Assessing Microfinance: The Bosnia and Herzegovina Case

This paper explores the use of microfinance in post-civil war Bosnia and Herzegovina (BH), and assesses its impact in terms of poverty reduction and post-conflict reconciliation.

The BH microfinance sector developed rapidly after the 1992-95 war, transforming MFIs from donor-funded institutions into financially-sustainable microcredit organizations. The sector gradually became institutionalized. The paper draws together evidence from independent reviews of BH microfinance to assess its impact in terms of economic performance, social welfare and post-conflict integration. Findings include:

• MFI sustainability in BH has been remarkable;
• Microfinance seems to have had a positive impact on the broader legal and economic system;
• Critics suggest that microfinance may have impeded SME development in the country;
• Microfinance in BH has been more impressive as a tool to improve economic performance of MFIs and their clients than to reach broader social goals;
• Microfinance has been more useful in aiding participants’ escape from poverty on an individual basis, than for addressing wider problems of social integration or institution building.

Study findings suggest that microfinance can only be used to pursue one goal directly. The broader goals may be achieved indirectly, if at all.