Studies | 18 June 2010

Indebtedness of microcredit clients in Bosnia and Herzegovina

In 2009, the EFSE Development Facility commissioned a study to analyze the situation of indebtedness of microcredit clients in Bosnia and Herzegovina which has been the leading microfinance market in Central and Eastern Europe.

The objectives of the study were:

  • to gain an understanding of the level of indebtedness and underlying borrowing patterns of microcredit clients;
  • to establish evidence on the scope of over-indebtedness;
  • to shed light - on both the demand and supply side - to the factors that led to over-indebtedness; and
  • to provide solutions and recommendations for overcoming the situation of increased over-indebtedness.

The study was conducted with a sample of approximately 900 microcredit borrowers of six leading microcredit providers. The sample was drawn proportionally reflecting the market share of each institution. Clients of the participating institutions were randomly selected to assure the validity and representativeness of the data. In a first stage, a quantitative analysis was conducted based on secondary data of the sample clients. The level of indebtedness was measured through a net indebtedness index which defines the level of indebtedness by the debt service payments in relation to net household income. The second stage of the study focused on assessing factors that led to over-indebtedness. On the supply side, interviews were conducted with representatives and staff of the participating microcredit providers. On the demand side, a survey among approximately 250 problem clients identified in the first stage was conducted.

The results of the study confirm that a sizeable proportion of microcredit borrowers in Bosnia and Herzegovina experience difficult financial situations and have problems with the repayment of their liabilities.



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Marianne Sulzer, Finance in Motion GmbH
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