Annual Report 2009 - ProCredit

Annual Report
2009

2
Annual Report 2009
Key Figures
EUR ’000 BAM ’000 Change
2009 2008 2009 2008 BAM
Balance Sheet Data
Total Assets 171,527 237,119 335,478 463,764 -27.7%
Gross Loan Portfolio 119,671 162,674 234,056 318,162 -26.4%
Business Loan Portfolio 74,439 96,479 145,590 188,697 -22.8%
EUR < 10,000 22,857 41,444 44,704 81,058 -44.8%
EUR > 10,000 < 50,000 22,875 26,873 44,739 52,559 -14.9%
EUR > 50,000 < 150,000 15,699 15,806 30,706 30,914 -0.7%
EUR > 150,000 13,008 12,356 25,441 24,166 5.3%
Agricultural Loan Portfolio 19,221 42,085 37,592 82,311 -54.3%
Housing Improvement Loan Portfolio 5,563 4,496 10,881 8,793 23.7%
Other 20,448 19,614 39,993 38,361 4.3%
Allowance for Impairment on Loans 7,072 5,529 13,832 10,814 27.9%
Net Loan Portfolio 112,599 157,145 220,224 307,348 -28.3%
Liabilities to Customers 124,104 171,517 242,727 335,458 -27.6%
Liabilities to Banks and Financial Institutions
(excluding PCH) 20,608 33,576 40,305 65,669 -38.6%
Shareholders’ Equity 17,882 22,822 34,975 44,635 -21.6%
Income Statement
Operating Income 9,863 19,381 19,290 37,905 -49.1%
Operating Expenses 18,120 19,722 35,439 38,573 -8.1%
Operating Profit Before Tax -8,257 -342 -16,149 -668 n/a
Net Profit -7,496 -384 -14,660 -751 n/a
Key Ratios
Cost/Income Ratio 116.4% 86.5%
ROE -36.8% -1.8%
Capital Ratio 17.3% 18.4%
Operational Statistics
Number of Loans Outstanding 39,762 65,277 -39.1%
Number of Loans Disbursed within the Year 12,113 41,972 -71.1%
Number of Business and Agricultural
Loans Outstanding 30,422 57,245 -46.9%
Number of Deposit Accounts 105,106 113,096 -7.1%
Number of Staff 662 888 -25.5%
Number of Branches and Outlets 26 44 -40.9%
Exchange rate as of December 31:
2009: EUR 1 = BAM 1.95583
2008: EUR 1 = BAM 1.95583

Contents 3
Mission Statement 4
Letter from the Supervisory Board 5
The Bank and its Shareholders 6
Special Feature 8
Management Business Review 10
Risk Management 20
Branch Network 24
Organisation, Staff and Staff Development 26
Business Ethics and Environmental Standards 29
The ProCredit Group: Responsible Banks for Small Businesses and Ordinary People 30
ProCredit in Eastern Europe 34
Our Clients 38
Financial Statements 42
Contact Addresses 74

4
Annual Report 2009
Mission Statement
ProCredit Bank Bosnia and Herzegovina is a development-oriented full-service bank.
We offer excellent customer service and a wide range of banking products. In our credit
operations, we focus on lending to very small, small and medium-sized enterprises, as
we are convinced that these businesses create the largest number of jobs and make a
vital contribution to the economies in which they operate.
Unlike other banks, our bank does not promote consumer loans. Instead we focus on
responsible banking, by building a savings culture and long-term partnerships with our
customers.
Our shareholders expect a sustainable return on investment, but are not primarily
interested in short-term profit maximisation. We invest extensively in the training
of our staff in order to create an enjoyable and efficient working atmosphere, and to
provide the friendliest and most competent service possible for our customers.

Letter from the Supervisory Board 5
Letter from the Supervisory Board
The year under review was a difficult period for the economy in Bosnia and Herzegovina (BiH). Since the
collapse of international financial markets in 2008, the global recession has strongly impacted domestic
output. GDP fell by an estimated 3.2% in 2009, ending a period of constant growth since the end of the
war in 1995. 1
The financial sector had been expanding at a very high rate in recent years due to rapid credit growth.
Unfortunately, many loans were disbursed in an irresponsible manner, causing a large number of households
to become heavily over-indebted. To make matters worse, reduced sales put many of the very smallest
enterprises under increasing pressure in 2009. Such businesses typically have limited reserves and
struggle to maintain a healthy cash flow in difficult times. These factors resulted in a surge in the proportion
of non-performing loans in the sector, prompting the banks and microcredit organisations that had
adopted aggressive lending practices to re-evaluate their strategies. Some institutions decided to raise
the interest rates on outstanding consumer loans, causing widespread dissatisfaction among clients and
the broader public. This behaviour attracted constant media attention and has led to a number of ongoing
lawsuits.
In this context, ProCredit Bank BiH continued to make credit available to its core client group of small and
medium-sized enterprises. We understand that small businesses require a reliable and transparent banking
partner that can respond to their financing needs in more volatile times. However, given the extent
of over-indebtedness among unregistered businesses, we revised our credit requirements for very small
loans and we increased the minimum loan amount to BAM 4,000 (EUR 2,000), as loans below this level
show the lowest development impact. By the end of December, this strategic shift had resulted in a decline
in the volume of outstanding loans, and our portfolio had contracted to BAM 234.1 million (EUR 119.7 million).
In accordance with our prudent business policy not to promote consumer lending, less than 5.3% of
our portfolio consisted of consumer loans.
ProCredit Bank’s commitment to social responsibility extends beyond its approach to the lending business.
In 2009 our staff organised major campaigns to promote transparency in the banking sector and
to help individuals manage their personal finances more effectively in difficult times. These popular initiatives
had a broad outreach and were part of our long-term aim to increase levels of financial literacy
among the population while cementing long-term client relationships. Despite a lack of public confidence
in banks, we maintained a stable customer base and a consistent level of deposits from private individuals.
After sustained growth in recent years, the bank restructured its branch network in line with its goal to
increase the proportion of financing extended to the SME sector, which is the key driver of economic development
and shows promising growth potential. In November we opened our first Business Center to
provide a dedicated service to SME clients, for whom it is our goal to be the “house bank” of choice, offering
a complete range of reliable banking services and excellent customer care. The first branch of this type
is located in Tuzla, and it will be a priority in 2010 to open Business Centers in other cities.
In closing, I would like to thank the management and staff of the bank for their hard work and dedication. I
would also like to extend my gratitude to our shareholders for their long-term commitment and support of
our mission. The experiences and learning gained in recent years will make us stronger in the future, and
we are confident that our performance in 2010 will demonstrate the soundness of our approach.
Members of the
Supervisory Board as of
December 31, 2009:
Claus-Peter Zeitinger
Helen Alexander
Klaus Glaubitt
Rainer Ottenstein
Philipp Pott
Members of the
Management as of
December 31, 2009:
Frieder Woehrmann
Sabina Mujanović
Edin Hrnjica
Vedran Hadžiahmetović
Senad Redžić
Radomir Savić
Maja Hrnjić
Claus-Peter Zeitinger
Chairman of the Supervisory Board
1
IMF, World Economic Outlook, October 2009.

