UNDP Microfinance Assessment Report: Croatia
UNDP microfinance assessment reports take a full perspective of national economy, politics, culture and the climate for microfinance. Their contents are structured around common components of which four here are microfinance specific. The components are:
- Executive summary;
- Political and administrative structure;
- Socio-economic situation;
- Cultural context;
- Finance and banking;
- Donor and international NGO Interventions in microfinance sector;
- Credit Unions, Savings Co-ops and SME finance;
- Potential and demand for microfinance;
- Abbreviations, acronyms, currency equivalents, indicators.
Finance and banking
The banking sector is suffering from serious liquidity problems due to bad loans. The government restructuring program is focusing on sanitising the portfolio of the largest banks so that they can restart on a sound financial basis. Due to high inflation rates and previous experiences with loss of savings, during the collapse of former Yugoslavia in the early '90s, people avoid keeping savings in banks. Since the majority of savings are not being banked, this means that there is a large informal financial sector based primarily on hard currency.
Donors and international NGOs
There is a strong focus on Small and Medium Enterprise finance from donors. There are very few NGOs operating in the field of microfinance.
Credit Unions, Savings Co-ops etc
Permission to create a credit union/savings co-operative must be obtained from the National Bank of Croatia. The two key players in Micro/SME finance are CARITAS and NOA/OPPORTUNITIES INTL. CARITAS is providing credit throughout the country (Zagreb, Zader, ?ibenik, Split Rijeka and Djakovo) and NOA a local credit union is operating in the area of Osijek. Both of these organisations are applying commercial interest rates. In the case of NOA/Opportunity Intl the objective is to create a financial sustainable credit union.
Potential and demand for Microfinance
There are two main strategies. One is to develop the framework for a permanent mutual guaranty fund which could provide long term access to bank credits for members but it requires strong management skills and may be susceptible to political pressures. Another option is to create a Grameen replicator or credit union to allow members to mobilise their own savings and increase the individual's stake in credit operations and allow guaranty decisions to be made at the small group or individual level. In both models the project should avoid financing production agriculture.
