Microcredit scheme for Southern and East Europe LOCAL

“Microcredit scheme for Southern and East Europe” LOCAL DEMOCRACY AGENCY SUBOTICA Overview of activities … Initial observations … Clients … Opportunities. . . Subotica, 10 th of March 2010.

Overview on 2009 ü In a past 12 months ALDA Microcredit was succesfully brought on Serbia financial market. ü Since the beginning of the project, LDA Subotica office worked on the presentations in several cities of Vojvodina, and our aim was to bring Microcredit line more closer to young entrepreneurs. ü Presentations were made for the district of Subotica, Bačka Topola, Senta, Čoka and Ada. The plan was to cover up the whole region of Vojvodina. Response was from 40 to 60%. During 2009, office in Subotica made 100. 500 EUR, and LDA CSS took much more of total amount 1. 085. 344 EUR.

Overview on 2009 • During 2009 LDA Subotica was started the project implementation phase. This phase was logical continue of former activities in 2008. • LDA Subotica was set up effective communication strategy towards clients, strategy that uses presentations as method of informing potential clients about the Micro credit scheme. • Actual, “on –field” problems were connected to clients that do not meet all the criteria needed for successful application. • Most important sector - agricultural / farming sector - was excluded from the Micro credit scheme. • Also, start-up borrowers were not in Bank’s focus as agreed in first place, often labeled as very risky financial category. • In order to fulfill 1 million EURO aim, during August 2009, we changed our policy and focused our resources towards borrowers with good annual income, solid assets, good support for credit collaterals etc. • By the mid October LDA Subotica has improved the former approved amount of 25. 000 EURO, to the new level of 100. 500 EURO disbursed to borrowers.

Initial observations ü In Vojvodina there is around 20. 000 SME enterprises, and more than 20. 000 enterpreneures. These customers are mainly interested in the maximum amount of loans with maximum repayment period. ü Need for financial support still remains. In 2010 there will be constant demand for any investment activities. ü Most important sector is the agricultural sector, particulary agricultural service sector that includes: organic food producers, fishery, producers of frozen vegetables and fruits, orchards, vineyard producers etc. Including this sector in Micro credit scheme can enlarge our possibilities in 2010. ü Operational problem can be justifying the spending of funds with invoices, particulary in cases of purchase from third parties. ü With a concrete actions towards selected focus groups and with 1 year experience, we can point out ALDA credit as competitive investment option.

In the begining: Conditions / Institution Credit amount Comparison: Micro credit and other credits on the market MICROCREDIT OTHER BANKS FUNF FOR DEV. 3. 000 - 10. 000 EUR not limited 5. 000 - 30. 000 7, 0% 13 - 25% 3, 0% 3 years 1 - 20 years 4 years 3 - 6 months 1 year Interest rate Repayment period Grace period In this moment: Conditions / Institution MICROCREDIT BANK A BANK B FUND C BANK & FUND Loan purpose Investments Equipment Investments Credit amount 1. 000 - 30. 000 EUR up to 200. 000 EUR up to 5 mil. EUR up to 200. 000 EUR 3. 000 - 100. 000 EUR 5% + 3 M Euribor 4, 5% + 3 M Libor 12% 3, 25% + 3 M Libor 8, 25% + 6 M Euribor 6, 5% 7, 0% n/a 4, 0% 12, 02% 6 months to 5 years up to 3 years up to 5 years 3 - 6 months up to 1 year no up to 1 year 3 - 6 months Nominal IR Effective IR Repayment period Grace period

Strategy in 2010 • In 2010, in order to serve greater number of potential clients, we will try to maintain communication with clients trough presentations. This approach of presenting the information is very attractive and useful. • With constant presentation activities we can improve Microcredit visibility, bring all necessary informations regarding succesfull application submiting, explaining basic conditions that must be fulfilled. • Besides, LDA Subotica will continue to support clients in preparing the business plan and other needed documentation. • Our strategy will target clients that belong to young tenants in business incubators, women entrepreneures, borrowers with great employment rate and clients with innovative ideas. • Therefore, our main goal is to settle new agreements on cooperation with institutions such as LED departments, Chambers of Commerce, and Bussines incubators. • Plan is to cover up the most succesfull entrepreneurial municipalities and regions in Vojvodina, as well as ones that were not covered before.

