Case Study

CARE Microfinance Case Study - Banja Luka, Bosnia and Herzegovina

How can group lending be a segue into individual lending in post-conflict regions?
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This case study, on CARE International's microcredit program in Bosnia and Herzegovina at the end of the war in 1997, details how it became one of the 17 successful microcredit institutions financed by the World Bank's Local Initiatives Microfinance Project (LIP).

  • The program started towards the end of 1997, but was registered locally in mid 1999 when NGO, Mikrofin, took charge of the microcredit program;
  • The objective of the program was to provide microcredit to low-income entrepreneurs;
  • Appropriate financing and institutional development enabled Mikrofin to become the largest microfinance provider in the region.

The following is an outline and description of the case study:

  • Methodologies:
    • Mikrofin provided group loans to refugees and the displaced poor who did not have access to any traditional collateral, with the help of the CARE International Project Manager;
    • It eventually provided individual loans, which were larger collateralized loans, to clients who had graduated from the solidarity group;
    • Loan sizes to groups ranged from $217-$652 while those to individuals had a range of US $1089-$6527.
  • Institutional framework:
    • Mikrofin is legally registered as a Citizens Association - a local NGO;
    • As of 2001, Mikrofin had plans to register as a non-profit, non-deposit taking microcredit organization.
  • Program information:
    • Mikrofin has become a self-sufficient and sustainable institution financing its operations through income generation, and not donations;
    • As of June 2001, Mikrofin had close to 4,000 active clients.
  • Lessons learned:
    • Staff training and technical assistance is a key constituent to growth;
    • Staff localization helped significantly with outreach due to better cultural knowledge;
    • Strict reporting standards ensure efficiency.
  • Challenges/constraints:
    • Mikrofin needs to asses its market position as competition increases;
    • It needs to form a solid management team;
    • It requires greater commercial funding.

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