The effect of European Union structural fund on small and medium enterprises

Purpose of the article This paper seeks to fulfill the following reasons given by OECD (2007) for undertaking evaluation of EU funding programs: which are firstly To establish the impact of policies and programmes, secondly to make informed decisions about the allocation of funds, thirdly show the taxpayer and the business community whether a programme is a cost-effective use of public funds, also to stimulate an informed debate and finally to achieve continued improvements in the design and administration of programmes. Methodology/methods The review of litherature and empirical data collection mostly based on the EU and OECD reports from official EU, OECD, Eurostat and World Bank website and databases Scientific aim This paper contributes to the discussion about the European Union structural funds and mechanisms and also how they affect SME's. Considering the obviouse absence of any critical analysis of the economic effect and viability of the funding programe, this paper serves as a scientific bridge and the beginning of critical study. Findings Seven main groups of SME development factors have been identified: external factors and internal factors and the most relevant effect of Structural funds on SME development factors are access to capital with non-repayable grants and repayable loans, the focus on employability and training of employees/human resources/entrepreneurs and several priority areas which are focused on environment or infrastructure (funded by ERDF and the Cohesion Fund). Conclusions There can only be ample efforts towards understanding the European Union policies towards Small and Medium Enterprises, as across the EU28 in 2013, some 21.6 million SMEs in the nonfinancial business sector employed 88.8million people and generated (sic) 3,666 trillion in value added. Expressed another way, 99 out of every 100 businesses are SMEs, as are 2 in every 3 employees.