6
Annual Report 2009
The Bank and its Shareholders
ProCredit Bank Bosnia and Herzegovina (BiH) is
a member of the ProCredit group, which is led by
its Frankfurt-based parent company, ProCredit
Holding. ProCredit Holding is the majority owner
of ProCredit Bank BiH and now holds 93.3% of the
shares.
ProCredit Bank BiH was founded in October 1997
as Micro Enterprise Bank (MEB) by an alliance of
international development-oriented investors.
Their goal was to establish a new kind of financial
institution that would meet the demand of
small and very small businesses in a socially
responsible way. The primary aim was not shortterm
profit maximisation but rather to deepen
the financial sector and contribute to long-term
economic development while also achieving a
sustainable return on investment.
The founding shareholders of ProCredit Bank
BiH were Internationale Projekt Consult (IPC),
International Finance Corporation (IFC), the European
Bank for Reconstruction and Development
(EBRD), the Netherlands Development Finance
Company (FMO), and BH Bank. Over the
years, ProCredit Holding has consolidated the
ownership and management structure of all the
ProCredit banks to create a truly global group
with a clear shareholder structure and to bring
to each ProCredit institution all the best practice
standards, synergies and benefits that this implies.
Today’s shareholder structure of ProCredit Bank
BiH is outlined below. Its current share capital is
EUR 20.7 million.
Shareholder
(as of Dec. 31, 2009)
ProCredit Holding
Commerzbank AG
Sector
Headquarters
Share
Paid-in Capital
(in EUR million)
19.30
1.38
Investment
Banking
Germany
Germany
93.3%
6.7%
Total Capital
100%
20.68
ProCredit Holding is the parent
company of a global
group of 22 ProCredit banks. ProCredit Holding
was founded as Internationale Micro Investitionen
AG (IMI) in 1998 by the pioneering development finance
consultancy company IPC.
ProCredit Holding is committed to expanding access
to financial services in developing countries
and transition economies by building a group of
banks that are the leading providers of fair, transparent
financial services for very small, small
and medium-sized businesses as well as the
general population in their countries of operation.
In addition to meeting the equity needs of
its subsidiaries, ProCredit Holding guides the development
of the ProCredit banks, provides their
senior management, and supports the banks in
all key areas of activity, including banking operations,
human resources and risk management. It
ensures that ProCredit corporate values, international
best practice procedures and Basel II risk
management principles are implemented groupwide
in line with standards also set by the German
supervisory authorities.
IPC is the leading shareholder and strategic investor
in ProCredit Holding. IPC has been the driving
entrepreneurial force behind the ProCredit group
since the foundation of the banks.
ProCredit Holding is a public-private partnership.
In addition to IPC and IPC Invest (the investment
vehicle of the staff of IPC and ProCredit), the other
private shareholders of ProCredit Holding include
the Dutch DOEN Foundation, the US pension fund
TIAA-CREF, the US Omidyar-Tufts Microfinance
Fund and the Swiss investment fund responsAbility.
The public shareholders of ProCredit Holding
include KfW (the German promotional bank), IFC
(the private sector arm of the World Bank), FMO
(the Dutch development bank), BIO (the Belgian Investment
Company for Developing Countries) and
Proparco (the French Investment and Promotions
company for Economic Cooperation).
ProCredit Holding has an investment grade rating
(BBB-) from Fitch Ratings Agency. As of the end of
2009, the equity base of the ProCredit group is
EUR 388 million. The total assets of the ProCredit
group are EUR 4.9 billion.

The Bank and its Shareholders 7
Commerzbank is one of
Germany’s leading banks for private and corporate
customers. Following the merger of Dresdner
Bank and Commerzbank in May 2009, its
customers will in future have access to around
1,200 branches, the largest branch network of
any German private bank. The new Commerzbank
has approximately 15 million private and corporate
customers worldwide, who can now enjoy
an even broader and more attractive range of
Commerzbank products and advisory services.
The new Commerzbank promises to be an even
stronger and more reliable partner for corporate
customers, particularly export-dependent small
and medium-sized firms (SMEs). It also manages
major corporate customers and institutions in
Europe as well as multinational enterprises. In
addition, the new Commerzbank is also strengthening
its position as a leading export financier,
supporting its customers in Germany and around
the world.
Commerzbank AG is the parent company of a
global financial services group. The group’s operating
business is organised into six segments
providing each other with mutually beneficial
synergies: Private Customers, Mittelstandsbank
(SME bank), Central & Eastern Europe, Corporates
& Markets, Asset Based Finance and Portfolio
Restructuring Unit.
Today some 30% of German foreign trade is channelled
through the new Commerzbank, the leading
export financier for the German industry. The
bank is directly represented in 46 countries as
well as through a network of more than 6,000
banking relationships worldwide.
Commerzbank is well positioned in Central and
Eastern Europe, serving more than 3.7 million
customers in the region. In Poland the bank holds
a 70% stake in BRE Bank, Poland’s third-largest
financial institution. In Ukraine it is the majority
shareholder of Bank Forum – a universal bank
with a nationwide network. Currently Commerzbank
operates in more than ten countries in the
region.

8
Annual Report 2009
Special Feature
ProCredit Bank – The Bank of Choice for SMEs
2009 was particularly challenging for small and
medium-sized enterprises (SMEs) in Bosnia and
Herzegovina. The global financial crisis had a significant
impact on macroeconomic stability in the
country, making it difficult for smaller businesses
to obtain credit from local institutions. Additionally,
international and domestic orders fell sharply,
which led to a slump in turnover and decreased
levels of production.
Despite the recession, ProCredit Bank continued
to serve its core client group by making credit
available to SMEs across the country. We understand
that these businesses create jobs and make
a vital contribution to economic development.
In this respect, it is clear to us that they require
a flexible banking partner that can respond to
their financing needs, particularly in more volatile
times. But that is not all: SMEs also require a reliable
bank that offers the full range of basic financial
services.
Against this background, ProCredit Bank made a
concerted effort in 2009 to position itself as the
“house bank” of choice for small and mediumsized
enterprises. By offering comprehensive
services and a personalised approach, we strive
to meet the individual needs of each of our clients.
This strategy was reinforced in October with the
launch of a new business package for registered
companies – ProBusiness.
The ProBusiness package includes all the basic
credit services such as business loans for working
capital or capital assets, an overdraft facility,
guarantees and letters of credit. Most ProBusiness
loans offer fixed interest rates and allow
clients to combine different forms of collateral.
To help registered enterprises manage their longterm
cash flows, we also extended the repayment
period on fixed asset loans from seven to ten
years.

