Micro, small and medium enterprises (MSMEs) affected by COVID-19 in Bosnia and Herzegovina will receive a boost through a new, $65.30 million loan (BAM106 million equivalent), approved today by the World Bank. The Firm Recovery and Support Project loan will help MSMEs recover through improved access to much-needed, longer-term financing and the provision of tailored programs, focused on adapting technology and digitization.
The deep and far reaching impact of the ongoing crisis caused by the COVID-19 pandemic calls for additional financing to support MSMEs in Bosnia and Herzegovina, including to underserved market segments such as women-inclusive enterprises, young firms, and firms in lagging regions. As a result of the increased uncertainty due to the ongoing crisis, commercial banks have been cautious in intensifying their lending activity to enterprises at a time when demand by MSMEs for additional financing has increased. The Firm Recovery and Support Project addresses this challenge by making longer-term financing available to viable MSMEs hit hard by the crisis, as well as to vulnerable and underserved segments that would otherwise face challenges accessing term-financing in support of enterprise recovery and growth. The project will also support the redesign of government programs aimed at helping firms adjust to the post COVID-19 world. It is expected that the project will directly support hundreds of businesses and as many as 10,000 jobs.
“MSME’s in BiH are severely affected by COVID-19, as they confront the combined shocks of lower demand, a shortage of working capital, and supply chain disruptions, causing many to require external financing to maintain business operations, retain jobs, and ultimately recover from this crisis,” says Emanuel Salinas, World Bank Country Manager for Bosnia and Herzegovina and Montenegro. “This project will provide crucial financial assistance to help firms survive the economic downturn and adapt to a new operating environment. It will also contribute to a recovery that is resilient to future shocks. We hope the project will be urgently processed by the authorities so the funds can be made available to MSMEs as soon as possible.”
The COVID-19 outbreak highlighted the structural deficiencies of the country’s business environment. The current situation is therefore an opportunity for Bosnia and Herzegovina to address some of its vulnerabilities to external shocks and overcome the changes needed to transform its economic model. The COVID-19 pandemic has showcased the need to ensure firms are able to adjust to working in the “new normal” being created by the pandemic, and adopt new technologies that can increase their growth potential and competitiveness during the recovery phase.
This project is an additional component of the wide-ranging response to the crisis response focused on support to MSMEs by the World Bank Group and other development partners. The World Bank portfolio of active projects in the country includes 11 operations, totaling $526.60 million. Additional areas of support include health, transportation, employment, energy efficiency, local infrastructure, and water management.