Studies | 20 May 2014

Indebtedness of micro, small and medium enterprise credit customers and the quality of finance in Bosnia and Herzegovina

This report analyses the level of indebtedness of MSME credit customers and the quality of finance in Bosnia and Herzegovina (BiH). The EFSE Development Facility (DF) commissioned this study in February 2013, following a first study by the EFSE DF on the subject in 2009. The first study (Maurer/Pytkowska, 2010) confirmed the presence of over-indebtedness as defined by the authors, among microcredit borrowers in BiH. More than half of the borrowers had more than one active credit contract and 28 per cent of the borrowers were seriously indebted or over-indebted.

The objectives of the follow-up study in 2013 are

  • to assess the current level of indebtedness and repayment performance of micro, small and medium enterprises (MSMEs) and retail borrowers in BiH,
  • to examine the factors – on both the demand and supply side – that drive high levels of indebtedness,
  • to assess the quality of finance for these clients of financial institutions, and
  • to propose recommendations for financial institutions in BiH.


Whilst the 2009 study focused solely on the microcredit market, the 2013 study captures MSME clients of banks and microcredit organisations (MCO) because it was indicated by the 2009 study that commercial banks and MCOs show growing customer overlaps in these market segments. Moreover, this study also covers the quality of finance aspect, since it is assumed that, whilst ready access to credit is a reality in BiH, it is not clear whether customers are satisfied with the services provided. Where possible, we compare the situation of microcredit borrowers of MCOs to the situation as assessed in 2009.

The findings show that the majority of borrowers have more than one credit product outstanding. Moreover, multiple and cross-borrowing are still prevalent albeit to a lower degree compared to the 2009 microcredit data sample and high levels of indebtedness still prevail in certain market segments.



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