Credits for housing

The European Commission has joined forces with the Kreditanstalt fur Wiederaufbau to set up a housing finance programme in Bosnia and Herzegovina. The housing loan programme has a double objective: to improve housing supply and at the same time to establish a sustainable financing system for housing construction in BiH. KFW has set up a revolving fund to which the European Commission has contributed 15 million EURO. The funds are made available in the form of loans to families who want to rebuild, extend or improve their homes. Given the limited experience of Bosnian banks in housing finance, and in order to limit the default risk, KFW consultants help the selected commercial banks establish housing loan departments and train loan officers. Thus the lending activities, including the screening of application forms, are closely monitored.

By Nihada Alajbegovic

During the past year BiH Kredit Bank KFW provided 38 million DM for housing reconstruction in Bosnia and Herzegovina. It has also begun to provide finance for small and medium-sized enterprises (SMEs) and up until now has made 800 individual loans. KFW has chosen to work with local banks in Bosnia and Herzegovina - four of them in the Federation of Bosnia and Herzegovina and two in Republika Srpska. The partners in the Federation are BiH banka, Gospodarska banka, Market banka and Univerzal banka, and in Republika Srpska, Kristal banka and Banjalucka banka.

"We signed agreements with these banks in October last year, and we have been doing business since November. After we began work on housing reconstruction, we started the second credit line designed to help SMEs. In Republika Srpska 28 companies have applied for loans although the funds have not yet been spent as they were frozen during the war in Kosovo. During hostilities we decided that our branch office in Banja Luka was not secure so we took the decision to withdraw our operations to Sarajevo. However, we hope that we will be able to revive this programme soon", said Leon Macioszek, Head of KFW's Sarajevo Office.

Partner banks

So far, KFW's partner banks have received some 1,900 requests for funds to build housing units. Of this total, 800 have been approved with a total value of 14 million DM. Out of 650 requests in Republika Srpska, 172 loans have been approved for the housing development. When it comes to allocating loans, there are no special criteria. All categories are included: returnees, refugees and the local population. Basically, any family can go to a partner bank and apply for credit.

The maximum amount that can be made available for a housing loan under the KFW scheme is 32,000 DM. Interest levels vary between 8-10%, depending on how the loan is insured. The housing credit scheme is a relatively long-term programme and borrowers have up to 12 years to pay off their loans. Funds for SMEs, on the other hand, are made available under different terms.

"Six weeks ago, we had 736 requests from SMES for credit. Now that figure has risen to 800. The annual interest rate on these loans is 12-16 percent, with a five-year payment plan. This programme provides a credit in a way that no other donors have up until now. Large companies have been helped by USAID, but our programme supports SMES", said Macioszek.

Late payment affects endorser

Studies carried out by KFW staff show that around 1.5 percent of borrowers are over 30 days late in repaying their loan instalments. In such cases money is transferred to the bank from the accounts of loan guarantors who undertook to ensure that the borrowers' repayment deadlines were met. According to KFW's figures, most of their housing credits have been given to people who stayed in their homes during the war. One of the reasons for this is that a person who applies for the housing reconstruction credit must be a homeowner.

"Returnees usually do not have permanent accommodation. We noted that our clients are in most cases the people who have already started rebuilding their homes. Our advice to returnees is to find accommodation, find a job and then decide where to stay. They should try to find a job that would ensure a salary of at least a few hundred DM a month then find an apartment and someone who can guarantee for them. Only then can they approach us. It is difficult to give a loan to a refugee with no accommodation and no job because he has no means to pay it off", stressed Macioszek.

KFW plans to expand its programme throughout Bosnia and Herzegovina. They currently cover Sarajevo, Gorazde, part of Middle Bosnia, Una-Sana Canton and Zenica-Doboj Canton, Banja Luka, Kotor Varos and Celinac. In total, this amounts to around 30 percent of the country's territory, meaning that 70 percent is still not covered.

The bank is hoping to begin operating in Republika Srpska, primarily in Doboj, Derventa, Bijeljina and Brcko. It also preparing to extend its activities in the Federation to Tuzla and Mostar. KFW hopes that a project to provide housing loans in Tuzla should be up and running by the end of this month. Its partner bank in the town will be Komercijalna banka.