Special Feature 9
Furthermore, the ProBusiness package allows clients
to take full advantage of the bank’s range of
payment services and its Internet banking facility.
These services help to increase efficiency and
enable our customers to access their accounts at
their convenience. We are committed to building
and maintaining long-term banking relationships
with as many people as possible in Bosnia and
Herzegovina, and so all of our ProBusiness clients’
employees are also given full access to our
retail services.
In addition to offering tailored products, we are
committed to supporting SME clients by organising
frequent seminars that cover topics of major
interest, such as accounting and tax law. Towards
the end of the year, we also produced the first edition
of Business World, a quarterly publication
that discusses the most important economic and
financial developments in the country. The magazine
also features articles that provide advice on
effective business management, ranging from
planning and budgeting to staff management.
Last but not least, Business World provides a
platform for selected businesses to increase their
visibility and develop new professional contacts.
Reflecting our focus on SME clients, we consolidated
our branch network with the aim of enhancing
our coverage of areas where the concentration
of such businesses is greatest. The new ProCredit
Business Center in Tuzla provides a dedicated
service to SME clients and offers a level of personal
attention that other banks cannot provide.
Our expert staff have received additional training
to ensure that they offer up-to-date advice regarding
their clients’ banking needs.
All of the above efforts demonstrate ProCredit
Bank’s continued commitment to being a reliable
partner for SME clients around the country. As
one customer explained: “In these difficult times,
small and medium sized enterprises do not only
need access to loans, but also a bank that will
monitor their development and provide suitable
products and services. I am pleased that ProCredit
Bank is working on achieving this.”

10
Annual Report 2009
Management Business Review
Management
from left to right:
Senad Redžić
Executive Director, Small and Medium Business Sector
Maja Hrnjić
Director of Operations
Vedran Hadžiahmetović
Executive Director, General Services Sector
Frieder Wöhrmann
Director
Edin Hrnjica
Executive Director, Retail and Payments Sector
Sabina Mujanović
Executive Director, Finance Sector
Radomir Savić
Executive Director, Risk and Compliance Sector

Management Business Review 11
Political and Economic Environment
BiH is behind other Western Balkan countries in
the EU integration process. The European Commission’s
progress report for 2009 concluded
that only very limited progress had been made in
addressing the political criteria required by the
Stabilisation and Association Agreement (SAA),
which was signed in June 2008. In particular, the
report pointed to the deteriorating political situation,
delays in reforms, and problems with the
work of state-level executive and legislative bodies.
Crucially, the report highlighted the need to
break the deadlock over constitutional reform,
singling out the entity-based voting system as
one of the main obstacles to a more efficient
state apparatus.
According to a report by the Agency for Statistics
of BiH, overall industrial production in BiH contracted
by 3.9% year on year in the first three
quarters of 2009. 2 Although a decline was recorded
in the Federation of BiH, growth was positive
in the Republika Srpska. Manufacturing shrank
by 5.8%, mainly because of reduced foreign demand,
while mining output declined by 2.9%. The
utilities sector (electricity, gas and water) was
alone in showing a positive trend with output up
by 1.4%.
Exports remained low due to reduced demand
for principal products such as metals and wood
in the main markets of the Eurozone, Croatia and
Serbia. Merchandise exports fell by 21.4% year
on year in the first three quarters, but this was
outpaced by the contraction in imports, which
shrank by 26.1%. 3
The currency board arrangement remained in
place with the convertible mark (BAM) pegged to
the euro at a rate of 1.96. The currency board promotes
macroeconomic stability.
A three-year stand-by facility was arranged with
the IMF in May 2009. Under this arrangement,
BiH must concentrate on maintaining macroeconomic
stability through fiscal consolidation,
an area that has received much criticism in the
past. The IMF also advocated further structural
reforms and a greater degree of privatisation.
However, the authorities must focus instead on
short-term measures to mitigate the impact of
the global economic downturn.
One important condition of the SAA is already in
effect: customs duties on a wide range of imports
from the EU were reduced or abolished as of January
2009, intensifying competition for many local
producers.
After GDP growth of 5.8% in 2008, economic output
contracted by an estimated 3.2% in 2009. 1
This was partly the result of increased unemployment
as well as measures taken to rein in the
budget deficit, such as public-sector wage cuts
and reductions in social welfare benefits. Access
to loans was also restricted, mainly because
banks were still reeling from the international financial
crisis.
Average consumer prices remained the same as
in 2008: annual inflation was 0.0% in December.
4 Food, housing and heating costs account for
over half the average household’s consumption
in BiH, and inflation is expected to increase to
around 2% in 2010.
Financial Sector Developments
At the end of 2009, 31 commercial banks and 25
microcredit organisations (MCOs) were operating
in the country. 5
The financial sector is dominated by foreign investors:
only nine banks are owned by domestic
shareholders. Concentration in the market remains
moderate. At the end of the year, the three
largest banks, Raiffeisen Bank, UniCredit Bank
and Hypo Bank, held 60% of the sector’s total assets.
6
1
Economic Intelligence Unit, Country Report, December
2009.
2
Agency for Statistics of BiH, Basic indicators available
at www.bhas.ba, December 2009.
3
ibid.
4
Agency for Statistics of BiH, Consumer Price Index in
BiH, December 2009.
5
Unless otherwise indicated, financial sector data based
on statistics of the Central Bank of BiH: www.cbbh.ba.
6
Based on the respective banks’ financial statements as
of December 31, 2009.

