4.3 5.3 1.9 14.0Agriculture 0.1 0.0 0.3 0.0 0.0 0.0 0.0 1.9 0.0Phytosanitary 0.7 0.7 0.5 1.1 2.3 0.0 0.0 0.0 0.8Agriculture 13.4 12.0 12.5 8.9 22.7 26.1 36.8 18.9 13.1Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0What was the purpose of the last inspection? (%) (C3)  804Regular 73.9 73.4 76.1 66.3 72.1 77.3 73.7 69.8 74.2Irregular 24.4 23.2 23.1 33.7 27.9 18.2 21.1 22.6 24.5Advisory 1.7 3.5 0.8 0.0 0.0 4.5 5.3 7.5 1.3Were you given prior notice of an inspection visit? (%) (C4) 801Yes 13.9 3.9 12.9 21.3 41.9 38.1 47.1 43.1 11.9No 86.1 96.1 87.1 78.7 58.1 61.9 52.9 56.9 88.1How much prior notice were you given before the inspection visit? (C4) 111Average # of days 3.0 3.9 2.8 2.9 2.5 3.0 5.1 3.2 3.0SD 1.9 2.3 1.8 1.9 1.0 0.5 2.3 1.5 2.0

Where you provided with an inspection checklist prior to the inspection visit? (%) (C5) 804

59

Yes 8.3 3.1 8.1 10.1 16.3 31.8 31.6 26.4 7.1No 91.7 96.9 91.9 89.9 83.7 68.2 68.4 73.6 92.9If no, did you know where to find the necessary checklist? (%) (C6) 737Yes 11.8 10.0 11.7 15.0 13.9 20.0 15.4 17.9 11.5No 88.2 90.0 88.3 85.0 86.1 80.0 84.6 82.1 88.5If yes, was the checklist effective in reducing the workload (%) (C7) 67Yes 68.7 75.0 60.0 77.8 71.4 57.1 100.0 78.6 66.0No 31.3 25.0 40.0 22.2 28.6 42.9 0.0 21.4 34.0Was the inspector knowledgeable about your company’s characteristics such as business/risk profile? (%) (C 8) 803Yes 86,2 81,1 86,0 91,0 97,7 95,5 100 94 86No 13,8 18,9 14,0 9,0 2,3 4,5 0,0 5.7 14.4How long did it take to complete the inspection process? (C9) 756Average days 1.4 1.2 1.4 1.9 1.2 1.3 1.0 1.4 1.4SD 1.6 1.4 1.3 3.4 0.7 0.7 0.0 0.9 1.7Prior to this inspection, when was your last inspection? (%) (C10) 752Before 2015 4.4 5.6 5.1 2.3 0.0 0.0 0.0 1.9 4.62015-2016 14.2 18.0 15.1 9.2 4.9 9.1 0.0 9.6 14.62017 39.0 38.6 41.1 35.6 36.6 27.3 36.8 36.5 39.12018 42.4 37.8 38.6 52.9 58.5 63.6 63.2 51.9How would you characterize this inspection compared to your previous inspection? (% of total) (C11) 753More efficient 13.5 10.3 14.0 14.8 14.6 22.7 26.3 15.4 13.4Less efficient 4.5 3.9 3.7 9.1 0.0 0.0 21.1 7.7 4.3About the same 81.9 85.8 82.3 76.1 85.4 77.3 52.6 76.9 82.3# of obs 781 250 359 88 43 22 19 227 554 781

60

Table 5: Business Governance, by Municipality

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Total Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

Total # of interviewed firms 820 99 88 104 125 94 98 113 99Total # of interviewed firms (%) 100.0 12.1 10.7 12.7 15.2 11.5 12.0 13.8 12.1Are you aware that you can conduct a self assessment (%) (G1) 819Yes 14.6 18.2 20.5 8.7 7.2 14.9 16.3 12.4 22.2No 85.4 81.8 79.5 91.3 92.8 85.1 83.7 87.6 77.8If yes, how many self assessments did you conduct in the last year? (G2) 120Firms that have conducted SA (% of total) 4.8 7.1 4.5 2.9 0.8 5.3 6.1 4.4 8.1Firms that have conducted SA (% of those aware) 32.5 38.9 22.2 33.3 11.1 35.7 37.5 35.7 36.4Average per firm 4.5 1.6 1.5 22.0 3.0 1.8 9.3 1.4 2.1SD 9.4 0.7 0.5 9.9 0.0 1.2 17.3 0.5 1.5Type of self-assessments (% of # of self-assessments) (G2) 39Tax 21.1 36.4 0.0 25.8 0.0 11.1 23.2 14.3 5.9Market 20.6 0.0 33.3 24.2 66.7 0.0 23.2 28.6 5.9Labor 24.6 18.2 33.3 25.8 33.3 0.0 25.0 28.6 29.4Sanitary 8.6 0.0 0.0 0.0 0.0 0.0 21.4 0.0 17.6Phytosanitary 9.7 18.2 0.0 9.1 0.0 44.4 3.6 0.0 17.6Agriculture 15.4 27.3 33.3 15.2 0.0 44.4 3.6 28.6 23.5Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Are you aware that you can request preventative / advisory assistance from any inspectorates? (%) (G3) 819Yes 24.4 33.3 37.5 16.3 11.2 22.3 25.5 21.2 33.3Have you requested at least one preventative activity in the last year? (G4) 818Yes 4.3 4.0 8.0 2.9 0.8 4.3 6.1 2.7 7.1If you requested, which inspectorates did you request a preventative visit from? (%) (G5) 35Tax 34.3 50.0 14.3 66.7 0.0 25.0 50.0 33.3 28.6

61

Market 31.4 0.0 57.1 33.3 100.0 25.0 33.3 66.7 0.0Lab 5.7 0.0 14.3 0.0 0.0 0.0 0.0 0.0 14.3San 8.6 25.0 0.0 0.0 0.0 0.0 16.7 0.0 14.3Phytosan 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Agri 2.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.3Other 17.1 25.0 14.3 0.0 0.0 50.0 0.0 0.0 28.6Does your business have internal procedures that should ensure your compliance with the requirements posed by any of the inspections? (G6) 819Yes 38.3 38.4 40.9 21.4 22.4 52.1 30.6 53.1 51.5Do you have an external professional assist with your business finances and/or planning? (G7) 819Yes 73.4 83.8 67.0 67.0 70.4 71.3 70.4 82.3 73.7During your last inspection, did you receive the result of your checklist? (G8) 819Yes 31.2 43.4 27.3 35.3 38.4 8.5 37.8 30.9 24.7Respondents that are exporters (% of total) (G9) 819# of exporters (% of total) 6.5 4.0 5.7 9.7 4.0 3.2 9.2 6.2 10.1Does the VAT process dissuade you from exporting? (%) (G10) 819# of firms (% of total) 1.7 4.0 1.1 1.9 0.0 1.1 2.0 0.9 3.0# of obs 819 99 88 103 125 94 98 113 99