Short and Efficient Procedure is the Goal

Macioszek says his bank's aim is to make the procedure for applying for housing loans as straightforward as possible.

"People who are interested in securing credit come to the bank and fill in an application form. We ask them if they have someone to guarantee for them and if they have their own property. If they give us positive answer we give them permission to apply for a loan. They must then present certain basic documents to the bank clerk. After this, we go to the spot to assess the damage. That is usually sufficient to secure the first payment. If the funds received are used properly they are then given the next instalment, with the guarantee of endorsers. We hoped this would be a relatively short procedure, three weeks for example, but in reality it usually takes six weeks, sometimes even longer.

The procedure is relatively short and efficient in cases of the housing credits - the bank clerk immediately knows what should be done. Sometimes we ask our client if he knows anyone abroad who could be able to help him to pay off his debt. Criteria for loans to SMEs are different and depending on the number of people employed in a particular company, on market conditions and on the amount of money that is being asked for.

Sometimes, it is necessary to carry out a personal investigation into individuals applying for loans ­ we need to know if the business they are planning is legal for example. This sort of crediting takes more time and is more complicated than the housing crediting. Companies that apply for the credit must not have more than 50 employees. This is one of conditions. The sorts of businesses that approach us most regularly are small bakeries, transport firms, equipment manufacturers, small printing companies and catering firms".

Macioszek says that KFW has a particular interest in working in Brcko.

"We are going to discuss with the European Union the possibility of setting up a special fund for Brcko because of the area's particular political significance", he said. He added that he hopes that this particular project will help local banks because the profits they could gain from it would allow them to become stronger and more trustworthy in the eyes of future customers.

KWF's contract with the European Union will be valid for 15 years, showing that the bank is considered a serious partner.

For more information:
KFW
tel.: + 387 71 213 017

"Inspekt RGH" Sarajevo Credit Enabled Expansion of Business

"Inspekt RGH", a goods control company from Sarajevo owned by Halid Jazvin, was recently awarded a loan by Market banka.

The bank recommended them to KFW who approved a credit line worth 100,000 DM for the firm. The monthly interest rate on the loan is 3,330 DM. Inspekt RGH owns laboratories in Kakanji and Tuzla that carry out quality control procedures on all kinds of goods. It also has branch offices in Bihac, Mostar, Breza, Gracanica and Zenica. After applying for the loan, the company had to wait for a month while a series of in-depth checks was carried out on its activities.

"They helped me a lot. I received the credit, expanded my business, and employed more people. I am now planning to put in a request for a new loan that would enable us to purchase two new machines for analysing the ecological quality of goods. We will be able to analyse the percentage of sulphur in coal and lead in petrol. We have taken on three new employees who are currently working for us for a trial period", says Jazvin.

Safet Subo, owner of Sarajevo's 'Dino Company' fitness club and Nihad Foric, who runs a trading company in the city both had similarly positive experiences of the KFW loan scheme.

in the Federation of Bosnia and Herzegovina:
Market Banka, Danijela Ozme 3, 71 000 Sarajevo
Market Banka, Marsala Tita bb, 73 000 Gorazde
Market Banka, Tabhanska 26, Visoko
Gospodarska Banka Sarajevo, Ferhadija 11, 71 000 Sarajevo
Gospodarska Banka Sarajevo, Kralja Tvrtka bb, 72 290 Travnik
Gospodarska Banka Tesanjka bb, Usora
Gospodarska Banka Sarajevo, Branilaca grada 2, 72 000 Zenica
Gospodarska Banka Sarajevo, 111 XP Brigade bb, 72 230 Zepce
Universal Banka, Branilaca Sarajeva 20/5, 71 000 Sarajevo
Universal Banka, Petog korpusa 15, 77 000 Bihac
Universal Banka, Trg Ahmeta Mrzljaka, 77 000 Velika Kladusa

in the Republika Srpska:
Banjalucka Banka, Marije Bursac 7, 78 000 Banja Luka
Banjalucka Banka, 78 220 Kotor Varos
Banjalucka Banka, 78 240 Celinac
Crystal Banka, Ivana Frane Jukica 9, 78 000 Banja Luka