doi.org/10.52340/eab.2025.17.02.07

In order to overcome the economic and social problems of society, authorities of all countries pay great attention to supporting small businesses and their development. At the current stage of Georgia's development, small businesses have a significant impact on raising the standard of living of the population and the country's economic growth rates. A fundamentally new approach to the development of economic policy and the social sphere lies in the fact that their main task is not the distribution of social benefits but rather fostering dynamic growth of the employed, enhancing their qualifications, integration into the labor market and, on this basis, advancing the social sphere. In this context, small businesses are an objectively necessary and important socio-economic element of a market economy, which allows not only to solve such important problems as: employment of the population and growth of their income, but also contributes to the integration of individual social strata of the population into the labor market. By shaping the economic, social and political interests fabric of society, small businesses have become a key driver of socio-economic transformation of the country, GDP growth, overcoming unemployment, and budget replenishment. By promoting economic growth, small business help cultivate a socially engaged citizenry and a robust middle class, which ensures an increase in the standard of living, contributes to the irreversibility of democratic transformations in society.The Strategy for the Development of Small and Medium-sized Enterprises in Georgia for 2021-2025 aimed to foster the continued advancement of small and medium-sized enterprises, aligning with fundamental principles of the European Small Business Act and incorporating the best practices of EU member states. The overarching objective was to enhance the competitiveness of small businesses, while promoting inclusive and sustainable economic growth. Thus, the main goal of developing this strategic document was to determine the specific interests of the country in the field of small business, take into account international practice in this field and overcome the obstacles that actually exist in the country in the field of small business development. To achieve this, it was vital for the country to formulate policies that effectively respond to the challenges faced by small and medium-sized businesses. The strategy for the Development of Small and Medium-sized Entrepreneurship in Georgia for 2021-2025 and the corresponding Action Plan were developed with the active involvement of the European Union. In addition, the vector of small business development and international support has significantly changed against the background of the decisions taken by the Government of Georgia in 2025.
The current conditions and institutional environment in Georgia fall short of meeting the requirements for the country's economic and political stability. Key challenges include ensuring free competition, fostering orientation toward foreign markets, providing effective financial and credit support from banks, financial institutions, and investment funds, as well as establishing a flexible labor market and robust labor relations. These shortcomings directly hinder the development of small businesses. It needs regulatory, organizational, financial, credit, resource, scientific-technical and informational support at both state and non-state levels. The main goal of the state support policy is to coordinate the efforts of central, regional and local government bodies to create favorable conditions for the development of small business and to elevate their role in the economic and social progress of the country. An effective support system – encompassing both state and non-state initiatives - not only enables the growth of small business but also improves the social well-being of employed workers and society at large. The key areas of such support include: enhancing the legislative framework for regulating business activities, addressing small business development issues at the national, regional and local levels, and providing financial, credit, informational, consulting, scientific and personnel support to small businesses.
To effectively address small business challenges in Georgia, it is vital to identify and analyze the factors influencing small business activity. Equally important is the development of state and non-state support measures aimed at improving the effectiveness of both national and regional programs for small business development, the social sphere, and the overall recovery of the country's economy.
The study presents a classification and analysis of those factors that negatively affect the development of small business in Georgia. To mitigate these factors and reduce their impact on small business development, we not only identified them, but also classified and ranked them in order to determine, based on the analysis, ways and main directions for reducing their impact on small business.
This study undertakes a thorough classification and analysis of the factors that adversely affect small business growth in Georgia. To minimize their impact, these factors were not only identified but also systematically classified and ranked. This process allows for a detailed understanding and provides the foundation for determining strategic approaches to mitigate their influence. Based on this analysis, clear directions and actionable measures have been proposed to reduce these negative effects and foster sustainable small business development.

Keywords: Small business, development factors, identification, research, impact on the country's economic development.
JEL Codes: L26, O12, M13, H70, J24, O10

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