Table 6: Business Governance, by Size and Export Status

Size Exporter # of obs

Total Micro (0-1)

Micro (2-4)

Micro (5-9)

Small (10-19)

Small+ (20-49)

M&L (50+)

Yes No

Total # of interviewed firms 820 267 377 90 44 23 19 53 766

62

Total # of interviewed firms (%) 100.0 32.6 46.0 11.0 5.4 2.8 2.3 6.5 93.4Are you aware that you can conduct a self assessment (%) (G1) 819Yes 14.6 10.1 14.1 22.2 11.4 34.8 36.8 28.3 13.7No 85.4 89.9 85.9 77.8 88.6 65.2 63.2 71.7 86.3If yes, how many self assessments did you conduct in the last year? (G2) 120Firms that have conducted SA (% of total) 4.8 2.2 3.2 11.1 0.0 17.4 36.8 13.2 4.2Firms that have conducted SA (% of those aware) 32.5 22.2 22.6 50.0 0.0 50.0 100.0 46.7 30.5Average per firm 4.5 1.5 1.5 5.0 6.5 10.3 12.6 2.7SD 9.4 0.8 0.6 10.4 5.6 16.0 15.5 6.0Type of self-assessments (% of # of self-assessments) (G2) 39Tax 21.1 0.0 16.7 32.0 19.2 18.1 19.3 23.0Market 20.6 11.1 16.7 30.0 19.2 16.7 18.2 23.0Labor 24.6 22.2 16.7 28.0 19.2 26.4 25.0 24.1Sanitary 8.6 0.0 0.0 0.0 11.5 16.7 17.0 0.0Phytosanitary 9.7 22.2 11.1 10.0 23.1 2.8 9.1 10.3Agriculture 15.4 44.4 38.9 0.0 7.7 19.4 11.4 19.5Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Are you aware that you can request preventative / advisory assistance from any inspectorates? (%) (G3) 819Yes 24.4 18.0 25.2 23.3 40.9 43.5 42.1 41.5 23.2Have you requested at least one preventative activity in the last year? (G4) 818Yes 4.3 1.1 4.2 5.6 4.5 21.7 21.1 20.8 3.1If you requested, which inspectorates did you request a preventative visit from? (%) (G5) 35

Tax 34.3 0.0 31.3 20.0 0.0 80.0 50.0 52.9 16.7

Market 31.4 33.3 43.8 20.0 50.0 20.0 0.0 35.3 27.8

Lab 5.7 0.0 0.0 0.0 0.0 0.0 50.0 0.0 11.1

San 8.6 33.3 12.5 0.0 0.0 0.0 0.0 0.0 16.7

Phytosan 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Agri 2.9 0.0 6.3 0.0 0.0 0.0 0.0 0.0 5.6

63

Other 17.1 33.3 6.3 60.0 50.0 0.0 0.0 11.8 22.2

Table 7: Businesses` Financing, by Municipality

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Total Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

Total # of interviewed firms 820 99 88 104 125 94 98 113 99Total # of interviewed firms (%) 100.0 12.1 10.7 12.7 15.2 11.5 12.0 13.8 12.1Today, does your business carry any external source of finance? (F1) 819Yes (#) 233 34 30 29 29 19 32 31 29No (#) 586 65 58 74 96 75 66 82 70Yes (%) 28.4 34.3 34.1 28.2 23.2 20.2 32.7 27.4 29.3No (%) 71.6 65.7 65.9 71.8 76.8 79.8 67.3 72.6 70.7If yes, what type of external source of finance did you use in the last year? (F2) 233Bank 97.4 100.0 93.3 100.0 100.0 100.0 100.0 93.5 93.1Equity 2.1 0.0 3.3 0.0 0.0 0.0 0.0 6.5 6.9Both 0.4 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.0If you have used bank loans, what did you primarily need to borrow money for? (up to two answers per firm that used bank loan) (F3) 225Personal / Household expenses 18.1 17.6 0.0 27.6 31.0 21.1 21.9 6.9 18.5

64

Purchase inventories / fixed assets 72.2 70.6 71.4 72.4 55.2 78.9 71.9 86.2 74.1Pay off other debts 7.5 0.0 14.3 0.0 13.8 5.3 9.4 13.8 3.7New business oportunity 7.0 5.9 7.1 3.4 13.8 5.3 9.4 6.9 3.7Expansion of existing business 17.2 17.6 17.9 13.8 20.7 10.5 18.8 20.7 14.8Other 4.8 5.9 10.7 0.0 6.9 5.3 0.0 0.0 11.1If you have used bank loans, what type of banking products did you receive in the last year? (multiple response) (F4) 225Personal / business loan 43.6 47.1 42.9 41.4 17.2 52.6 34.4 62.1 55.6Overdraft 14.1 2.9 17.9 6.9 10.3 15.8 15.6 24.1 22.2Short-term loan (up to 2 years) 46.3 44.1 39.3 55.2 65.5 10.5 53.1 37.9 51.9Long-term loan (2-5 years) 22.5 23.5 14.3 10.3 17.2 42.1 25.0 37.9 14.8

65

If you had to finance an investment today, where would you look for funds? (%) (F5) 785Personal (own) funds 57.0 52.5 43.2 51.9 68.8 51.1 52.0 69.9 59.6Family/ friends 17.1 12.1 22.7 21.2 13.6 19.1 10.2 17.7 21.2Business partners 3.0 1.0 3.4 3.8 7.2 1.1 4.1 1.8 1.0Banks 38.0 38.4 55.7 34.6 31.2 36.2 40.8 34.5 37.4State/gov’t institution 5.4 3.0 4.5 3.8 4.0 1.1 12.2 6.2 8.1Private Equity fund/ Investment fund 4.5 3.0 8.0 2.9 3.2 2.1 6.1 5.3 6.1Crowdfunding 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.4 1.0 0.0 0.8 1.1 0.0 0.0 0.0 0.0How would you finance your business if you couldn’t get a loan from the bank? (%) (F6) 819own 72.1 72.7 75.8 71.2 82.4 67.0 71.4 70.8 75.8family 20.6 21.2 18.2 20.2 12.8 24.5 14.3 27.4 18.2partner 7.2 6.1 6.1 7.7 4.8 8.5 14.3 1.8 6.1Has your business made any request for external non-banking financing in the past year? (F7) 819Yes 6.2 5.1 8.0 2.9 5.6 9.6 2.0 6.2 11.1No 93.8 94.9 92.0 97.1 94.4 90.4 98.0 93.8 88.9If yes, who did you request external non-banking financing from? (F8) 50Friend / Relative 52.9 40.0 42.9 0.0 71.4 77.8 50.0 57.1 45.5Employee 2.0 0.0 0.0 0.0 14.3 0.0 0.0 0.0 0.0Private investor 3.9 0.0 14.3 0.0 0.0 0.0 0.0 0.0 9.1Other 39.2 60.0 42.9 100.0 14.3 22.2 50.0 42.9 36.4Beside financing your business via banking loans, would you consider giving equity share in your company (F9) 819Yes 13.7 11.1 22.7 14.6 11.2 14.9 21.4 7.1 9.1No 86.3 88.9 77.3 85.4 88.8 85.1 78.6 92.9 90.9If not using a bank loan, what was the main reason why your business did not borrow money (F10) 583No need for a loan 61.3 66.2 65.5 58.1 65.6 50.7 56.1 59.8 68.6Wouldn’t get the loan 8.2 3.1 8.6 9.5 3.1 12.0 13.6 12.2 4.3Application procedures complex 3.8 4.6 6.9 8.1 1.0 4.0 3.0 2.4 1.4Interest rates not favorable 23.2 20.0 15.5 23.0 28.1 28.0 24.2 22.0 21.4Collateral requirements too high 1.9 3.1 1.7 0.0 1.0 2.7 1.5 3.7 1.4Size of loan insufficient 1.2 3.1 1.7 1.4 1.0 0.0 1.5 0.0 1.4Today, do you have a need to invest in your firm? (%) (F11) 818

