Sarajevo, Bosnia and Herzegovina, July
28, 2006—The International Finance Corporation, the private sector
arm of the World Bank Group, signed an agreement to provide a 3 million
euro loan to Ekonomic Kredit Institution, a non-bank microcredit organization
based in Tuzla, Bosnia and Herzegovina, with branch offices located throughout
the country.
The proposed project will expand a financially successful microlending
program, targeting micro and small enterprises that have little or no access
to the formal financial system. EKI specializes in lending to low-income
entrepreneurs, but has particular expertise in lending to agribusinesses
and for housing refurbishment. The loan includes €2.4 million to
support EKI’s micro and small business lending operations and €600,000
to support its Housing Refurbishment Loan Program, which focuses on energy
efficiency in housing. Many of EKI’s clients live in houses that
remain badly damaged by the war of the early 1990s.
Shahbaz Mavaddat, IFC’s Director for Southern Europe and Central Asia,
said, “We expect the project to have a significant developmental impact
by providing credit to an estimated 20,000 microentrepreneurs over the
next three years.” He added, “The loan will allow EKI to diversify
its client base to include many micro and small businesses outside of its
traditional client base.”
Housing loans will mainly finance installation of energy saving equipment,
such as thermal insulation and improved boilers. IFC’s Environmental
Opportunities Facility will draw on a €60,000 grant from Austria’s Ministry
of Foreign Affairs to train EKI’s loan officers in processing energy efficiency
housing loans.
EKI’s loans range from $180 to $18,200, with an average tenor of 17 months
and a maximum term of 36 months. The organization's strong performance,
as demonstrated by its portfolio growth, profitability, and control mechanisms,
will serve as a best practice example for other financial institutions
throughout Southern and Eastern Europe.
Mavaddat added, “We hope that this is the start of a long-term strategic
relationship with EKI. In addition to the investment, IFC will be providing
governance advice through its technical assistance facility, the Private
Enterprise Partnership Southeast Europe.”
Sadina Bina, EKI’s Director, stressed the importance of microloans for
human development: “Microcredit, microfinance, provides opportunity for
low-income people to start up or continue running microenterprises – and
to generate more income to improve their standard of living. Many people
were affected by the war, and formal sector employment levels remain low.
As a result, each family may have only one income generator in the
family.” She added, “EKI’s overall strategy is to maintain its
leadership position among microfinance institutions by transforming itself
into a new legal structure following passage of a new microfinance law.
This should make it better positioned to provide a wide range of
services and resources to meet the needs of its microentrepreneur clients.”
About EKI
EKI was founded by World Vision
International in1996, when it opened its first office in Zenica. EKI
operates 34 offices throughout Bosnia and Herzegovina, mostly in rural
areas where agriculture is an important business sector. EKI is
one of the most successful microfinance institutions in the country. At
December 31, 2005, its total assets stood at €29.0 million at, of which
its loan portfolio represented 92.7%. Loan portfolio quality was
high, with loans in arrears over 30 days representing0.3% of the gross
loan portfolio at the end of 2005. In terms of profitability, EKI achieved
a net income (excluding grants) of €1.4 million, an increase of 9.1%
over the net income figure of €1.2 million in 2004.
About IFC
The International Finance Corporation
is the private sector arm of the World Bank Group and is headquartered
in Washington, D.C. IFC coordinates its activities with the other institutions
of the World Bank Group but is legally and financially independent. Its
178 member countries provide its share capital and collectively determine
its policies.
The mission of IFC is to promote sustainable private sector investment
in developing and transition countries, helping to reduce poverty and improve
people’s lives. IFC finances private sector investments in the developing
world, mobilizes capital in the international financial markets, helps
clients improve social and environmental sustainability, and provides technical
assistance and advice to governments and businesses. From its founding
in 1956 through FY05, IFC has committed more than $49 billion of its own
funds and arranged $24 billion in syndications for 3,319 companies in 140
developing countries. IFC’s worldwide committed portfolio as of FY05 was
$19.3 billion for its own account and $5.3 billion held for participants
in loan syndications. For more information, visit www.ifc.org.
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