English

Abstract

IntroductionThis paper explores whether microcredit (MC) programs have any effect on alleviating poverty and restoring livelihoods for the targeted populations in Bosnia and Herzegovina (BH). Doyle, who conducted a comprehensive review on the general impact of MC in helping refugees, returnees and IDPs in improving their living conditions and restoring their livelihoods, seems to believe so (Doyle, 1998 & 2008). As a mechanism that has a stated directive and the objective of targeting the most impoverished groups of society, the role of microfinance in BH deserves much more attention and serious exploration.Bosnia and Herzegovina is a country that endured a devastating war from 1992- 1995. The traditional best-practice paradigms of microfinance are inapplicable in war and conflict-affected situations because of the instability of the governmental and financial institutions, and the lack of communal and social trust among individuals. Within these post-war environments, refugees, returnees and internally displaced populations (IDPs) are among the most marginalized and helpless of the affected groups. Providing microfinance to them is then perhaps the most challenging problem facing practitioners and MC institutions engaged in this kind of relief and development work. Various micro-financial institutions have been active in Bosnia-Herzegovina since 1996 and struggle with providing services in such a challenging environment. An insight into their work promises to uncover strategies that may be employed with the problems and successes of such endeavors. Therefore, this paper will shed light on the work of these organizations and their effectiveness.The following relevant research questions are addressed in this study:Research question number one: How do micro-credits affect the livelihoods of the targeted groups, and to what extent do refugees, internally displaced persons and returnees have access to micro-credits in Bosnia and Herzegovina?Research question number two: What are the objectives of the microcredit programs, and what are the most requested loans in Bosnia and Herzegovina?Research question number three: What are the perspectives of the beneficiaries of micro-credits in Bosnia and Herzegovina regarding this service and its impact on them?There is a big debate and doubts about the certain impact of the MC industry in BH both at the local and international levels. The reports from the World Bank, Microfinance Information Exchange (MIX) and the Association of Microfinance Institutions in Bosnia and Herzegovina (AMFI) show that; among peers in Kosovo and in the Balkans (Albania, Croatia, Macedonia, Montenegro, Serbia) in general, as well as peers similar in size and market outreach from Eastern Europe and Central Asia (ECA), the Bosnian MFIs are some of the most highly leveraged, more than 70 percent of all funding to MFIs in BH during 2007 came from foreign lenders. In 2007, most Bosnian MFIs showed high growth rates in active borrowers and especially loan portfolio. More than half of the non-bank MFIs grew by more than 50 percent in outreach. On the other hand, others like Karnani (2007a) suggested that governments, businesses and civil society should work together to reallocate their resources away from microfinance and instead support larger enterprises in labour intensive industries. A strong critique comes from Bateman (2007a) 'new wave commercial microfinance' where he asks whether microfinance can actually undermine medium-term economic development because it supports inefficient activities. Bateman found that there is little solid evidence to confirm that commercial microfinance facilitates sustain economic and social development.However, this paper might provide some evidence as to whether the MCI in BH, with it's both commercial and non-profit institutions, helps in alleviating poverty and promots economic and social development.Literature ReviewOrigin and Philosophy of MicrocreditMicro-credits, as a viable tool of development, began in 1976 when Bangladeshi economist and social reformer Muhammad Yunus began lending small amounts of money to rural poor women of Jobra village to start or expand their businesses. …