12
Annual Report 2009
Capitalisation and liquidity levels remained
sound despite the impact of the global financial
crisis. However, the expansion of financial intermediation
slowed down, and the profitability of
most banks suffered considerably, with some
institutions recording a marked loss for the year.
In response to a sharp drop in customer deposits
in October 2008, the Deposit Insurance Agency of
BiH raised its coverage to BAM 20,000. This and
the ability of banks to meet withdrawal requests
reassured savers that their money was safe, and
the volume of deposits remained stable in 2009,
growing by 2.1% to BAM 12.2 billion (EUR 6.2 billion).
Deposits from private individuals accounted
for around 52% of the total volume.
After overheated credit growth in recent years, total
assets decreased by 1.6% to BAM 20.7 billion
(EUR 10.6 billion). The consolidated loan portfolio
contracted due to lower demand as well as stricter
lending conditions, both of which were caused by
rising levels of indebtedness. Total loans declined
by 3.1% to BAM 14.1 billion (EUR 7.2 billion), representing
58.8% of GDP (2008: 59.1%).
In response to the slowdown in lending, the Central
Bank of BiH (CBBH) lowered the reserve requirement
for deposits with a maturity above 12
months from 10% to 7%. It also excluded government
deposits intended for development projects
from the calculation base.
The percentage of non-performing loans rose
from 3.1% at the end of 2008 to 5.9%. According
to CBBH, interest rates for local currency loans
to private companies increased from 7.42% in
December 2008 to 9.14% in December 2009 for
short-term maturities, while decreasing from
8.10% to 7.78% for long-term financing.
Some banks also raised the interest on outstanding
variable-rate loans, justifying their actions
by referring to the worsening economic environment
and increased credit risk. This was met with
a high degree of public anger, and the media accused
guilty banks of inconsistent and non-transparent
behaviour.
While the negative sentiment towards banks also
affected our operations to a certain extent, we
continued to emphasise the importance of open
and honest communication, positioning ourselves
as a reliable, long-term partner for SMEs
and small savers.
ProCredit Performance
Against the background of an economic crisis and
a highly competitive banking sector, ProCredit
Bank BiH stayed true to its mission to provide socially
responsible financial services to its core client
groups. Aggressive and irresponsible lending
practices have been all too evident in recent times,
plunging a significant number of companies and
individuals into excessive debt. In order to avoid
exacerbating this problem, we raised our credit
eligibility criteria, resulting in an overall decrease
in the loan portfolio.
Although the negative economic environment
increased the default risk, the bank managed to
maintain the proportion of non-performing loans
in its portfolio in line with the sector average.
We have always placed strong emphasis on individual
credit analyses and rigorous risk management.
Moreover, if it becomes too difficult for our
clients to meet their scheduled repayments, we
strive to find mutually beneficial solutions at an
early stage. As a result, the portfolio at risk (PAR
– loans overdue by more than 30 days) was 5.6%
at the end of December.
In line with our ongoing goal to increase the bank’s
range of services for enterprise clients, we opened
our first Business Center, located in Tuzla. Additional
branches of this type will open in Sarajevo,
Mostar and Banja Luka in early 2010, providing a
dedicated service to customers in the SME sector.
On the retail side, we continued to offer attractive
and straightforward deposit accounts and other
services. Our staff receive continuous training so
that they are in a position to offer professional
advice and build deep client relationships founded
on mutual respect and trust. We welcome
customers from all social backgrounds and of all
ages, and at the end of the year we were serving
more than 107,900 people in BiH.
Despite a challenging operational environment,
ProCredit Bank established a sound basis for its
future development. This would not have been pos-

Management Business Review 13

14
Annual Report 2009
sible without the long-term support of our shareholders
and the dedicated efforts of our staff.
The following sections give a detailed overview of
our lending and retail operations and present the
financial results for the year under review.
Lending
ProCredit Bank continued to make credit widely
available to sustainable businesses in a challenging
year. The bank disbursed 12,113 loans
with a combined volume of BAM 143.7 million
(EUR 73.5 million). The average loan disbursement
was BAM 11,861 (EUR 6,065), representing
an increase of 82.4% in comparison with 2008.
This reflects our goal to increase the proportion
of the portfolio that finances the SME sector.
Given the extent of over-indebtedness among
clients who operate unregistered businesses,
we revised our credit requirements at the beginning
of the year and reduced the number of disbursements
in this category. These measures led
to a decrease of 49.6% in the volume of agricultural
and business loans below EUR 10,000. As
a result, the gross loan portfolio contracted by
27.0% to BAM 234.1 million (EUR 119.7 million).
The bank had a total of more than 39,700 outstanding
loans at year-end. Loans outstanding to
agricultural producers and very small companies
amounted to BAM 82.3 million (EUR 42.1 million),
representing 35.2% of the portfolio.
Our main priority in 2009 was to increase the
level of financing extended to SMEs (loans above
EUR 10,000). Accordingly, we streamlined lending
procedures and revised the maturity periods
and collateral requirements of certain products
to better meet our clients’ needs. In addition,
we launched the “ProBusiness” package, a convenient
“one-stop” solution for larger business
customers. To promote these services, specialist
staff visited potential clients at their workplace,
taking the first step to building a close working
relationship.
The bank disbursed 843 loans to SMEs with a combined
volume of BAM 56.6 million (EUR 28.9 million).
The average outstanding loan size in this category
was BAM 67,143 (EUR 34,330). Thanks to our
responsible approach, we maintained high portfolio
quality in this segment: the portfolio at risk (PAR
– loans more than 30 days in arrears) was 1.9%.
The volume of bank guarantees and letters of
credit amounted to BAM 8.9 million (EUR 4.5 million).
In line with our mission to support the development
of as many small businesses as possible,
we aim to promote these products in the
coming year to a larger number of SME clients.
We continued to offer housing loans and home
improvement loans to customers with a regular
Loan Portfolio Development
Number of Loans Outstanding – Breakdown by Loan Size*
Volume (in EUR million)
Number (in ’000)
180
160
140
120
100
80
60
40
90
80
70
60
50
40
30
20
3.8%
41.0%
0.6%
0.1%
54.4%
20
10
0
Jun
05
Dec
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
0
< EUR 10,000 > EUR 150,000
EUR 10,001 – EUR 50,000 Total number outstanding
EUR 50,001 – EUR 150,000
< EUR 1,000 EUR 50,001 – EUR 150,000
EUR 1,001 – EUR 10,000 > EUR 150,000
EUR 10,001 – EUR 50,000 * 31 Dec 2009

Management Business Review 15
salary. At the end of 2009, these two segments
represented 4.6% of the total portfolio.
Due to the difficult economic climate and the
number of clients who had become overly indebted,
often by taking out additional loans from
other institutions since ProCredit Bank conducted
its initial credit assessment, the PAR over 30
days had risen to 5.6% at the close of the year
(2008: 2.3%).
Our staff have always maintained close personal
contact with their clients and strive to recover
overdue loans, initiating legal proceedings when
necessary. To enhance arrears management, we
formed dedicated teams at each branch in 2009
to monitor the portfolio and take proactive measures
to combat problem loans. One of the most
mutually beneficial solutions is to restructure
the loan in accordance with predefined criteria,
adjusting clients’ payment schedules to reflect
Business Loan Portfolio – Breakdown by Maturity
Loan Portfolio Quality (arrears >30 days)
in %
in % of loan portfolio
100
90
80
70
60
50
40
30
20
10
0
Jun
05
Dec
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
Jun
05
Dec
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
< 12 months 12 – 24 months > 24 months
Net write-offs: in 2006: EUR 254,409 in 2008: EUR 2,538,340
in 2005: EUR 270,002 in 2007: EUR 703,616 in 2009: EUR 5,492,202

