MICROFINANCE IN CROATIA - REVISITED
Zdenko Prohaska, Ph.D.
EACES Seminar “ The Role of Microfinance in Promoting Sustainable Development in SE Europe” , Brijuni, July 5-6, 2007
What is Microfinance ?
The purpose of such form of finance would be to provide small amounts of loans to target populations, i.e. the poor who cannot get regular loans offered by commercial banks
Form of organisation
MFIs act as nonprofit institutions, savings and loan cooperatives, savings banks and other legal forms depending on national legislation and tradition in different countries
The Case of Croatia
3 S&L Cooperatives in Croatia
NOA (OSI), Osijek DEMOS (ICMC), Karlovac MIKROPLUS (CRS), Zagreb
Financial Market Structure - 2005
Relative size of financial sectors in CEE countries
Legislation in Croatia
The S&L Cooperatives shall be established by at least 30 natural persons with legal capacity who carry out authorised activities as self-employed persons, farmers and citizens
Legislation in Croatia (cont.)
The total amount of deposits made on the occasion of establishing a S&L Cooperative shall not be lower than HRK 100,000.00. The deposits shall be made only in cash.
Deposits of a member and related members shall not exceed 10% of the total S&L Cooperative deposits.
Related members shall be those of lineal consanguinity, first-degree collateral descendants and spouses
Supervision
The Ministry of Finance supervises operations of S&L Cooperatives in accordance with the regulations based on this Act and other Acts that they have to observe (permission)
In its supervisory role, the Ministry of Finance shall
evaluate the legality and regularity of S&L Cooperatives’ operations and shall pass the decision prescribing corrective measures for detected unlawful and irregular operations
Law on Microfinancing (WB)
MFIs as non-profit institutions 2000 – 2002 (SAL Agreement) According to international best practices Credit only MFIs, no deposit taking Cash only as partial collateral for loans No taxation on profits Proposal to the Government of Croatia International Working Group
Law on Microfinancing (CG)
Proposal of the WB rejected Working group – mostly domestic experts Proposal finished in 2002 Establishing MFI – 10 persons and 1 mio. Kn No deposit taking – but donations Interest rate ceilings Loans only up to 35.000 Kns to one person Draft Law rejected in Parliament (S&L Coop.Act)
Microfinancing in Croatia today
According to S&L Cooperatives Act (2002) Law on Interest rates (2004) – ceilings: 21%
for physical persons, 17% for companies, 15% on late payments
New Law on Credit Unions Amendment of the Banking Act (savings
banks) Microfinancing gap – New Law on MFIs ?!
