Credits for small businesses

During the last year and a half, the Business Bank MEB approved approximately 2,000 loans, worth between 400 and 60,000 DM, to private companies in the Federation.

By Sanja Hodzic

The business bank was created by five partner organisations: the European Bank for Reconstruc-tion and Development (EBRD) the International Financial Corporation (IFC), German consultants IPC and two banks from Sarajevo, FMO and BH Banka.

Business Bank MEB has its headquarters in Sarajevo and branch offices in Ilidza, Tuzla and Bihac. Plans to open another branch office in Banja Luka are underway.

Success - the only criteria

As a business bank, the MEB bank supplies loans to very small or 'micro' enterprises, which often employ just one or two people. Customers typically include people who run market stalls, café owners and taxi drivers, explains Bank Manager Elke Oehme.

To be eligible to apply for loans, businesses have to have been registered for six months or longer and credit approval rules are the same for all applicants whether they are refugees, returnees or local residents.

Oehme explains the steps businesses seeking credit must follow when approaching the bank. "Anyone interested in working with us must come personally to our headquarters and fill in an application form. Then our experts analyse the condition and productivity of the business and our team goes to the field to assess the situation on the spot. After that the team will recommend whether credit should be granted or not and, if the answer is yes, how much money should be made available. Then, once we have ensured that the loan is fully guaranteed, we pay the borrower", she says.

One percent of clients are late

Oehme says that only around one percent of her customers are late in paying off their instalments. If this happens, the person who has agreed to guarantee the loan must pay in the borrower's place, she explains. Bank employees also carry out regular inspections to ensure that funds are being spent correctly.

What makes MEB different to other banks is that it supplies loans to people who would normally find it very difficult to gain access to credit as most commercial banks are wary of dealing with micro enterprises. Besides having the basic aim of any bank ­ to make a profit ­ MEB also has as one of its core goals the creation of employment in BiH. As Oehme put it, they strive to tackle challenges of the global economy through the development of micro enterprises.

Capital of the bank - five million DM

MEB Bank employs 24 persons and also carries out regular jobs such as opening accounts for its clients and issuing chequebooks. The bank has existed in Federation of Bosnia and Herzegovina since November 1997 and has a total capital of around five million DM. The European Union has provided some six million EURO to help finance the bank's work, and the Norwegian and Japanese governments have made available a further 600,000 DM.

Credit Conditions

Borrowers pay differing interest rates on their loans depending on the activity their business is engaged in. Shops and services pay between 2 to 3 percent, while the rate for companies producing products is between 1.5 to 2.5 percent.

Money made available for private businesses has to be paid of within 18 months but this time period is extended to 60 months when credit is used as working capital.

Borrowers must have one or two guarantors, depending on the amount of money they are asking for. Guarantors can either be private individuals or profitable companies.

For all loans worth more than 20,000 DM, borrowers are obliged to mortgage their property as collateral.

Aziza Pucar, Credit Beneficiary

Second Credit Planned

Aziza Pucar from Sarajevo owns a stand in Sarajevo's "Kvadrant" market. He has recently had his request for a 3,000 DM loan approved by the MEB bank. Pucar must pay off any credit she uses to ease the turnover of her goods within ten months and she has just made her third repayment of 342.94 DM. "This is the first time I have ever applied for micro-credit and I have to say that the bank staff have been very helpful. The whole application and approval procedure lasted four days and after that the money was transferred to me almost straight away! At present, I do not employ anyone", she explains. Pucar, who has been in the market business for four years now, says she is planning to pay off the remaining credits on her existing loan and then apply for more credit. She hopes this will enable her to expand her business. "With another loan, I would be able to rent one more stand or even a box at one of markets in Sarajevo which would enable me to employ my son and daughter-in-law, or even someone else", she says.

For more information:
MEB Banka
+387 71 232 172 or 232 173