66

Yes 59.7 65.7 59.1 61.2 48.0 61.3 59.2 64.6 60.6No 40.3 34.3 40.9 38.8 52.0 38.7 40.8 35.4 39.4If yes, how much would you want to invest? (%) (F12)<25k eur 69.9 69.7 69.6 68.7 79.4 74.2 68.2 70.3 58.125-99k eur 17.8 22.7 18.8 16.4 13.2 11.3 21.2 13.5 25.8100-249k eur 7.7 4.5 7.2 9.0 5.9 9.7 3.0 10.8 11.3250-1M eur 2.4 1.5 1.4 3.0 0.0 3.2 3.0 5.4 1.61M+ eur 2.2 1.5 2.9 3.0 1.5 1.6 4.5 0.0 3.2How many additional people would you hire? (F13) 796Total 2516 270 245 192 175 93 279 380 882Average 3 3 3 2 1 1 3 3 9SD 23 10 7 4 3 2 10 13 61When was the last year you made an investment in your business? (F14) 786<1990 0.9 0.0 0.0 2.8 3.0 1.0 0.0 0.0 0.01990-1999 3.1 1.9 2.2 7.5 4.5 2.9 3.0 1.7 0.92000-2004 4.1 2.9 2.2 10.4 4.5 2.9 6.0 3.3 0.02005-2009 7.9 9.7 7.6 7.5 5.3 4.9 9.0 8.3 11.32010-2014 17.5 16.5 18.5 18.9 16.5 20.4 20.0 12.5 17.9>2015 66.5 68.9 69.6 52.8 66.2 68.0 62.0 74.2 69.8How is your firm planning to finance next year’s new growth investments and expenditures? (%) (F15) 819Own resources 54.4 67.7 52.3 45.2 42.4 56.4 61.2 59.3 53.5External funds 14.4 20.2 14.8 16.3 7.2 13.8 14.3 12.4 18.2Does not plan to expand 31.1 12.1 33.0 37.5 50.4 29.8 24.5 28.3 28.3If you need money in the future, which of the following would be your preferred option? (%) (F16) 815Own resources 58.9 56.6 50.0 53.4 65.9 58.1 59.2 61.1 64.3Friends / Relatives 8.0 8.1 8.0 7.8 3.3 9.7 6.1 15.0 6.1Microfinancing 3.3 1.0 6.8 6.8 3.3 1.1 5.1 2.7 0.0Traditional bank financing 27.4 31.3 31.8 29.1 26.8 29.0 28.6 19.5 24.5Investment fund 2.5 3.0 3.4 2.9 0.8 2.2 1.0 1.8 5.1Crowdfunding 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Has your current business operations been simplified due to better IT services provided by your bank? (%) (F 17) 819Yes 49,9 54,5 53,4 44,7 48,0 44,7 53,1 51,3 50,5Has anyone from your business participated in any training to develop financial management skills in the past year? (%) (F18) 819Yes 11.4 16.2 6.8 13.6 7.2 4.3 11.2 16.8 14.1

67

Would you be interested in receiving financial management training? (%) (F19) 819Yes 38.6 45.5 45.5 35.0 28.0 31.9 33.7 46.0 45.5# of obs 820 99 88 103 125 94 98 113 99 819

Size Exporter # of obs

Total Micro (0-1)

Micro (2-4)

Micro (5-9)

Small (10-19)

Small+ (20-49)

M&L (50+)

Yes No

Total # of interviewed firms 820 267 377 90 44 23 19 53 766Total # of interviewed firms (%) 100.0 32.6 46.0 11.0 5.4 2.8 2.3 6.5 93.4Today, does your business carry any external source of finance? (F1) 819Yes (#) 233 50 107 28 21 15 12 30 203No (#) 586 217 270 62 23 7 7 23 563Yes (%) 28.4 18.7 28.4 31.1 47.7 68.2 63.2 56.6 26.5No (%) 71.6 81.3 71.6 68.9 52.3 31.8 36.8 43.4 73.5If yes, what type of external source of finance did you use in the last year? (F2) 233Bank 97.4 100.0 95.3 100.0 100.0 100.0 91.7 96.7 97.5Equity 2.1 0.0 3.7 0.0 0.0 0.0 8.3 3.3 2.0Both 0.4 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.5If you have used bank loans, what did you primarily need to borrow money for? (up to two answers per firm that used bank loan) (F3) 225Personal / Household expenses 18.1 26.0 18.6 10.7 19.0 13.3 0.0 6.9 19.7Purchase inventories / fixed assets 72.2 74.0 74.5 64.3 76.2 60.0 72.7 69.0 72.7Pay off other debts 7.5 6.0 8.8 3.6 14.3 0.0 9.1 6.9 7.6New business oportunity 7.0 8.0 6.9 7.1 0.0 6.7 18.2 13.8 6.1Expansion of existing business 17.2 10.0 14.7 14.3 4.8 53.3 54.5 41.4 13.6Other 4.8 4.0 2.9 17.9 4.8 0.0 0.0 0.0 5.6If you have used bank loans, what type of banking products did you receive in the last year? (multiple response) (F4) 225Personal / business loan 43.6 48.0 52.0 39.3 38.1 6.7 18.2 20.7 47.0Overdraft 14.1 8.0 14.7 17.9 23.8 13.3 9.1 6.9 15.2Short-term loan (up to 2 years) 46.3 42.0 44.1 32.1 66.7 66.7 54.5 62.1 43.9

68

Long-term loan (2-5 years) 22.5 30.0 14.7 39.3 9.5 26.7 36.4 27.6 21.7Table 8: Businesses` Financing, by Size and Export Status