16
Annual Report 2009
their changed financial situation. Restructured
loans constituted 2.5% of the total portfolio at
the end of December.
Net write-offs totalled BAM 10.7 million (EUR
5.5 million) and were equivalent to 4.6% of the
year-end portfolio. Loan loss provisions were increased
to BAM 13.8 million (EUR 7.1 million) and
thus covered the PAR over 30 days by 105.6%.
Deposits and Other Banking Services
Despite the lack of confidence in banks and the
negative media coverage in 2009, ProCredit Bank
maintained its solid reputation, and savers maintained
their high level of trust in the institution.
At the end of December, the bank was serving
118,000 account holders. Total deposits amounted
to BAM 242.7 million (EUR 124.1 million), which
was equivalent to 103.7% of the loan portfolio. Reflecting
our goal to attract funds from small savers
as well as enterprise clients, the average account
balance was BAM 2,133 (EUR 1,090).
The bank maintained a stable portfolio, recording
modest growth in retail deposits. By the end of December,
private individual deposits had increased
by 2.2% compared with 2008. Our strategy was
geared towards further diversifying the deposit
base to ensure a comfortable liquidity position for
the bank. The central aim here was to increase the
proportion of long-term placements by personal
customers. The bank paid out a number of large
deposits by public companies and institutions. As
a result, legal entities contributed 34.6% of total
deposits, compared to 53.8% in 2008, and the
overall deposit base decreased by 27.7%.
The maturity and size structure of the deposit base
was satisfactory. Term deposit accounts (TDAs)
contributed the largest share of the total volume
(64.4%), followed by current accounts (25.4%) and
regular savings accounts (10.2%). The average
balance of private individual TDAs rose by around
6.2% to BAM 15,083 (EUR 7,712), while for business
clients the average amount held in TDAs was
BAM 496,358 (EUR 253,784).
The stability we maintained in our retail deposit
business was a direct result of our efforts to promote
a savings culture by providing simple and
attractive deposit options for ordinary people. It
also reflects our commitment to fostering trust in
banks. In September, for example, we published
100,000 brochures for the general public containing
practical tips on effective household budget
management during difficult times.
Our branches organised direct promotions and
regular informative events to present the bank’s
diverse range of products and services in 2009.
Staff also visited the workplaces of business cli-
Customer Deposits
Number of Customer Deposits – Breakdown by Size*
Volume (in EUR million)
Number (in ’000)
180
160
140
180
160
140
1.8%
9.6%
0.1%
o.1%
120
120
100
100
80
80
13.9%
60
40
20
0
Jun
05
Dec
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
60
40
20
0
74.5%
Term Savings Sight Total number
< EUR 100 EUR 10,001 – EUR 50,000
EUR 101 – EUR 1,000 EUR 50,001 – EUR 100,000
EUR 1,001 – EUR 10,000 > EUR 100,000
* 31 Dec 2009

Management Business Review 17
ents to explain the advantages of these services to
people who receive their salaries through current
accounts at ProCredit Bank.
We encourage our customers to use payment
cards as a safe and convenient alternative to cash.
More than 26,400 active cards were in circulation
at the end of 2009, most of which were VISA Electron
and Maestro debit cards. The bank also issues
VISA Business cards, VISA charge cards and
MasterCards to eligible clients.
Our Internet banking facility continued to grow in
popularity. The number of clients registered on the
ProBanking system increased by 11.8% to 1,800,
and the number of transactions carried out via this
portal rose by 65.4% to 66,600.
In its payments business, the bank executed over
1.6 million domestic transfers with a total volume
of BAM 1.7 billion (EUR 890.8 million). Over 46,000
international transfers were carried out with a total
volume of BAM 399.1 million (EUR 204.1 million).
Domestic Money Transfers
International Money Transfers
Volume (in EUR million)
1,000
900
800
700
600
500
400
300
200
100
0
Jan–
Jun
05
Jul–
Dec
Jan–
Jun
06
Jul–
Dec
Jan–
Jun
07
Jul–
Dec
Jan–
Jun
08
Incoming Outgoing Number
Jul–
Dec
Number (in ’000)
Jan–
Jun
09
Jul–
Dec
1,000
900
800
700
600
500
400
300
200
100
0
Volume (in EUR million)
180
160
140
120
100
80
60
40
20
0
Jan–
Jun
05
Jul–
Dec
Jan–
Jun
06
Jul–
Dec
Jan–
Jun
07
Jul–
Dec
Jan–
Jun
08
Incoming Outgoing Number
Jul–
Dec
Number (in ’000)
Jan–
Jun
09
Jul–
Dec
45
40
35
30
25
20
15
10
5
0

18
Annual Report 2009
Financial Results
ProCredit Bank’s overall performance in 2009
was impacted by the effects of the international
financial crisis on the real economy. In response
to the changing conditions in the local market,
our main strategy was to withdraw from the lowest
end of our lending activities in favour of enhancing
our services for SME clients.
The bank introduced higher collateral requirements
for loans below EUR 10,000 and limited the
volume of exposures to unregistered companies.
These measures led to a decrease of 49.6% in the
very small and agricultural loan portfolio. At the
same time, an increase of 1.9% was recorded for
loans above EUR 50,000. The gross loan portfolio
contracted by 26.4%, driving a decrease in total
assets of 27.7%.
Despite a shortage of funds on international markets,
the bank maintained a very strong liquidity
position and closed the year with liquid assets
equivalent to 30.5% of total assets.
Continued public trust in ProCredit Bank even
during turbulent economic times was reflected by
an increase of 2.2% in retail deposits. A number
of early repayments of large deposits by public
institutions enabled the bank to further diversify

Management Business Review 19
the deposit base, although total deposits subsequently
fell by 27.7%. The bank did not need to
tap external funding sources, and outstanding liabilities
to banks and other financial institutions
were reduced by 38.6% to BAM 40.3 million (EUR
20.6 million).
Total operating income for the year was BAM
30.4 million (EUR 15.6 million). Net interest income
represented 83.3% of this amount, and
lending activities generated 88.8% of interest
income. Net fee and commission income accounted
for 14.1% of operating income and remained
at a similar level to the previous year despite a
negative trend in the sector as a whole. The bank
achieved this result primarily by expanding its
SME client base and developing highly competitive
pricing plans.
Due to organisational changes, including a strategic
consolidation of the branch network and an
intensive cost management programme, operating
expenses were reduced by 7.9% to BAM 35.4
million (EUR 18.1 million).
As a responsible lending institution, the bank
raised its provisions in line with the high rate of
arrears in the market. Allowances for loan impairment
were increased by 66.1% to BAM 11.1 million
(EUR 5.7 million).
Due to the difficult business environment and
the significant increase in provisions, the bank
posted a net loss of BAM 14.7 million (EUR 7.5
million).
However, this result did not affect the capital adequacy
ratio, which remained safely above the
required level throughout the year. Confirming
their long-term commitment to ProCredit Bank’s
vision and forthcoming expansion in the SME
sector, which will involve greater credit exposure
limits, the shareholders increased their paid-in
equity by BAM 5 million (EUR 2.6 million) in December
2009. This further improved the capital
adequacy ratio, which stood at 17.3% at the close
of the year.
Outlook
The economic crisis is far from over in BiH, and
2010 will be another difficult year. After a period
of recession, GDP is expected to turn positive in
line with increasing demand for Bosnian exports
in the Eurozone and in regional markets. However,
recovery will be slow due to reduced private consumption,
high unemployment and limited public
spending. It follows that arrears will remain high,
and access to credit is likely to remain restricted.
The SAA requires local authorities to strengthen
policy co-ordination between the governing bodies
of each entity and to create a single economic
space in BiH. However, the general elections
scheduled for the end of 2010 will be a priority
in the political sphere, and the reform process is
therefore unlikely to make significant progress.
The banking sector is expected to remain stable.
For a number of MCOs, though, it will be a decisive
year: many risk losing their licences due to a
high level of arrears. The Federal Banking Agency
requires PAR over 30 days of less than 5.0% and
write-offs equivalent to less than 3.0% of the portfolio,
and some institutions have already exceeded
these limits.
In this challenging environment, ProCredit Bank
will continue to be a stable and trustworthy partner.
Our key priority will be expanding in the SME
sector, specifically by establishing additional
Business Centers around the country, in Sarajevo,
Mostar and Banja Luka. We are constantly improving
our services for SME clients, which include
credit lines, tailored loans and a diverse range of
non-credit products. These efforts will be supported
by marketing activities designed to strengthen
our image as a reliable “house bank”.
The development of our branch network will be
another important challenge in 2010. However,
we are confident that our inclusive approach, our
commitment to our target groups and our dedicated
staff will make 2010 a successful year for the
institution.
Fitch Ratings assigned ProCredit Bank BiH a longterm
foreign currency rating of “B” with a stable
outlook and a long-term local currency rating of
“B+” with a stable outlook.

