Bosnia and Herzegovina SME PROJECT Consultancy Services for

Bosnia and Herzegovina – SME PROJECT Consultancy Services for SME Project Implementation Unit (PIU) For Bosnia and Herzegovina EBRD Roma, March 1 st 2005 Project implementation : December 1999/ November 2002 (3 years) 1

Bosnia and Herzegovina – SME PROJECT Structure of Project · A SME credit Line Framework facility of Euro 15 million, to be channelled to privately owned SMEs through credit lines made available to privately owned participating banks, to finance eligible projects of SMEs. · A technical Co-operation programme involving setting up of an autonomous PIU staffed by experienced banking/credit professionals (consultant) in order to support and monitor the implementation of the facility. 2

Bosnia and Herzegovina – SME PROJECT Background · A number of eligibility criteria as to the ownership and financial structure of the participating banks and of the SMEs have been determined by EBRD. · Loan Agreements signed between the banks and EBRD determine the eligibility criteria and the responsibilities of every participants. · Final risk is borne by each individual bank. · The consultant reviews each sub-project. 3

Bosnia and Herzegovina – SME PROJECT Objectives Providing liquidity for long term lending to banks who don’t have the adequate resources Providing long term funds to SMEs for their investments Strengthening of the credit decision and implementation processes Training Banks’ staff Assisting Participating banks (PB) in assessing loan applications Co-ordinating disbursement requests from the PBs Reporting to EBRD 4

Bosnia and Herzegovina – SME PROJECT Scope of work TA work follows a rigorous methodology and process, though the consultant has to adapt to local conditions, and primarily set up a confident relationship with the selected banks, based on professionalism. Phase 1. · Assessment of the credit issues and level of credit expertise in the banks · Design of a working plan with clear benchmarks 5

Bosnia and Herzegovina – SME PROJECT Phase 2. All tasks are to be performed simultaneously. At the level of the bank management and credit management. · Improvement of the credit procedures and processes · Credit decision process/organization of the credit department · Standardization of the approach to SME lending · Organisation of the credit committee · Delegation of authority · Code of ethics · Environmental procedures · Credit procedures and manual 6

Bosnia and Herzegovina – SME PROJECT At the level of the individual credits · Creation of a pipeline of potential projects to be financed · Selection of the projects to be financed · Screening of the projects · Disbursement · Monitoring of the individual credits and of the facility Training · Set up of a training programme to cover the main aspects of credit analysis and decision making · On the job training · Class room training 7

Bosnia and Herzegovina – SME PROJECT Key issues Transmission of know How and experience This implies a close together working with the credit staff, based on practical and work on the ground Helping credit staff to build up a substantial pipeline Prioritising the selection of projects according to priorities of the bank as to the type of clientele, quality of every individual project and quality of risk/credit worthiness Site visits to identify key issues and key questions. Checklist and preparation of the client interviews 8

Bosnia and Herzegovina – SME PROJECT (Key issues) Preparation of a business plan Assessment of the project and business plan, making sure all the appropriate elements have been taken into consideration (financial, marketing, industrial, environmental) Close review of the assumptions Security taking and role of the guarantees Post disbursement site visits to check on individual projects completion Closely monitoring the repayments 9

Bosnia and Herzegovina – SME PROJECT Results 5 banks have been elected for the project v Postanska Banka Mostar v Raiffeisen Bank Bi. H v Universal Bank v Zagrebacka Banka v UPI Banka The full amount (Euros 15 million) has been on lent to SMEs The whole territory of the Federation has been covered Over 60 sub-loans have been granted Marginal delinquency and default rate 10

Bosnia and Herzegovina – SME PROJECT Training 15 : number of staff trained Strengthening of Bank organization. Changes in the Credit decision process and organization of credit committees have been recommended and implemented. Credit procedures have been proposed and implemented. Banks expressed their overall satisfaction to the experts. 11