RURAL FINANCE AND CREDIT ACCESS IN SOUTH-EASTERN BOSNIA AND HERZEGOVINA

Many surveys carried out in last years in Bosnia and Herzegovina (BiH) showed that one of the most important problems faced by farmers and rural entrepreneurs is the lack of and/or difficult access to financial resources. The paper aims at analyzing rural finance and access to credit in south-eastern BiH. An exploratory survey was performed in March 2013 with 147 rural households from Vlasenica, Han Pijesak, Milici, Zvornik, Rogatica, Pale, Bratunac, Sokolac and Foca municipalities. About a half of the interviewees used loans for different purposes such as the purchase of agricultural equipment and machines, agricultural input, livestock and transport equipment and renovation of buildings but also for covering children education expenses or even for repayment of other debts. The interviewed rural households prefer borrowing from the formal sector (banks), followed by the informal sector (friends, relatives, private moneylender, supplier credits) then the semiformal sector (micro-finance institutions). Most rural people lack access to the range of financial services they need and those available to them are relatively costly or rigid. The interest rate is quite high and it is up to 12% yearly. The percentage of loan applications rejected is rather high. An important loan rejection reason is the lack of collaterals. Improving rural financial market in Bosnia has enormous potential to contribute to economic growth, poverty reduction and rural economy diversification. Therefore, public action and support is highly needed to make easier access to credits from formal institutions and to better structure and organize the semiformal financial sector.