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 Project implementation :

December 1999/ November 2002 (3years)

Consultancy Services for SME Project Implementation Unit (PIU)

For Bosnia and HerzegovinaEBRD

Roma, March 1st 2005

Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT

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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.

 

Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT

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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. 

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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 

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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 

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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

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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

Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT

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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

Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT

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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 

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(Key issues)

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Results

 5 banks have been elected for the project

        Postanska Banka Mostar

       Raiffeisen Bank BiH

       Universal Bank

       Zagrebacka Banka

       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

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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.

Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT