IFC Helps Citizens of Bosnia and Herzegovina Overcome Over-Indebtedness

Nataša Goronja, International Finance Corporation

Some 20 years after the Balkan conflict, Bosnia and Herzegovina is still struggling economically. Growth is sluggish and unemployment exceeds 25 percent. Many citizens are highly indebted and, lacking basic financial literacy, are unsure how to climb back into the black.

Court cases in which lenders have sued their clients are clogging the court system, eroding the relationships between financial institutions and their borrowers and pushing some into the informal financial sector.

Project Microfinance in Bosnia and Herzegovina, overseen by the World Bank Group’s Finance and Markets Global Practice, has been working to restore responsibility to the country’s microfinance sector.

“To date more than 3,000 individuals have received debt counseling and well over 10,000 have received financial literacy education through this project,” said Thomas Lubeck, IFC Regional Manager for the Western Balkans.

Modeled after similar initiatives in the UK, South Africa, Austria, and the Czech Republic, IFC works with local municipalities to bring constructive debt counseling solutions to those facing a real problem.

More than twenty municipalities have joined the project, which offers free financial counseling to their citizens, and new ones are expected follow. Srebrenica, a symbol of suffering during the war in Bosnia and Herzegovina, is the latest municipality to join the project.

“We hope the citizens of Srebrenica will also have a positive experience and use counseling services provided locally by the municipality,” said Lubeck. “We are very grateful to our partners is this project: the Swiss government, the European Fund for Southeast Europe (EFSE) and association
U plusu.”

The municipality of Bijelina in north-eastern Bosnia and Herzegovina was one of the first to join the program.

“I had a job and was repaying a loan, but I became unemployed,” says Gordana Antić, a client from Bijeljina. “I was unable to repay my loan on time but managed to get it rescheduled thanks to the counseling program operating within the Bijeljina City Administration.“

The project also works to help the country’s microfinance market become more responsible. Through a partnership with the SMART Campaign for responsible microfinance, three microfinance institutions (Partner, EKI and MI-BOSPO) have been certified. As a result, sector responsibility has increased and organizations that are already compliant with the international standards have gained ground.

In addition, in partnership with EBRD, KfW and EFSE, IFC and the World Bank Group will continue to assist the country with the necessary regulatory changes relating to microfinance industry.

To learn more about this project, please watch this short video.