69

If you had to finance an investment today, where would you look for funds? (%) (F5) 785Personal (own) funds 57.0 62.5 57.0 45.6 40.9 65.2 57.9 52.8 57.3Family/ friends 17.1 19.9 20.4 8.9 4.5 0.0 0.0 5.7 17.9Business partners 3.0 1.9 2.1 4.4 9.1 0.0 21.1 5.7 2.9Banks 38.0 28.5 41.9 45.6 43.2 34.8 52.6 45.3 37.6State/gov’t institution 5.4 3.7 4.8 8.9 6.8 8.7 15.8 13.2 4.8Private Equity fund/ Investment fund 4.5 2.2 3.7 7.8 4.5 8.7 31.6 15.1 3.8Crowdfunding 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.4 0.0 0.3 0.0 4.5 0.0 0.0 1.9 0.3How would you finance your business if you couldn’t get a loan from the bank? (%) (F6) 819own 72.1 68.9 72.1 76.7 70.5 91.3 73.7 71.7 72.2family 20.6 27.0 20.7 13.3 15.9 0.0 0.0 9.4 21.4partner 7.2 4.1 7.2 10.0 13.6 4.3 26.3 18.9 6.4Has your business made any request for external non-banking financing in the past year? (F7) 819Yes 6.2 4.5 6.6 6.7 2.3 13.6 21.1 9.4 6.0No 93.8 95.5 93.4 93.3 97.7 86.4 78.9 90.6 94.0If yes, who did you request external non-banking financing from? (F8) 50Friend / Relative 52.9 83.3 52.0 50.0 0.0 33.3 0.0 0.0 58.7Employee 2.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 2.2Private investor 3.9 8.3 0.0 0.0 0.0 0.0 25.0 20.0 2.2Other 39.2 8.3 40.0 50.0 100.0 66.7 75.0 80.0 34.8Beside financing your business via banking loans, would you consider giving equity share in your company (F9) 819Yes 13.7 10.9 13.8 13.3 18.2 22.7 31.6 18.9 13.3No 86.3 89.1 86.2 86.7 81.8 77.3 68.4 81.1 86.7If not using a bank loan, what was the main reason why your business did not borrow money (F10) 583No need for a loan 61.3 55.8 64.1 66.1 56.5 85.7 71.4 78.3 60.6Wouldn’t get the loan 8.2 13.4 5.6 3.2 8.7 0.0 0.0 4.3 8.3Application procedures complex 3.8 0.9 6.7 1.6 4.3 0.0 0.0 0.0 3.9Interest rates not favorable 23.2 26.7 21.9 21.0 17.4 14.3 14.3 8.7 23.8Collateral requirements too high 1.9 1.4 1.1 4.8 4.3 0.0 14.3 4.3 1.8Size of loan insufficient 1.2 1.4 0.4 3.2 4.3 0.0 0.0 0.0 1.2Today, do you have a need to invest in your firm? (%) (F11) 818

70

Yes 59.7 53.6 56.8 68.9 81.4 77.3 89.5 73.6 58.7No 40.3 46.4 43.2 31.1 18.6 22.7 10.5 26.4 41.3If yes, how much would you want to invest? (%) (F12) 488<25k eur 69.9 84.0 75.7 58.8 51.4 5.9 5.9 12.5 74.525-99k eur 17.8 10.3 17.2 25.0 27.0 35.3 29.4 32.5 16.6100-249k eur 7.7 3.8 5.0 11.8 10.8 41.2 23.5 35.0 5.5250-1M eur 2.4 1.3 1.7 4.4 2.7 5.9 11.8 2.5 2.41M+ eur 2.2 0.6 0.4 0.0 8.1 11.8 29.4 17.5 1.0How many additional people would you hire? (F13) 796Total 2516 331 625 250 127 203 980 1065 1451Average 3 1 2 3 3 9 52 20 2SD 23 6 6 4 4 21 133 83 7When was the last year you made an investment in your business? (F14) 786<1990 0.9 1.4 0.5 1.0 0.0 0.0 4.3 0.0 1.01990-1999 3.1 3.2 2.3 3.1 4.3 13.6 4.3 3.6 3.12000-2004 4.1 4.6 4.1 1.0 2.2 9.1 8.7 5.5 4.02005-2009 7.9 10.3 7.1 4.1 4.3 9.1 13.0 7.3 7.92010-2014 17.5 17.1 18.8 16.5 13.0 18.2 13.0 16.4 17.6>2015 66.5 63.3 67.3 74.2 76.1 50.0 56.5 67.3 66.5How is your firm planning to finance next year’s new growth investments and expenditures? (%) (F15) 819Own resources 54.4 47.6 57.0 61.1 68.2 43.5 47.4 47.2 55.0External funds 14.4 10.1 13.5 18.9 18.2 30.4 42.1 34.0 13.1Does not plan to expand 31.1 42.3 29.4 20.0 13.6 21.7 10.5 18.9 32.0If you need money in the future, which of the following would be your preferred option? (%) (F16) 815Own resources 58.9 62.6 58.4 55.6 45.5 63.6 57.9 49.1 59.6Friends / Relatives 8.0 11.3 8.0 4.4 2.3 0.0 0.0 3.8 8.3Microfinancing 3.3 3.8 2.7 3.3 6.8 0.0 5.3 0.0 3.5Traditional bank financing 27.4 20.8 29.1 33.3 40.9 27.3 26.3 37.7 26.6Investment fund 2.5 1.5 1.9 3.3 4.5 9.1 10.5 9.4 2.0Crowdfunding 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Has your current business operations been simplified due to better IT services provided by your bank? (%) (F 17) 819Yes 49,9 39.7 46.4 66.7 72.7 86.4 89.5 83.0 47.7Has anyone from your business participated in any training to develop financial management skills in the past year? (%) (F18) 819Yes 11.4 5.2 10.9 11.1 25.0 40.9 42.1 34.0 9.8

71

Would you be interested in receiving financial management training? (%) (F19) 819Yes 38.6 29.6 39.0 42.2 50.0 68.2 78.9 58.5 37.2# of obs 819 267 377 90 44 22 19 53 766 819

72

Table 9: Inspector Demographic Data, by Municipality

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

# of surveyed inspectors / inspections conducted  111total # of respondents 10 9 15 13 13 11 31 9% (total # of respondents = 100) 9.0 8.1 13.5 11.7 11.7 9.9 27.9 8.1Gender of respondents (A7) 111Females (% of total) 40 67 60 62 62 55 42 33Which inspectorate do you work for? (% of total) (X1) 111Market 30.0 33.3 26.7 23.1 23.1 27.3 41.9 33.3Labor 20.0 22.2 20.0 38.5 38.5 27.3 29.0 33.3Construction 0.0 11.1 0.0 0.0 0.0 0.0 0.0 0.0Environment 0.0 11.1 6.7 0.0 15.4 9.1 0.0 0.0Sanitary 30.0 0.0 26.7 15.4 15.4 0.0 22.6 11.1Phytosanitary 0.0 0.0 6.7 7.7 0.0 0.0 6.5 11.1Agriculture 0.0 0.0 13.3 15.4 0.0 0.0 0.0 11.1Veterinary 0.0 0.0 0.0 0.0 0.0 18.2 0.0 0.0Fire protection 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 20.0 22.2 0.0 0.0 7.7 18.2 0.0 0.0Approximately how many unique inspections did you personally conducted in the past year? (X2) 111# of inspections 1,792 1,011 3,068 2,820 3,315 2,552 5,132 1,419Average 179 112 205 217 255 232 166 158Median 138 75 120 190 200 150 150 180SD 110 98 150 118 170 144 125 84