20
Annual Report 2009
Risk Management
The global economic downturn highlighted the
importance of a prudent approach to risks. Our
commitment to responsible banking involves not
only offering straightforward banking products
tailored to our target groups’ needs; we also
strive to manage our risks in a responsible way.
Our culture of internal and external transparency
is also an important part of our overall approach
to risk mitigation.
The bank addresses key risk areas through its Risk
and Compliance Division. Within this division, the
Risk Department co-ordinates the identification,
assessment, monitoring, control and mitigation
of the risks inherent in the bank’s operations.
Ultimate responsibility for risk management lies
with the executive management, but other senior
managers are also responsible for managing risks
in their respective areas of authority. In addition,
the Internal Audit Department conducts processfocused
internal audits as an integral part of the
risk management system.
A number of specialised bodies deal with individual
areas of risk management. These include the
Risk Management Committee, the Portfolio Credit
Risk Committee, the Assets and Liabilities Committee
(ALCO), and the Operational Risk Committee.
They meet regularly to monitor developments
and decide on risk-mitigation measures.
The bank profits from the guidance provided by
ProCredit Holding (PCH) on all risk-related issues,
and, in line with the group’s risk management
policy, the bank reports its risk position to both
the Supervisory Board and PCH’s Group Risk Management
Department on a quarterly basis. The
key risk indicators are reported more frequently.
Under new group policies introduced in 2009,
all of the ProCredit banks now comply with the
risk-management standards of the German Federal
Financial Supervisory Authority (BaFin). If the
Group Risk Management Policies are in conflict
with local legal requirements, the more conservative
standard prevails.
Credit Risk
The bank uses the proven ProCredit lending methodology
to manage credit risk in all phases of the
lending cycle. Loan officers conduct rigorous
credit analyses involving various cross-checks to
gauge each applicant’s creditworthiness. Lending
decisions are taken by credit committees
consisting of experienced staff members. We
maintain close relationships with our borrowers,
and regular monitoring by the responsible loan
officers permits timely identification of potential
repayment problems.
Our portfolio contained over 39,500 loans at
year-end. And while our emphasis on diversification
remained as strong as ever, our main objec-

Risk Management 21
tive in 2009 was to increase lending in the small
loan segment (EUR 10,000 to EUR 100,000). We
achieved this goal, with the share of small loans
in the total number of loans outstanding rising to
3.1%, compared to 2.2% in 2008, and the share
of loans in this size range in the total portfolio
volume increasing from 22.8% to 27.5%. The average
outstanding amount in the small loan segment
at the end of 2009 was EUR 27,013.
The bank analyses its outstanding loans by both
size and sector, assessing its credit risk exposure
in the light of local and regional economic trends.
Although we applied sound credit risk management
principles, the portfolio at risk (PAR - the
proportion of loans in arrears by more than 30
days) increased from 2.3% at the end of 2008 to
5.6% at the end of 2009. The highest increase in
the PAR was in the market segment of very small
businesses, due primarily to the effects of the
global economic crisis as well as the rapidly deteriorating
situation in the local microfinance market.
Easy access to loans in previous years and
irresponsible lending by certain institutions had

22
Annual Report 2009
compromised the ability of a sizeable number of
borrowers to meet their cumulative obligations.
In response, the bank further strengthened its
monitoring and analysis of the PAR.
Net write-offs amounted to EUR 5.5 million,
equivalent to 4.6% of the year-end portfolio. The
bank has a conservative policy regarding loan
loss provisions, which at year-end were equivalent
to 105.6% of the PAR, and to 5.9% of the total
portfolio volume. Arrears management will once
again be a key priority in the coming year. We will
continue our intensive training for loan officers,
focusing in particular on further strengthening
their ability to analyse applicants’ overall debt
levels.
Our lending staff closely monitors clients’ businesses
to assess the impacts of the economic
downturn on an individual basis. As part of our
long-term relationships with clients, we are
providing advice and assistance to guide them
through difficult times. We will continue to modify
repayment plans and restructure loans to help
them meet their obligations.
Market Risk
Our exposure to market risk is low because we
focus on our core business activities and do not
engage in speculative transactions or proprietary
trading. Interest rate derivatives are used for
hedging purposes only. Our model for measuring
interest rate risk enables us to identify, assess,
monitor and control our exposure in this area.
BiH has a currency board regime under which the
local currency (BAM) is pegged to the euro. Thus,
depreciation of the local currency is not an imminent
risk. Also, other foreign currency positions
are kept at a minimal level.
The ALCO regularly monitors and analyses the interest
rate risk exposure and open currency positions,
meeting at least once a month. The bank
aims to maintain a very low open currency position,
and in 2009 the annual average position
stood at 3.6% of the total year-end capital. Interest
rate risk is managed by minimising maturity
gaps across the entire range of maturities.
Liquidity Risk
The ALCO reviews the development of the loan
portfolio and the deposit base using a reporting
system which tracks cash flow on a daily
and monthly basis, and also monitors the liquidity
position. Thanks to our conservative liquidity
policy, the ratio of liquid assets (including
the mandatory reserve) to total assets stood at
30.5% at the end of 2009. The liquidity position
is evaluated on a monthly basis using stress testing
and scenario analysis.
Given that most loans are repaid in monthly instalments,
and with the slowdown in lending
due to the changed economic situation, we had
excess liquidity in 2009. Thus, we did not need
to obtain funds from other banks in the group or
to tap expensive financing sources in the credit
markets. In line with our strategy in 2009, we
achieved greater diversification in our deposit
base by focusing more on mobilising funds from
private individuals, thus reducing the share of
the total volume held by legal entities. Thus, at
year-end the 20 largest depositors accounted for
23.9%, compared to 39.4% in 2008.
The ratio of total deposits to the total loan portfolio
was 103.7%, compared with 105.0% in 2008.
Operational Risk
All policies, processes and procedures for the
control and mitigation of material operational
risks meet the criteria of the ProCredit group and
comply with international best-practice standards
and the local regulations.
In operational risk management, we focus on ensuring
that:
• the design of all processes and systems reduces
the associated operational risks;
• the “four-eyes” principle and a segregation
of duties are implemented and that control
mechanisms are integrated into the relevant
IT systems;
• the risks associated with business processes
and products and services are continuously
monitored at various levels; and that
• regular audits are performed to evaluate the
quality of monitoring.

