Legal and Regulatory Environment for Microfinance in Bosnia and Herzegovina: A Decade of Evolution and Prognosis for the Future

This paper discusses the evolution of the legal and regulatory environment for microfinance over the past decade in Bosnia-Herzegovina. It presents the historical background that is necessary to understand the legal and regulatory environment for microfinance in post-war Bosnia-Herzegovina.

The paper states that:

• The early years of microcredit started in 1996 but presented a particularly confusing picture on the legal form of NGOs to the would-be sponsors of microcredit in Bosnia-Herzegovina;
• In the year 2000 there was adoption of the microcredit organizations laws that recommended four legal forms, but the draft law called for introduction of ownerless legal entity called micro credit organization (MCO);
• The third phase of developments (2002-2003) involved changes in the broader Bosnian financial system that affected microcredit organizations.

The paper concludes that:

• Broad consensus has emerged to replace the entity-level MCO laws with a new law;
• There will be emergence of the Central Bank as a likely dominant force in the future development of the Bosnian financial system;
• Some of the larger MCOs are likely to undergo a commercial transformation, once the legal opportunity to do so is made available.

The paper finally concludes that except a few, all legal options originally envisioned for carrying out microfinance in Bosnia-Herzegovina will eventually be put in place.