73

Did you receive any training on the implementation of inspections oversight? (%) (X3) 111Yes 70.0 55.6 53.3 76.9 76.9 45.5 90.3 55.6Did this training improve your ability to conduct inspections? (%) (X4) 78Yes 71.4 100.0 100.0 80.0 90.0 80.0 78.6 100.0Have you conducted any preventative inspections in the past year? (X5; X6) 111Yes (%) 60 22 60 62 46 45 42 56Average # of preventive inspections 41 5 11 51 35 7 19 15SD 66 1 8 64 52 3 18 15Preventative inspections (% of total Inspections) 14 1 3 14 6 1 5 5Did you conduct any other types of preventative oversight activities in the past year? (%) If yes, what types and how many? (X7; X8) 111Yes 50.0 66.7 33.3 61.5 61.5 63.6 67.7 66.7Advisory (planned) (% of total prev activities) 26 14 73 22 53 17 53 41Advisory (requested) (% of total prev activities) 4 73 28 45 40 6 31 22Educational activities # (% of total prev activities) 70 14 0 34 6 78 16 38Has the overall inspection process been simplified and shortened in the last year? (%) (X9) 111Simplified 20 11 0 8 8 27 16 22Shortened 20 0 0 0 8 0 10 11Both 10 0 13 15 0 9 13 11Neither 50 89 87 77 85 64 61 56# of obs 10 9 15 13 13 11 31 9 111

74

Table 10: Inspector Demographic Data, by Type of Inspection and Training Status

Type of Inspection Training # of obs

Total Market Labor Sanitary Agri Other Yes No

# of surveyed inspectors / inspections conducted  111total # of respondents 111 35 32 19 10 15 78 33% (total # of respondents = 100) 100.0 31.5 28.8 17.1 9.0 13.5 70.3 29.7Gender of respondents (A7) 111Females (% of total) 51 40 38 63 100 60 49 58Which inspectorate do you work for? (% of total) (X1) 111Market 31.5 100.0 0.0 0.0 0.0 0.0 37.2 18.2Labor 28.8 0.0 100.0 0.0 0.0 0.0 25.6 36.4Construction 0.9 0.0 0.0 0.0 0.0 6.7 0.0 3.0Environment 4.5 0.0 0.0 0.0 0.0 33.3 5.1 3.0Sanitary 17.1 0.0 0.0 100.0 0.0 0.0 20.5 9.1Phytosanitary 4.5 0.0 0.0 0.0 50.0 0.0 3.8 6.1Agriculture 4.5 0.0 0.0 0.0 50.0 0.0 3.8 6.1Veterinary 1.8 0.0 0.0 0.0 0.0 13.3 0.0 6.1Fire protection 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 6.3 0.0 0.0 0.0 0.0 46.7 3.8 12.1Approximately how many unique inspections did you personally conducted in the past year? (X2) 111

# of inspections21,10

9 2,860 7,688 5,270 2,358 2,933 15,016 6,093Average 190 82 240 277 236 196 193 185Median 150 75 200 270 204 144 150 140SD 136 44 128 122 128 154 141 122

Did you receive any training on the implementation of inspections oversight? (%) (X3) 111Yes 70.3 82.9 62.5 84.2 60.0 46.7 100.0 0.0Did this training improve your ability to conduct inspections? (%) (X4) 78Yes 84.6 82.8 85.0 81.3 100.0 85.7 84.6 -

75

Have you conducted any preventative inspections in the past year? (X5; X6) 111Yes (%) 49 37 50 68 30 60 44 61Average # of preventive inspections 25 6 46 16 75 9 32 12SD 42 5 53 9 89 8 50 10Preventative inspections (% of total Inspections) 6 3 10 4 10 3 7 4Did you conduct any other types of preventative oversight activities in the past year? (%) If yes, what types and how many? (X7; X8) 111Yes 59.5 51.4 53.1 89.5 40.0 66.7 57.7 63.6Advisory (planned) (% of total prev activities) 37 76 4 34 78 22 37 38Advisory (requested) (% of total prev activities) 26 12 49 30 22 12 30 17Educational activities # (% of total prev activities) 37 11 46 35 0 65 34 44Has the overall inspection process been simplified and shortened in the last year? (%) (X9) 111Simplified 14 20 16 11 0 7 15 9Shortened 6 9 9 5 0 0 6 6Both 10 20 9 0 10 0 8 15Neither 70 51 66 84 90 93 71 70# of obs 111 35 32 19 10 15 78 33 111

Table 11: Risk Assessment and Risk Planning, by Municipality

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

# of surveyed inspectors / inspections conducted  111

76

total # of respondents 10 9 15 13 13 11 31 9% (total # of respondents = 100) 9.0 8.1 13.5 11.7 11.7 9.9 27.9 8.1Does your inspectorate conduct risk assessments to determine which businesses you should inspect? (% of total) (Y1) 110% of inspectors (Yes) 90.0 88.9 86.7 69.2 76.9 90.9 83.9 88.9% of inspections (Yes) 94.4 65.4 83.7 64.5 61.4 96.9 81.3 78.9Does the risk assessment use quantified and registered data in some kind of formula to determine risk? (%) (Y2) 93Yes 88.9 50.0 61.5 33.3 70.0 60.0 50.0 87.5Have you personally contributed to the risk planning process, in last year, with your experience and information? (%) (Y3) 93Yes 55,6 75,0 69,2 77,8 60,0 70,0 57,7 75,0Does the risk analysis use the correct criteria to identify business risk profiles? (% of those which inspectorate conducts RA) (Y4) 93Yes 44.4 62.5 30.8 33.3 60.0 70.0 53.8 75.0Has risk analysis contributed to improvements in inspection planning in the past year? (% of those which inspectorate conducts RA) (Y5)

93

Better 66.7 50.0 38.5 66.7 50.0 40.0 73.1 62.5Worse 0.0 12.5 7.7 11.1 0.0 10.0 0.0 0.0Same 33.3 37.5 53.8 22.2 50.0 50.0 26.9 37.5Do you find you are increasingly inspecting more higher risk businesses compared to last year? (%) (Y6) 93Yes 77.8 62.5 61.5 77.8 50.0 40.0 46.2 87.5Who determines which businesses you visit? (%) (Y7) 111Risk sector 0.0 0.0 0.0 7.7 0.0 0.0 6.5 0.0Chief Inspector 80.0 44.4 66.7 69.2 100.0 72.7 87.1 77.8Inspector him/herself 20.0 44.4 33.3 23.1 0.0 18.2 6.5 11.1Does the issuance of warrants improve how you are received by businesses? (%) (Y8) 111Yes 90.0 66.7 53.3 53.8 76.9 27.3 77.4 66.7Have you experienced a reduction in the # of inspections you personally conducted in the past year? (%) (Y9) 111Yes 60.0 55.6 33.3 53.8 61.5 27.3 48.4 44.4

