An Evaluation of Micro-Credit Programs in Bosnia and Herzegovina Using Porter’s Diamond Model

The effective design and delivery of a microcredit program is difficult under any circumstance. Similarly, the task of microcredit institutions in Bosnia and Herzegovina that provide financial stability to its most impoverished members is very much complicated. The purpose of this paper is to explore competitive advantages that microcredit industry in Bosnia and Herzegovina has by using Porter's diamond model. The demonstration of the Diamond Model is used to explain the competitive advantage that the microcredit industry has in Bosnia and Herzegovina. To analyze the competitive advantages, secondary data were used from various institutional and governmental resources .The findings reflect that the meaningful objectives were set out by microcredit institutions in the country including objectively verifiable indicators of achievements. Among peers in Kosovo and in other Balkan regions (Albania, Croatia, Macedonia, Montenegro, Serbia), as well as peers similar in size and market outreach from Eastern Europe and Central Asia (ECA), the Bosnian microcredit institutions are some of the most highly leveraged. There is a clear upward trend in the median indicator for portfolio at risk between 2006 and 2008. The inflationary pressures that started at the end of 2007 in BH as well as the repercussions of the global 2008/2009 financial crisis have affected the repayment capacity of clients. From a policy perspective, the results suggest that in order to improve efficiency in the microcredit sector, and in the financial sector as a whole, a unified banking agency for the country must be established. Despite being hopeful for future, this doesn't seem likely to happen until the Bosnian Constitution is amended sometime in the future.