Financial Inclusion Remains Elusive for Some in Bosnia and Herzegovina

Despite progress in expanding financial services, Bosnia and Herzegovina still grapples with significant gaps in financial inclusion. A recent assessment highlights the mixed state of affairs, with some segments struggling to access credit due to stringent collateral demands and ineffective credit recovery mechanisms.

Barriers to Financial Inclusion

• Slow domestic economy: The country’s sluggish economic growth hampers business access to financing.
• Stringent collateral demands: Excessive collateral requirements make it difficult for businesses to secure loans.
• Ineffective credit recovery mechanisms: Weak processes hinder the ability to recover defaulted loans, further limiting access to credit.

Challenges in Specific Market Segments

While Bosnia and Herzegovina has made strides in expanding financial services, certain market segments continue to face significant barriers:

Small Businesses

• Difficulty in accessing credit due to lack of collateral or high interest rates
• Limited availability of microfinance options
• Inefficient loan processing times

Rural Communities

• Limited access to banking facilities and financial services
• Higher costs associated with mobile payment transactions
• Lower levels of financial literacy

Way Forward

To foster a more inclusive financial environment, policymakers must prioritize initiatives aimed at:

Enhancing Domestic Demand

• Stimulating economic growth through targeted policies
• Encouraging consumer spending and investment
• Supporting entrepreneurship and small businesses

Streamlining Collateral Requirements

• Introducing alternative forms of collateral
• Relaxing collateral requirements for specific market segments
• Implementing more efficient loan processing systems

Strengthening Credit Enforcement Processes

• Improving credit recovery mechanisms
• Enhancing the effectiveness of debt collection agencies
• Increasing transparency in loan agreements