Has the inspections planning process improved in the last year? (% of total) (Y10) 111Better 70.0 22.2 53.3 38.5 53.8 36.4 64.5 66.7Worse 0.0 33.3 6.7 15.4 7.7 18.2 3.2 11.1Same 30.0 44.4 40.0 46.2 38.5 45.5 32.3 22.2# of obs 10 9 15 13 13 11 31 9

77

78

Type of Inspection Training # of obs

Total Market Labor Sanitary Agri Other Yes No

# of surveyed inspectors / inspections conducted  111total # of respondents 111 35 32 19 10 15 78 33% (total # of respondents = 100) 100.0 31.5 28.8 17.1 9.0 13.5 70.3 29.7Does your inspectorate conduct risk assessments to determine which businesses you should inspect? (% of total) (Y1) 110% of inspectors (Yes) 83.8 97.1 65.6 89.5 80.0 86.7 88.5 72.7% of inspections (Yes) 78.4 97.6 61.4 90.5 75.4 84.7 83.4 66.0Does the risk assessment use quantified and registered data in some kind of formula to determine risk? (%) (Y2) 93Yes 60.2 47.1 76.2 64.7 50.0 69.2 60.9 58.3Have you personally contributed to the risk planning process, in last year, with your experience and information? (%) (Y3) 93Yes 65,6 58,8 71,4 76,5 62,5 61,5 68,1 45,8Does the risk analysis use the correct criteria to identify business risk profiles? (% of those which inspectorate conducts RA) (Y4) 93Yes 52.7 44.1 57.1 47.1 75.0 61.5 55.1 45.8Has risk analysis contributed to improvements in inspection planning in the past year? (% of those which inspectorate conducts RA) (Y5)

93

Better 58.1 61.8 71.4 52.9 50.0 38.5 62.3 45.8Worse 4.3 2.9 9.5 0.0 0.0 7.7 2.9 8.3Same 37.6 35.3 19.0 47.1 50.0 53.8 34.8 45.8Do you find you are increasingly inspecting more higher risk businesses compared to last year? (%) (Y6) 93Yes 59.1 64.7 76.2 41.2 50.0 46.2 62.3 50.0Who determines which businesses you visit? (%) (Y7) 111Risk sector 2.7 2.9 0.0 5.3 10.0 0.0 3.8 0.0Chief Inspector 77.5 88.6 84.4 68.4 60.0 60.0 78.2 75.8Inspector him/herself 17.1 8.6 12.5 26.3 30.0 26.7 17.9 15.2

Table 12: Risk Assessment and Risk Planning, by Type of Inspection and Training Status

79

Does the issuance of warrants improve how you are received by businesses? (%) (Y8) 111Yes 65.8 85.7 68.8 52.6 30.0 53.3 69.2 57.6Have you experienced a reduction in the # of inspections you personally conducted in the past year? (%) (Y9) 111Yes 47.7 74.3 12.5 63.2 40.0 46.7 52.6 36.4Has the inspections planning process improved in the last year? (% of total) (Y10) 111Better 53.2 62.9 59.4 47.4 30.0 40.0 55.1 48.5Worse 9.9 5.7 9.4 5.3 20.0 20.0 6.4 18.2Same 36.9 31.4 31.3 47.4 50.0 40.0 38.5 33.3# of obs 111 35 32 19 10 15 78 33 111

80

Municipality # of obsEast Serbia Šumadija and West Serbia Vojvodina South Serbia

Pirot Zaječar Čačak Kragujevac

Šabac Sombor Niš Vranje

# of surveyed inspectors / inspections conducted 111total # of respondents 10 9 15 13 13 11 31 9% (total # of respondents = 100) 9.0 8.1 13.5 11.7 11.7 9.9 27.9 8.1Do checklists improve efficiency? (%) (Z1) 111Yes 90.0 55.6 66.7 53.8 61.5 63.6 74.2 66.7How much do you deviate from the checklist? (%) (Z2) 110Not at all 60.0 33.3 60.0 69.2 69.2 63.6 83.9 66.7Some, but not much 40.0 55.6 33.3 30.8 30.8 36.4 16.1 33.3Significantly 0.0 11.1 0.0 0.0 0.0 0.0 0.0 0.0If you deviate, is it your experience that the requirements on the checklists are inadequate or incorrect? (%) (Z3) 35Incomplete 75.0 83.3 60.0 50.0 0.0 50.0 60.0 66.7Inaccurate 0.0 0.0 0.0 0.0 25.0 25.0 20.0 33.3Both 25.0 16.7 40.0 50.0 75.0 25.0 20.0 0.0Is there an internal review process for checklists where you could provide feedback on checklist quality? (%) (Z4) 111Yes 50.0 33.3 6.7 23.1 15.4 9.1 19.4 33.3Are you able to provide inputs to your superiors which influence the requirements on the checklist? (%) (Z5) 111Yes 90.0 66.7 86.7 76.9 53.8 81.8 71.0 66.7Has the field inspection process become more efficient in the last year? (%) (Z6) 111Better 60.0 0.0 33.3 53.8 46.2 0.0 74.2 77.8Worse 10.0 44.4 26.7 7.7 15.4 9.1 9.7 0.0Same 30.0 55.6 40.0 38.5 38.5 90.9 16.1 22.2Do you find that the enhanced inspections procedures have increased the total amount of work you must do? (%) (Z7) 111Yes 60.0 100.0 100.0 76.9 84.6 90.9 80.6 55.6In your opinion, have small businesses responded more favorably to the inspection process in the past year? (%) (Z8) 111Yes 60.0 33.3 40.0 46.2 46.2 27.3 64.5 66.7

Table 13: Checklists, by Municipality

81

Did your inspectorate conduct any campaigns to inform businesses on the inspection oversight process? (%) (Z9) 111Yes 80.0 33.3 26.7 53.8 53.8 54.5 90.3 66.7Do you feel that businesses are more cooperative in engaging in the inspection oversight process? (%) (Z10) 111Yes 70.0 55.6 53.3 61.5 38.5 18.2 58.1 55.6# of obs 10 9 15 13 13 11 31 9

