Lithuania's SME Sector Faces €1 Billion Financing Gap

The dominance of foreign-owned banks has created a high-barrier environment where 90% of SMEs must provide collateral to secure loans, a requirement far exceeding the EU average. With outstanding SME loans representing less than 10% of GDP in 2024, many firms are forced to rely on personal savings rather than institutional investment. This lack of liquidity prevents small businesses—nearly all of which employ fewer than 10 people—from scaling their operations or investing in modern technology.

Capital market underdevelopment further compounds these systemic issues. While alternative funding sources like crowdfunding have gained traction, they remain heavily skewed toward real estate and technology startups, leaving traditional industries behind. The erosion of domestic capital, highlighted by the contraction of second-pillar pension assets from €11 billion to €7 billion in early 2026, limits the pool of available long-term investment. To reverse this trajectory, the IMF suggests a multifaceted reform strategy, including strengthening the national promotional bank ILTE and integrating more deeply with broader European financial markets to reduce the cost of capital.