As the EFSE doesn’t provide financing directly to the final borrowers, but through the financial sector, the Fund depends on reliable partner lending institutions (PLIs) to properly execute their role as financial intermediaries, and channel EFSE funding to the final borrowers so as to have the desired effects in terms of income and employment generation as well as decent housing.
Danka Grbovic, a mushroom grower, lives in Lukavica, which is situated about 15 minutes by car from Sarajevo, the capital of Bosnia and Herzegovina. She is now is her 11th loan cycle, having raised a total of KM 76,000 (EUR 39,400) with EKI microcredit foundation.
Mrs. Grbovic’s operation is spread over 12 growing chambers, which are temperature-controlled and feature shelves stacked with mushroom growing kits. By growing mushrooms in different cycles, she is able to maintain a constant supply to meet the needs of over 25 regular clients, assuring her a continuous income flow.
When the time to pick the mushrooms comes, Mrs. Grbovic hires several women to help her with the work.
Asked by a journalist, whether she can afford a holiday now, Mrs. Grbovic shakes her head. It's not because she lacks finances, she explains, but because the process of growing mushrooms takes most of her time and requires her permanent presence.
Another client of EKI is Adis Basic, a beekeeper, who lives in Vares, 50 km from Sarajevo. Mr. Basic produces honey as well as other bee products like beewax, royal jelly, pollen, swarms with young queens, and wooden beehives. He collects honey from over 270 beehives at three diriment locations.
Before the war, beekeeping was his father’s pastime. Afterwards, the son took over the 30 existing beehives and started growing the business bringing the capacity to 4 to 5 tons of honey per year.
He is very proud of his production which was awarded gold medals during different international fairs.
Mr. Basic took out his first loan with MCF EKI in 2008 at the amount of KM 2,500 (EUR 1,300). To date, he has utilized KM 38,000 (EUR 19,700) in loans.
He says he avoids dealing with major retailers who offer a lower price for his products, which have been recognized at the market for high quality and uniqueness. The price of the product depends on the honey, as the basis, and additional components. There are certain standards for mixing the components but they can be changed by a client’s request.
On average, the share of loans dedicated to the agricultural sector in the EFSE target region hardly exceeds 5%. In contrast, agricultural activities account for about 12% of all sub-loans disbursed from EFSE funds in volume terms in 2012 – both MSE and housing, with a growing trend.
Whilst only 10% of the EFSE investment portfolio can be attributed to credit lines specifically targeting the agricultural/rural sector, a sizeable portion of the sub-loans financed from general MSE credit lines is channeled to agricultural/rural borrowers as well. This is even more significant as the EFSE gives PLIs full flexibility in using MSE credit line funds across economic sectors. Hence, the EFSE is one of the largest funding sources for agricultural and rural business activities in its target markets.