82

Type of Inspection Training # of obs

Total Market Labor Sanitary Agri Other Yes No

# of surveyed inspectors / inspections conducted  111total # of respondents 111 35 32 19 10 15 78 33% (total # of respondents = 100) 100.0 31.5 28.8 17.1 9.0 13.5 70.3 29.7Do checklists improve efficiency? (%) (Z1) 111Yes 67.6 77.1 62.5 57.9 60.0 73.3 73.1 54.5How much do you deviate from the checklist? (%) (Z2) 110Not at all 67.6 77.1 65.6 57.9 80.0 53.3 74.4 51.5Some, but not much 30.6 22.9 34.4 36.8 20.0 40.0 25.6 42.4Significantly 0.9 0.0 0.0 0.0 0.0 6.7 0.0 3.0If you deviate, is it your experience that the requirements on the checklists are inadequate or incorrect? (%) (Z3) 35Incomplete 57.1 75.0 45.5 42.9 50.0 71.4 60.0 53.3Inaccurate 11.4 0.0 18.2 14.3 0.0 14.3 10.0 13.3Both 31.4 25.0 36.4 42.9 50.0 14.3 30.0 33.3Is there an internal review process for checklists where you could provide feedback on checklist quality? (%) (Z4) 111Yes 21.6 11.4 15.6 42.1 20.0 33.3 23.1 18.2Are you able to provide inputs to your superiors which influence the requirements on the checklist? (%) (Z5) 111Yes 73.9 62.9 71.9 94.7 80.0 73.3 76.9 66.7Has the field inspection process become more efficient in the last year? (%) (Z6) 111Better 48.6 68.6 50.0 26.3 50.0 26.7 57.7 27.3Worse 14.4 8.6 12.5 26.3 10.0 20.0 9.0 27.3Same 36.9 22.9 37.5 47.4 40.0 53.3 33.3 45.5Do you find that the enhanced inspections procedures have increased the total amount of work you must do? (%) (Z7) 111Yes 82.0 77.1 93.8 84.2 60.0 80.0 80.8 84.8In your opinion, have small businesses responded more favorably to the inspection process in the past year? (%) (Z8) 111

50.5 62.9 50.0 36.8 40.0 46.7 53.8 42.4Table 14: Checklists, by Type of Inspection and Training Status

83

Did your inspectorate conduct any campaigns to inform businesses on the inspection oversight process? (%) (Z9) 111Yes 62.2 68.6 62.5 57.9 50.0 60.0 70.5 42.4Do you feel that businesses are more cooperative in engaging in the inspection oversight process? (%) (Z10) 111Yes 52.3 62.9 56.3 26.3 60.0 46.7 53.8 48.5# of obs 111 35 32 19 10 15 78 33 111

84

ANNEX 3: DATA COLLECTION INSTRUMENTS

Individual Business Questionnaire

A1 Enumerator: A5 Region:

A2 Date: A6 Municipality:

A3 Start Time: A7 Name of business:

A4 Finished Time: A8 Contact #/ Registration #:

B. Background

B1 B2 B3 B4 B5 B6 B7 B8 C1Gender

Are you registered as a business organization or as an entrepreneur?

In which year was your business established?

What is the business sector you predominantly/ mainly operate within?

Approx how many people do you currently employ?

Are you a member of a business association?

If B7 = yes, what benefits do you gain from the association?

(check all that apply)

Do the benefits associated with membership justify the costs associated with membership?

How many unique inspections have you had in the past year?

85

[1] M[2] F

[1] Business organization[2] Entrepreneur[3] Other

[98] Unknown

[1] Services[2] ConstructionManufacturing[3] Ag[4] Industrial [5] Retail/ Wholesale Trade[95] Other

# female

# male

[1] Yes[0] No

[a] Market information/ advice[b] Formal training/ education opportunities[c] Policy advocacy [d] Access to financial services[e] Organizing public outreach[f] Collective marketing[g] Shared experience support[h] I do not gain any benefit

[1] Yes[0] No[95] No payment is required

C. Inspection ProcessC2 C3 C4 C5 C6 C7 C8 C9 C10 C11What was the last type of inspection you had?

What was the purpose of the last inspection?

How much prior notice were you given before the inspection visit?

Where you provided with an inspection checklist prior to the inspection visit?

If C5 = no, did you know where to find the necessary checklist?

If C5 = yes, was the checklist effective in reducing the workload for your business in connection with the inspection?

Was the inspector knowledgeable about your company’s characteristics such as business/risk profile?

How long did it take to complete the inspection process?

Prior to this inspection, when was your last inspection?

How would you characterize this inspection compared to your previous inspection?

[ / ]

[1] Tax[2] Market[3] Labor [6] Sanitary[7] Phytosanitary[8] Agriculture[95] Other

[1] Regular[2] Irregular[3] Preventative/ Advisory

[a] Days[b] Weeks[c] I did not receive any notice

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[a] Days[b] Weeks[c] The inspection is on-going

Month / Year

[1] More efficient[2] Less efficient[3] About the same

86

G. GovernanceG1 G2 G3 G4 G5 G6 G7 G8 G9 G10Are you aware that you can conduct a self assessment prior to any inspection?

If G1 = yes, how many self assessments did you conduct in the last year?

Are you aware that you can request preventative / advisory assistance from any inspectorates?

Have you requested at least one preventative activity in the last year?

If G4 = yes, which inspectorates did you request a preventative visit from?

Does your business have internal procedures that should ensure your compliance with the requirements posed by any of the inspections?

Do you have an external professional assist with your business finances and/or planning?

During your last inspection, did you receive the result of your checklist?

Do you export anywhere outside Serbia in the last year?

Does the VAT process dissuade you from exporting?

[ ] Tax [ ] Market [ ] Labor [ ] Ag [ ] Sanitary [ ] Other

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[1] Tax[2] Market[3] Labor [6] Sanitary[7] Phytosanitary[8] Agriculture[95] Other

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

Finance

F1 F2 F3 F4 F5 F6 F7 F8 F9

87

Today, does your business carry any external source of finance?

If F1 = yes, what type of external source of finance did you use in the last year?

If F2 = yes, what did you primarily need to borrow money for?

(check maximum TWO)

If F2 = yes, what type of banking products did you receive in the last year?

(check all that apply)

If you had to finance an investment today, where would you look for funds?

(check all that apply)

How would you finance your business if you couldn’t get a loan from the bank?

(check only ONE)

Has your business made any request for external non-banking financing in the past year?

If F7=yes, who did you request external non-banking financing from?

(check all that apply)

Beside financing your business via banking loans, would you consider giving equity share in your company to someone who is not family or a close friend?

[1] Yes[0] No

[1] Bank[2] Equity[3] Both

[a] Personal/HH expenses [b] Purchase inventories/ fixed assets [c] Pay off other debts[d] New biz opportunity[e] Expand existing biz[f] Other

[a] Personal Loan

Business Loan [b] Overdraft[c] Short-term loan/Up to 24 months loan[d] Long-term loan/ 24 to 60 months loan

[a] Personal (own) funds[b] Family/ friendsc] Business partners[d] Banks [e] State/gov’t institution[f] Private Equity fund/ Venture Capital fund/ Investment fund[g] Crowdfunding[f] Other

[1] Own sources[2] Family/friends[3] Private Equity fund/ Venture Capital fund/ Investment fund

[1] Yes[0] No

PROMPT: This would be any request for financing from outside investors including friends and family members in exchange for a share of the ownership of the business

(a) A friend or relative of the business owner (b) An employee of the business (c) A private investor from outside the firm unrelated to the firm and its owners (i.e. angels) (d) other

[1] Yes[0] No

88

Finance (con’t)F10 F11 F12 F13 F14 F15 F16 F17 F18 F19If F1 = no, what was the main reason why your business did not borrow money in the last year?

