1 project implementation : december 1999/ november 2002 (3years) consultancy services for sme...
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Project implementation :
December 1999/ November 2002 (3years)
Consultancy Services for SME Project Implementation Unit (PIU)
For Bosnia and HerzegovinaEBRD
Roma, March 1st 2005
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Structure of Project
A SME credit Line Framework facility of Euro 15 million, to be channelled to privately owned SMEs through credit lines made available to privately owned participating banks, to finance eligible projects of SMEs.
A technical Co-operation programme involving setting up of an autonomous PIU staffed by experienced banking/credit professionals (consultant) in order to support and monitor the implementation of the facility.
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Background
A number of eligibility criteria as to the ownership and financial structure of the participating banks and of the SMEs have been determined by EBRD.
Loan Agreements signed between the banks and EBRD determine the eligibility criteria and the responsibilities of every participants.
Final risk is borne by each individual bank.
The consultant reviews each sub-project.
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Objectives
Providing liquidity for long term lending to banks who don’t have the adequate resources
Providing long term funds to SMEs for their investments
Strengthening of the credit decision and implementation processes
Training Banks’ staff
Assisting Participating banks (PB) in assessing loan applications
Co-ordinating disbursement requests from the PBs
Reporting to EBRD
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Scope of work
TA work follows a rigorous methodology and process, though the consultant has to adapt to local conditions, and primarily set up a confident relationship with the selected banks, based on professionalism.
Phase 1. Assessment of the credit issues and level of credit expertise in the banks
Design of a working plan with clear benchmarks
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Phase 2.
All tasks are to be performed simultaneously.
At the level of the bank management and credit management.
Improvement of the credit procedures and processes
Credit decision process/organization of the credit department
Standardization of the approach to SME lending
Organisation of the credit committee
Delegation of authority
Code of ethics
Environmental procedures
Credit procedures and manual
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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At the level of the individual credits
Creation of a pipeline of potential projects to be financed
Selection of the projects to be financed
Screening of the projects
Disbursement
Monitoring of the individual credits and of the facility
Training Set up of a training programme to cover the main aspects of credit analysis and decision making
On the job training
Class room training
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Key issues
Transmission of know How and experience
This implies a close together working with the credit staff, based on practical and work on the ground
Helping credit staff to build up a substantial pipeline
Prioritising the selection of projects according to priorities of the bank as to the type of clientele, quality of every individual project and quality of risk/credit worthiness
Site visits to identify key issues and key questions. Checklist and preparation of the client interviews
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Preparation of a business plan
Assessment of the project and business plan, making sure all the appropriate elements have been taken into consideration (financial, marketing, industrial, environmental)
Close review of the assumptions
Security taking and role of the guarantees
Post disbursement site visits to check on individual projects completion
Closely monitoring the repayments
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
(Key issues)
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Results
5 banks have been elected for the project
Postanska Banka Mostar
Raiffeisen Bank BiH
Universal Bank
Zagrebacka Banka
UPI Banka
The full amount (Euros 15 million) has been on lent to SMEs
The whole territory of the Federation has been covered
Over 60 sub-loans have been granted
Marginal delinquency and default rate
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT
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Training
15 : number of staff trained
Strengthening of Bank organization.
Changes in the Credit decision process and organization of credit committees have been recommended and implemented.
Credit procedures have been proposed and implemented.
Banks expressed their overall satisfaction to the experts.
Bosnia and Herzegovina – SME PROJECTBosnia and Herzegovina – SME PROJECT