Risk Management 23
Together with the risk event database, the results
of the risk assessments are used to develop an
operational risk profile and risk mitigation plan
for each business process.
Regular reporting of pertinent information to senior
management and the management board supports
the proactive management of operational
risks. Moreover, annual risk awareness training
is mandatory for all employees. Despite the rather
difficult environment in 2009, there were no
significant losses related to operational risk during
the year.
Capital Adequacy
requirements and those of the ProCredit group,
as well as the local regulations in BiH, the bank
ensures that its capital adequacy ratio (CAR) is at
least 12%.
The loss posted in 2009 led to a reduction in the
amount of the bank’s capital, which was reflected
in the CAR. At the end of 2009, the Tier I and Tier
II capital covered the risk-weighted assets by
17.3% (2008: 18.4%).
Shareholder support remained strong, as evidenced
by the capital increase of EUR 2.6 million
in December, boosting total shareholders’ funds
to EUR 20.7 million.
ProCredit Bank’s capital was sufficient throughout
the year to provide the necessary coverage
for its risk-weighted assets. In line with Basel II

24
Annual Report 2009
Branch Network
ProCredit Bank’s strategic goal in 2009 was to
consolidate its branch network with the aim of increasing
outreach to business customers in cities
where the demand from small and medium-sized
enterprises is greatest. We reduced our presence
in rural areas in response to the abundance of alternative
sources of financing: many loans have
been disbursed by other institutions in an irresponsible
manner, which has led to a high level
of over-indebtedness in the country. Thus, at the
end of the year, ProCredit Bank was operating a
network of 26 branches in 18 towns and cities.
We relocated a number of our offices to more
accessible and visible locations. For example,
in Zalužani, a district in North Banja Luka, we
opened new premises in the industrial zone. This
move placed us in an ideal position to serve a
large number of business clients who appreciate
the convenience of having a branch close to the
workplace.
In Tuzla, we relocated one of our two branches
there and opened our first Business Center. This
exciting development, which took place in November,
will be followed by opening Business
Centers in Sarajevo, Mostar and Banja Luka.
Staffed by specially trained employees, these
offices offer our SME clients a dedicated service
that is tailored to their needs. Our goal in developing
such branches is to support those enterprises
that contribute most to local economic
growth.
In the year just ended, our ATM network consisted
of 28 terminals. Since mid-2009, our ATMs
have allowed clients to print a summary statement
detailing the most recent transactions on
their account. In line with our aim to continuously
improve our customers’ banking experience, we
aim to introduce cashless payments via Point-of-
Sale (POS) terminals in the coming year. POS terminals
are a simple and secure way for retailers
Cazin
Trn-Zalužani
Prijedor
Gradačac
Brčko
Bijeljina (2)
Bihać
Doboj
Banja Luka (2)
Bosnia and Herzegovina
Zavidovići
Tuzla (2)
Serbia
Travnik
Zenica
Sarajevo (4)
Croatia
Ilidža (2)
Pale
Posušje
Mostar (2)
Montenegro
Adriatic Sea
Trebinje

Branch Network 25
and service providers to collect payments made
by debit or credit card.
At all of our branches, our team is committed to
building and maintaining long-term client relationships
that are founded on competence and
mutual trust. In the coming year, our efforts will
be directed towards further expanding our outreach
to the SME sector, with Business Centers
serving as centres of excellence for financial advice
for small and medium-sized companies, and
with professional and efficient payment services
being offered in all other branches.

26
Annual Report 2009
Organisation, Staff and Staff Development
At ProCredit Bank, we understand that if we wish
to offer professional service, it is necessary to
have a team of well-trained employees who are
both highly motivated in their roles and able to
identify with the mission and corporate values of
the organisation. The consolidation of the branch
network led to an overall reduction in staffing
levels, and at the end of the year we had a team of
662 staff members.
Before receiving on-the-job training, our employees
attend an induction course that explains the
historical background and development orientation
of the ProCredit group. We also organise
regular training events for our existing employees
and operate a mentoring scheme to encourage an
ongoing transfer of skills and knowledge. Underscoring
our commitment to ensuring that our staff
reach their full potential, a total of BAM 737,061
(EUR 376,052) was invested in training in 2009.
In line with our operational focus on small and
medium-sized enterprises, we designed training
events to enhance the performance of loan officers
in a challenging economic environment and
to build on the specialist knowledge of our credit
staff. The bank dedicated a total of 57 training
days to loan officers alone, with the aim of developing
a strong team to work with our growing
base of SME clients.
In the very small business segment, we reinforced
debt recovery strategies. This has become
a priority for the bank due to increasing levels of
indebtedness on the part of clients who have taken
out subsequent loans from other institutions
since undergoing our credit analysis.
For more experienced staff, middle management
training takes place at the ProCredit Regional
Academy, located in Macedonia. This facility
is operated by the ProCredit group to provide a
high level of training to key staff members of the
group’s institutions in Eastern Europe. In 2009
13 participants from Bosnia and Herzegovina attended
courses at the Regional Academy.
In addition, six management staff members took
part in the three-year part-time programme offered
by the ProCredit Academy in Germany,
three of whom completed the final course in July,
graduating with a “ProCredit Banker” diploma.

Organisation, Staff and Staff Development 27
Working for ProCredit Bank and taking advantage
of the broad range of training on offer requires a
firm command of English, and so we organise language
lessons for all staff. Additionally, nine employees
attended an intensive two-month course
at the group’s language centre in Germany, and
a further five completed a similar course in Macedonia.
In order to facilitate an exchange of ideas and
practical experience, ProCredit Holding provides
opportunities at the group level for employees
from the 22 institutions to work in direct contact
with each other. Particularly in the light of recent
difficulties in the financial sector, such seminars
and secondments are of great importance for our
future.
In order to continue strengthening the skills of
our employees and to further improve the quality
of their work, we plan to establish a Training
Department in 2010. Presently a unit within the
Human Resources Department, it will be charged
with the systematic professional development of
all staff members, designing tailored programmes
to help the team adjust to institutional changes
more effectively. The new department will also
assign internal coaches to train employees in the
specific areas related to their job descriptions.
In line with our commitment to transparency and
clear communication, we have adopted a new
salary structure that will be implemented in the
coming year. Senior management staff and members
of the Human Resources Department also
make regular visits to branches, inviting their colleagues
to offer suggestions regarding internal
organisation, and thus to play an active role in the
bank’s development.

