Innovative Approaches to Microfinance in Post-conflict Situations: Bosnia Local Initiatives Project

This paper examines the successes of the World Bank's Local Initiatives Project (LIP) implemented in post-conflict Bosnia. This microfinance project proved to be a worthwhile investment as it rapidly created local jobs, contributing to the rebuilding of the financial infrastructure, particularly for smaller borrowers.

The intended clients were:

• Low-income, micro-entrepreneurs or would-be entrepreneurs without access to financing and requiring limited amounts of capital;
• Persons most affected by the war, such as demobilized soldiers, displaced persons, returning refugees, war widows.

With no tradition of NGOs or microcredit, Bosnia presented the initial challenge of developing a pilot project that could build sustainable local and national institutional support for microcredit in a fragile economy. The Tuzla Pilot Project set the groundwork for the larger project because it was designed to:

• Test the demand for microcredit;
• Test different lending methodologies using three different NGOs;
• Determine whether NGOs have the capacity to manage a loan fund.

The paper concludes that:

• Transforming a pilot project into a national project required intensive stakeholder involvement at both local and national levels;
• Such coalitions for change need time to grow and see positive results as a way of mobilizing action for change;
• The use of a pilot project to initiate and test a national project enabled the team to work productively and quickly outside the bureaucracy of a skeptical government until the success of the pilot project was evident.