THE ROLE OF FORMAL & INFORMAL FINANCING SOURCES IN ENHANCING DAIRY FARM ECONOMIC PERFORMANCE: A CASE STUDY IN KOSOVO

Abstract

Access to finance is crucial for improving dairy farm productivity in Kosovo, yet farmers face challenges in securing sustainable funding. This study analyzes the impact of formal (loans, subsidies, grants) and informal (non-bank loans, equity, remittances) financial sources on farm economic performance. Using limited primary data from 138 dairy farmers, located in six municipalities of Kosovo, the research applies descriptive statistics and multiple regression analysis to examine financing effects on income, expenses and investments. The results show a new finding in the scientific literature that 97.8% of farmers use multiple funding sources, with subsidies and bank loans being the most common. However, subsidies boost income but lack long-term investment impact, while loans support investment but are hindered by high interest rates, strict conditions and high collateral requirements. To improve access and sustainability, the study recommends low-interest agricultural loans, state-backed guarantees, flexible repayment options, and investment-oriented subsidies. These measures aim to improve access to finance, reduce risk, and enhance the long-term sustainability of Kosovo’s dairy sector.