Abstract
Small and medium-sized enterprises (SMEs) constitute the foundation of the European economy, representing over 99% of all enterprises and generating a significant share of employment and gross value added. Despite their crucial role, SMEs face numerous challenges, including limited access to external financing, rising operational costs, regulatory burdens, and the need to adapt to digital and sustainable transformation. Bank credit remains an important source of investment financing, though its relative importance has declined in recent years, as SMEs increasingly rely on internal funds and alternative financing instruments. Cooperative banks play a key role in supporting SME financing, particularly in countries with well-developed cooperative banking sectors, due to their close relationships with local businesses, regional presence, and ability to reduce information asymmetry. However, structural changes such as digitalization, branch closures, demographic shifts, and increasing competition from commercial banks and non-bank financial institutions may affect their future role. The study highlights the importance of cooperative banks in ensuring SMEs’ access to finance and emphasizes the need to strengthen the institutional and financial frameworks supporting SME development in the European Union.