Strategy in 2010 Presentation chart in 2010. PREVIOUSLY HELD PRESENTATIONS TO BE HELD

Clients During 2009 LDA has been managed 48 client applications, and five borrowers succeded. Among those five are: S. Z. R. “Paroški”, S. Z. R. “Bajka AAA” and “Autoremont – Car service” d. o. o. S. Z. R. “Paroški”, Bačka Palanka SZR “Paroški” is a small family firm with more than 10 years of working experience. Main purpose of the firm is to combine livestock growing with forage production, mainly for the hogs at the farm. Production capacity of the farm is approximately 200 hogs on annual basis. The farm management’s intention was to expand the production to 800 pigs per year, while the forage production amounts to 4 tons daily, which makes 65% of the production capacity rate.

They have been in this production sector since 1996, and since then main problem was to equip firm with a good distribution vehicle. Management decided to take a chance and apply for a Micro credit loan. Decision was proper and micro credit conditions were major element for focusing this loan instead of other commercial loans. The owner Mr. Vladimir Paroški said: “With readiness and persistence of LDA consultants and with expedition and preciseness of Bank’s officers, we did manage to gain a financial advantage in comparison with other similar producers. Through this financial help firm managed to gain a comparative advantage, in comparison with other similar producers. Through this financial help firm managed to buy a transportation vehicle, making supply and sales process more effective and easier. We are really glad for having a chance to cooperate with reliable consultants form Local democracy Agency. They analyzed our possibility for business development, preparing with us our business plan and other documents need thought the submitting process”.

“Paroški” family farm is successfully repaying the micro credit loan. Credit was approved for a two years period, and half of that time has passed. With the vehicle firm managed to rise sales share in local market by 25%. Besides that, they lowered delivery period, and also reduced costs in fuel and services, providing a higher quality service. S. Z. R. “Bajka”, Pančevo SZR “Bajka AAA” from city of Pančevo is the private children’s kindergarten and the playroom. “Bajka AAA” started their bussines in september 2008 and from then „Bajka AAA“ developed very effective business in sector of services. Main purpose of this small private firm is making children’s happy by organizing birthday parties, celebrations, and fun events for the kids aged 2 -12. Besides, there was a special program of learning, which combines playing practical games and studying. In order to improve the quality of the programs intended for the children, they decided to invest in equipment. During 2009 head manager and the owner of the firm, Miss Aneta Ilić, has called LDA office in Subotica with proposition for cooperation on Microcredit loan. „Bajka AAA“ wanted to invest 8. 000, 00 EUR in a new box playhouse, like the ones that can be seen in Mc. Donalds stores.

Bajka AAA

With this investment, „Bajka AAA“ made their space much more interesting for kids, as in financial matters, they managed to keep and extent number of kids, and that surelly had good effect on firms profit. Application was subbmited in 15 th of October and by the end of the month loan was granted. Miss Aneta Ilić was very pleased to have the assistance of LDA Subotica consultant, and she also said: “I enjoy working with children. One can see their satisfaction in their eyes. During 2009 for me and my business it was almost impossible to continue. I knew that I have to make a step forward, to be better than other private playrooms, and to offer something innovative. So, the best choice was investing money in 3 D box for children. Now I have a biggest 3 D box in Pančevo that can offer fun for 20 kids at the same time, and furthermore I have satisfied clients who are coming over and over. Once again, LDA people were here to help with good business plan preparation and concrete advices. With them and with good and encouraging loan conditions, in the middle of raging economical crisis I got a chance to improve and extent my business”.

SZR “Autoremont”, Pančevo „Autoremont“ d. o. o. is now one of the biggest car mechanic service in city of Pančevo. This is a family owned firm with 100% private capital, the property of two brothers’, Đuro and Nikola Pivašević. “Autoremont” started their family business in 1990. as small family car service, called SZR “Autoremont”. In 1998 owners founded “Autoremont” d. o. o. , limited liability company. During last August, the management of this company decided to build up a new car service facility. In consultation with Bank’s officers they were offered the Microcredit loan. The whole investment was around 62. 000 euros, while the part that was covered from the ALDA loan was 30. 000 euros.

During consultations period with LDA officer, management made one step forward. “Autoremont” completed the construction of the facility, employed 4 new workers, and started preparations for a new investments. This will help them obtain necessary equipment and tools to meet the requirements for direct cooperation with FIAT Italy. In this way, entire investment and loan got new very important dimension. Mr. Pivosević and his advisors made a profitable long term contract with FIAT Italy, becoming their official service and car dealer.

Project supported by:

THANK YOU ! Milan Bošnjak Micro credit consultant LDA Subotica office March, 2010.