(check only ONE)

Today, do you have a need to invest in your firm?

How much would you want to invest?

How many additional people would you hire?

When was the last year you made an investment in your business?

How is your firm planning to finance next year’s new growth investments and expenditures?

If you need money in the future, which of the following would be your preferred option?(check only ONE)

Has your current business operations been simplified due to better IT services provided by your bank?

Has anyone from your business participated in any training to develop financial management skills in the past year?

Would you be interested in receiving financial management training?

[ ]

[ ]

[1] No need for a loan[2] Wouldn’t get the loan even if we applied/Banker outlined that the application would be denied [3] Application procedures were complex [4] Interest rates were not favorable[5] Collateral requirements were too high[6] Size of loan and maturity were insufficient

[1] Yes[0] No

[1] < 25k[2] 25k – 99k[3] 100k – 249k[4] 250k - 1M[5] 1M+

insert year

[1] Own sources[2] External sources[3] I do not plan to expand next year

[1] Use my own money[2] Family/friends[3] Microfinance[4] Traditional bank finance[5] Private Equity fund/ Venture Capital fund/ Investment fund[6] Crowdfunding

[1] Yes[0] No

PROMPT: mobile banking, digital branches, co-browsing and more services

[1] Yes[0] No

[1] Yes[0] No

89

Inspector Questionnaire

A1 Enumerator: A5 Region:

A2 Date: A6 Municipality:

A3 Start Time: A7 Gender of Inspector: [ ] Male [ ] Female

A4 Finished Time:

X : Inspections BackgroundX1 X2 X3 X4 X5 X6 X7 X8 X9Which inspectorate do you work for?

Approximately how many unique inspections did you personally conducted in the past year?

Did you receive any training on the implementation of inspections oversight?

Did this training improve your ability to conduct inspections?

Have you conducted any preventative inspections in the past year?

If X5 = yes, approximately how many preventative inspections did you conduct?

Did you conduct any other types of preventative oversight activities in the past year?

If G7 = yes, what types and how many of these activities did you conduct?

(answer all that apply)

Has the overall inspection process been simplified and shortened in the last year?

90

[1] Tax[2] Market[3] Labor [4] Construction[5] Environment[6] Sanitary[7] Phytosanitary[8] Agriculture[9] Veterinary[10] Fire protection

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[ ] Advisory (planned)

[ ] Advisory (requested)

[ ] Educational activities

[ ] Other

[ ] Simplified

[ ] Shortened

[ ] Both

91

Y : Planning/Risk AssessmentY1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10Does your inspectorate conduct risk assessments to determine which businesses you should inspect?

Does the risk assessment use quantified and registered data in some kind of formula to determine risk?

Do you personally contribute your experience /information to the risk planning process?

Does the risk analysis use the correct criteria to identify business risk profiles?

Has risk analysis contributed to improvements in inspection planning in the past year?

Do you find you are increasingly inspecting more higher risk businesses compared to last year?

Who determines which businesses you visit?

Are their cases where you personally influencel

Does the issuance of warrants improve how you are received by businesses?

Have you experienced a reduction in the # of inspections you personally conducted in the past year?

Has the inspections planning process improved in the last year?

[1] Yes[0] No

Prompt : if yes, answer Y2-Y5

[1] Yes[0] No

[1] Yes[0] No

[1] Yes[0] No

[1] Better[2] Worse[3] Same

[1] Yes[0] No

[1] Risk Dept[2] Chief Inspector[3] Myself[4] Other

[1] Yes[0] No

[1] Yes[0] No

[1] Better[2] Worse[3] Same

Z : ChecklistsZ1 Z2 Z3 Z4 Z5 Z6 Z7 Z8 Z9 Z10Do checklists improve efficiency, taking into consideration the type of inspections you conduct?

How much do you deviate from the checklist?

If Z2 = 2/3, is it your experience that the requirements on the checklists are inadequate or incorrect?

Is there an internal review process for checklists where you could provide feedback on checklist quality?

Are you able to provide inputs to your superiors which influence the requirements on the checklist?

Has the field inspection process become more efficient in the last year?

Do you find that the enhanced inspections procedures have increased the total amount of work you must do?

In your opinion, have small businesses responded more favorably to the inspection process in the past year?

Did your inspectorate conduct any campaigns to inform businesses on the inspection oversight process?

Do you feel that businesses are more cooperative in engaging in the inspection oversight process?

92

[1] Yes[0] No

[1] None, the checklists are complete [2] Some, but not much[3] Significant, the checklist is inadequate for my needs

[1] Incomplete[2] Incorrect[3] Both

[1] Yes[0] No

[1] Yes[0] No

[1] Better[2] Worse[3] Same

[1] Yes[0] No

[1] Yes[0] No[95] No change

[1] Yes[0] No

[1] Yes[0] No[98] I have no opinion

93

ANNEX 4: DISCLOSURE OF ANY CONFLICTS OF INTEREST [The Evaluation Policy requires that evaluation reports include a signed statement by each evaluation team member regarding any conflicts of interest. A suggested format is provided below.]Name

Title

Organization

Evaluation Position? Team Leader Team memberEvaluation Award Number (contract or other instrument)

USAID Project(s) Evaluated (Include project name(s), implementer name(s) and award number(s), if applicable)

I have real or potential conflicts of interest to disclose.

Yes No

If yes answered above, I disclose the following facts:Real or potential conflicts of interest may include, but are not limited to:

1. Close family member who is an employee of the USAID operating unit managing the project(s) being evaluated or the implementing organization(s) whose project(s) are being evaluated.

2. Financial interest that is direct, or is significant though indirect, in the implementing organization(s) whose projects are being evaluated or in the outcome of the evaluation.

3. Current or previous direct or significant though indirect experience with the project(s) being evaluated, including involvement in the project design or previous iterations of the project.

4. Current or previous work experience or seeking employment with the USAID operating unit managing the evaluation or the implementing organization(s) whose project(s) are being evaluated.

5. Current or previous work experience with an organization that may be seen as an industry

94

competitor with the implementing organization(s) whose project(s) are being evaluated.

6. Preconceived ideas toward individuals, groups, organizations, or objectives of the particular projects and organizations being evaluated that could bias the evaluation.

I certify (1) that I have completed this disclosure form fully and to the best of my ability and (2) that I will update this disclosure form promptly if relevant circumstances change. If I gain access to proprietary information of other companies, then I agree to protect their information from unauthorized use or disclosure for as long as it remains proprietary and refrain from using the information for any purpose other than that for which it was furnished.Signature

Date

95

U.S. Agency for International Development1300 Pennsylvania Avenue, NW

Washington, DC 20523

96