MICROCAPITAL BRIEF: Center for Financial and Credit Counseling of Bosnia Offers Debt Mediation, Financial Education to Microfinance Clients

The Center for Financial and Credit Counseling (CFKS), a nonprofit established in 2010 in the Bosnian city of Tuzla, has been set up to counter the negative impact of over-indebtedness through financial education, counseling, mediation and debt resolution. CFKS prepares debt restructuring and payment plans for microfinance clients that are then offered to creditors for approval. The center’s services are free to debtors. As of 2011, 388 individuals with a combined debt of approximately USD 4.7 million reportedly have been helped by the center. In 16 percent of cases, a debt restructuring plan developed by CFKS was accepted by both client and creditor, and in 21 percent of cases CFKS provided training that reportedly enabled the clients to resolve their credit situation directly. Training topics include household budgeting, comparisons among financial institution types and features of savings and loan products. CFKS also plans to conduct financial literacy workshops for high school students.

CFKS receives funding support from the United Kingdom’s Department for International Development (DFID), the World Bank’s International Finance Corporation (IFC), Dutch cooperative Oikocredit, Luxemburg-based investment fund European Fund for Southeast Europe and Swiss investors responsAbility and Blue Orchard. CFKS is in the process of expanding its operations throughout the country and hopes to replicate it globally.

By Nisha Koul, Research Associate

About Center for Financial and Credit Counseling: The Center for Financial and Credit Counseling (CFKS) was established as a nonprofit debt counseling center in 2010 in the Bosnian city of Tuzla with start-up funding from the United Kingdom’s Department for International Development (DFID). Using the model of debt counseling services operating in United Kingdom it prepares debt restructuring and payment plans for microfinance clients that are then offered to creditors for approval. The center’s services are free to debtors and also include training programs on household budgeting, comparisons among financial institution types and features of savings and loan products. As of 2011, 388 individuals with a combined debt of approximately USD 4.7 million have been helped by the center. It receives funding support from the United Kingdom’s Department for International Development (DFID), the World Bank’s International Finance Corporation (IFC), Dutch cooperative Oikocredit, Luxemburg-based investment fund European Fund for Southeast Europe, Swiss investors responsAbility and Blue Orchard. As of 2011 CFKS is in the process of expanding its operations throughout the country and aims hopes to replicate it globally.

About Department for International Development (DFID): The Department for International Development (DFID) is the department of the British government responsible for carrying out overseas development work. In fiscal year 2010/2011, the British government, through DFID, spent GBP 7.6 billion, the equivalent of over USD 11.9 billion, on international development. The major spending areas included government and civil society, health, economic growth, education, and humanitarian assistance.

About International Finance Corporation (IFC): A member of the World Bank Group, the International Finance Corporation (IFC) offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of 2011, IFC has 182 member countries that drive its policies and approve disbursements. As of June 30, 2010, IFC reports net income of USD 1.75 billion, total assets of USD 61 billion, return on assets of 3.1 percent and total investment mobilization of USD 18.4 billion to 528 projects.

Sources and Additional Resources:

Microfinance Gateway, “Escaping the Debt Trap in Bosnia,” http://www.microfinancegateway.org/p/site/m/template.rc/1.26.17407/

Department for International Development (DFID), Key Statistics, http://www.dfid.gov.uk/About-us/How-we-measure-progress/Aid-Statistics/Statistics-on-International-Development-2011/Key-Statistics/

MicroCapital.org story, February 15, 2011, “MICROCAPITAL BRIEF: CGAP (Consultative Group to Assist the Poor) Explores Over-Indebtedness in Microfinance Through New Blog Series,” https://www.microcapital.org/microcapital-brief-cgap-consultative-group-to-assist-the-poor-explores-over-indebtedness-in-microfinance-through-new-blog-series/

MicroCapital.org story, January 8, 2010, “MICROCAPITAL BRIEF: Critics Claim that Bosnian Microfinance Institutions Simply Issuing “Commercial Loans Masquerading as Microfinance,” https://www.microcapital.org/microcapital-brief-critics-claim-that-bosnian-microfinance-institution-simply-issuing-commercial-loans-masquerading-as-microfinance/

MicroCapital.org story, December 16, 2009, “MICROCAPITAL BRIEF: Defaults Rise in Bosnian Microfinance Sector,” https://www.microcapital.org/microcapital-brief-defaults-rise-in-bosnian-microfinance-sector/

MicroCapital Universe profile: Department for International Development (DFID), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Department+for+International+Development+%28DFID%29

MicroCapital Universe profile: International Finance Corporation (IFC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29

MicroCapital Universe profile: Center for Financial and Credit Counseling (CFKS), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Center+for+Financial+and+Credit+Counseling

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