A few facts give a good indication of what Opportunity Banka in Serbia is all about. Two-thirds of its loans are to the rural community and 85 per cent are under €5000. Around 40 per cent of loans are to women. And it has some lovely client stories. There’s the mobile beekeeper given a loan for his converted bus; the start-up family broom-making business; the somewhat higher tech video drone start-up; the single mother taxi driver; and the small-scale sustainable farmers and craft makers.
Why the need in Serbia?
Opportunity Banka fills an important niche in a country that is more or less devoid of other microfinance providers. “We are one of the few countries in the region, or in the world even, that doesn’t have microfinance institutions,” says Opportunity Banka’s CEO, Vladimir Vukotic. This is largely for reasons of legislation. “Any lending must be via banks and the price is so high that it is almost not a viable option. They are very risk averse so they won’t, for instance, provide a loan to a small bakery.” The alternative is often loan sharks that plague Serbia as they do so many other countries.
Serbia has good payments systems (“much more modern and digitized than the US and the UK even,” says Mr Vukotic) and there tends to be access to current accounts but individuals without a credit rating and small businesses need affordable finance. Probably more than 30 per cent of the country’s population falls into this category, he believes. It is the bank’s ambition to be able to reach all of these.
The survival of many small entrepreneurial projects is impossible without adequate financial support but banks in Serbia generally do not grant loans for businesses that have been operating for less than three years. Therefore, Serbian citizens are reluctant to engage in private business and those who do so often reach a key moment when they find they have no access to finance and this often leads to difficulties. According to the country’s Agency for Business Registers, the annual number of start-up businesses in Serbia is approximately equivalent to the number of business closures.
Opportunity Banka’s USP
The bank is part of Opportunity Network International which spans microfinance institutions in 20+ countries and was founded in Chicago in 1971. Of late, the bank has also become a member of the Global Alliance for Banking on Values (GABV), the umbrella organisation for the world’s ethical financial institutions. Opportunity Banka has 27 branches, 300 staff, 37,000 lending customers and 38,000 savings ones. As well as banking, it provides education, including workshops on small business finance and financial literacy. It was set up in 2002 and gained full bank status in 2007.
The GABV membership has largely stemmed from a partnership with Dutch flagship ethical bank, Triodos. Triodos now provides a sub-debt facility to Opportunity Banka and introduced its Serbian partner to GABV. Mr Vukotic explains that the financing is a useful first step but he also hopes that Triodos can provide additional help and expertise. In particular, Opportunity Banka would like to move into sectors in which Triodos is well-entrenched, particularly renewable energy.
Similarly, Mr Vukotic believes the GABV is a “great platform for us to exchange some knowledge and practices. It is a very good forum for people with the same alignments in terms of what banks should do in the community.” The bank’s mission statement reads: “By providing financial solutions and training, we empower underserved and financially excluded people to transform their lives, their children’s futures and their communities.” This is regardless of race, faith, ethnicity and gender. Bad debts are a fact of life for any bank but the bank seeks to treat everyone with respect and will write off these where necessary, without hounding the customers.
As one of the largest and sophisticated banks in the Opportunity International Network, the flow of expertise tends to be from Opportunity Banka to other members, rather than the other way. This is in areas such as risk management, governance, audit and human resources.
The bank is still seeking to grow its user base, so that it can serve everyone that needs its services. “We don’t have to market very much, in fact we spend almost nothing on marketing,” says Mr Vukotic. A lot of its business stems from word of mouth.
The bank would also like to improve the interest rates on its savings accounts, to three or four per cent, which he feels is feasible as it has a Triple A credit rating, which reduces its cost of financing. And it would like to be able to provide easier access to cash, potentially facilitated by regulatory changes in the pipeline. There is currently no cash back service in Serbia, for instance, and it is often a problem to convert virtual money into cash.
There is no doubt that Opportunity Banka has become an important facilitator within the Serbian economy. It claims to account for one-third of agricultural loans and it supports many start-up businesses that would otherwise have no recourse to fair finance. These types of banks often have a low profile outside of their individual countries but show how financial services can be a force for good.