Bosnia and Herzegovina Country-Level Savings Assessment

Read the results of CGAP's fourth country-level test diagnostic of small-balance savings mobilization.

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Executive Summary

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This report summarizes the fourth test of CGAP's Country-Level Savings Assessment Tool, which took place in Bosnia and Herzegovina (BiH). The purpose of the toolkit is to help government agencies, donors, international networks, and technical service providers to define potential strategies for increasing poor people's access to high-quality deposit services. The methodology examines four levels of the financial system: client demand, institutional capacity, industry infrastructure and support services, and policy. The assessment concludes with suggested strategies for improving the quality and quantity of deposit services available to poor and low-income households.

Bosnia and Herzegovina is in the process of rebuilding its economy and society after a destructive war which ended in late 1995 with the signing of the Dayton Accords. The banking system has received considerable attention and is today highly competitive, strictly regulated, and considered to be the most successful sector of the economy. However, a substantial amount of currency is still outside the banking system compared with other transitional economies.

Demand for savings services is constrained by mistrust in the banking system and the loss of savings habits during the war period. A recent survey shows that unmet demand is significant. However, the savings products currently on offer do not seem to provide the services that the unbanked population needs since banks do not direct their efforts towards mobilizing savings from the poor. While microcredit organizations (MCOs) know the low-income market and have incentives to gather deposits, they lack legal structures and the technical capacity to do so. Supervisory structures have been the focus of intense rebuilding efforts, but training and technical assistance for small-balance deposit mobilization, electronic payment methods, and liquidity management alternatives are all in need of development.

Based on the information gathered though this country assessment, seven suggestions for promoting quality deposit services for low-income people emerged:

1. Conduct more research on the unbanked population to provide information on their habits and needs.
   
   
2. Carry out financial education focused on savings with low-income and unbanked clients to provide information on banking services and rebuild trust.
   
   
3. Develop specialized products and services for low-income clients.
   
   
4. Expand the e-payment infrastructure to bring more money into the system and increase the convenience of access.
   
   
5. Stimulate stronger communication and policy dialogue between policy makers and microcredit institutions to clarify the legal infrastructure and to inform policymakers about the needs of the microfinance industry.
   
   
6. Encourage partnerships between combinations of institutions that bring together the capacity, permission, and incentive to mobilize small deposits.
   
   
7. Offer technical assistance for bank downscaling.