Access to Finance

Traditionally SMEs in Bosnia and Herzegovina rely on banks and relatives to finance their operations. Due to high collateral demands and interest rates perceived as excessive, SMEs persistently complain about their inability to obtain suitable finance. Banks on the other hand complain that there are insufficient bankable projects and have doubts about the fundamental competitiveness of most SMEs. This dilemma has resulted in a vicious circle that afflicts SMEs ability to make new investments and finance working capital.

Financing is crucial for the overall development of the value chain. Some value chain actors finance others as a means to offset potential risk, to meet market demands or invest in upgrading to reach new markets. With the onset of the financial crises, companies in FIRMA’s focus sectors were affected by both credit tightening by their own banks and the financial distress of other value chain actors, which significantly affected their cash flow and ability to fund operational expenses.

FIRMA is addressing both the demand and supply sides of access to finance. By working through our principal implementing partners, FIRMA improves SME’s creditworthiness, identifies new options for finance, and works with business development service providers to promote sustainability. We work with banks and other financial institutions to encourage the design of new and more innovative financial products. FIRMA’s goal is to greatly increase finance to the actors in its focus value chains, addressing this key obstacle to their competitiveness.