28
Annual Report 2009

Business Ethics and Environmental Standards 29
Business Ethics and Environmental Standards
Part of the overall mission of the ProCredit group
is to set standards in the financial sectors in which
we operate. We want to make a difference not only
in terms of the target groups we serve and the
quality of the financial services we provide, but
also with regard to business ethics. Our strong
corporate values play a key role in this respect.
Six essential principles guide the operations of
the ProCredit institutions:
• Transparency: We adhere to the principle of
providing transparent information both to our
customers and the general public and to our
employees, and our conduct is straightforward
and open;
• A culture of open communication: We are
open, fair and constructive in our communication
with each other, and deal with conflicts
at work in a professional manner, working together
to find solutions;
• Social responsibility and tolerance: We offer
our clients sound advice and assess their economic
and financial situation, business potential
and repayment capacity so that they can
benefit from the most appropriate loan products.
Promoting a savings culture is an important
part of our mission, and we are committed
to treating all customers and employees with
fairness and respect, regardless of their origin,
colour, language, gender or religious or
political beliefs;
• Service orientation: Every client is served in
a friendly, competent and courteous manner.
Our employees are committed to providing excellent
service to all customers, regardless of
their background or the size of their business;
• High professional standards: Our employees
take personal responsibility for the quality of
their work and always strive to grow as professionals;
• A high degree of personal commitment: This
goes hand-in-hand with integrity and honesty
– traits which are required of all employees in
the ProCredit group.
These six values represent the backbone of our
corporate culture and are discussed and actively
applied in our day-to-day operations. Moreover,
they are reflected in the ProCredit Code of Conduct,
which transforms the group’s ethical principles
into practical guidelines for all staff. To make
sure that new employees fully understand all of
the principles that have been defined, induction
training includes sessions dedicated to the Code
of Conduct and its significance for all members of
our team. Regular refresher training sessions help
to ensure that employees remain committed to
our high ethical standards and are kept abreast of
new issues and developments which have an ethical
dimension for our institution. These events allow
existing staff to analyse recent case studies
and discuss any grey areas.
Another aspect of ensuring that our institution adheres
to the highest ethical standards is our consistent
application of best practice systems and
procedures to protect ourselves from being used
as a vehicle for money laundering or other illegal
activities such as the financing of terrorist activities.
An important focus here is to “know your customer”,
and, in line with this principle, to carry out
sound reporting and comply with the applicable
regulations. Updated anti-money laundering and
fraud prevention policies are being introduced
across the group to ensure compliance with German
regulatory standards.
We also set standards regarding the impact of our
lending operations on the environment. ProCredit
Bank Bosnia and Herzegovina has implemented
an environmental management system
based on continuous assessment
of the loan portfolio according
to environmental criteria, an indepth
analysis of all economic activities
which potentially involve
environmental risks, and the rejection
of loan applications from
enterprises engaged in activities
which are deemed environmentally
hazardous and appear
on our institution’s exclusion
list. By incorporating environmental
issues into the loan
approval process, ProCredit
Bank Bosnia and Herzegovina
is also able to raise its clients’ overall
level of environmental awareness. We also ensure
that requests for loans are evaluated in terms
of the applicant’s compliance with ethical business
practices. No loans are issued to enterprises
or individuals if it is suspected that they are making
use of unsafe or morally objectionable forms
of labour, in particular child labour.

30
Annual Report 2009
The ProCredit Group:
Responsible Banks for Small Businesses and Ordinary People
The ProCredit group comprises 22 financial institutions
whose business focus is on providing
responsible banking services in transition economies
and developing countries. We aim to provide
accessible, reliable services to small businesses
and the ordinary people who live and work in the
neighbourhoods in which we operate. At the end
of 2009 our 19,600 employees, working in more
than 830 branches, were serving 3.1 million customers
in Eastern Europe, Latin America and Africa.
The first ProCredit banks were founded more than
a decade ago with the aim of making a significant
development impact by promoting the growth of
small businesses. We sought to achieve this by
providing loans tailored to their requirements
and offering attractive deposit facilities that
would enable and encourage low-income individuals
and families to save. The group has grown
strongly over the years, and today we are one of
the leading providers of banking services to small
business clients in most of the countries in which
we operate.
Our development mission and socially responsible
approach remain as relevant today as they
have always been. Indeed, their importance has
been underscored by the widespread macroeconomic
decline which most of our countries of
operation experienced in 2009. The challenges
this has created for individual clients as well as
for national economies are significant. While the
impact has differed from country to country and
from region to region, it is clear that our customers
need a reliable banking partner now more
than ever. Many small businesses have adjusted
to the new environment and are beginning to invest
again, and ordinary people are regaining
their trust in banks. That is why we will continue
to apply the principles that have defined the
ProCredit group since its foundation.
Our mission is to provide credit in a responsible
manner to very small, small and medium-sized
enterprises, as we are convinced that these businesses
create the largest number of jobs and
make a vital contribution to the local economy.
Unlike most other banks operating in our markets,
we avoid aggressive consumer lending and
all speculative lines of business. Instead, the
ProCredit banks work in close contact with their
clients to gain a full understanding of the problems
small businesses face and the opportunities
that are available to them.
Our credit technology, developed over many years
with the support of the German consulting company
IPC, relies on the careful individual analysis
of all credit risks. By making the effort to know
our clients well and maintain long-term working
relationships based on trust and understanding,
we are well positioned to support them not only
when the economy is buoyant, but also during a
downturn and recovery. In 2009, the ability of our
loan officers to proactively make appropriate adaptations
to payment plans where necessary to
reflect clients’ new and more challenging sales
environments has played an important role in
maintaining good loan portfolio quality.
We not only extend loans, but also offer our enterprise
clients a broad range of other banking
services such as cash management, domestic
and international money transfers, payroll
services, POS terminals and payment and credit
cards. These services are geared towards assisting
our business clients to operate more
efficiently and more formally and thus help to
strengthen the real economy and the banking
sector as a whole.
Furthermore, our targeted efforts to foster a
savings culture in our countries of operation
have enabled us to build a stable deposit base.
ProCredit deposit facilities are appropriate for
a broad range of lower- and middle-income customers.
We place particular emphasis on working
with the owners, employees and families associated
with our core target group of very small,
small and medium-sized businesses. ProCredit
banks offer simple savings products and place
great emphasis on promoting children’s savings
accounts and on running financial literacy campaigns
in the broader community. In addition to
deposit facilities, we offer our clients a full range
of standard retail banking services. Despite considerable
public nervousness about the safety
of banks and intense competition in the deposit
market, the ProCredit institutions managed to
steadily increase their overall retail deposit
base in 2009, increasing the number of deposit

The ProCredit Group: Responsible Banks for Small Businesses and Ordinary People 31
accounts by some 300,000 and securing a very
comfortable liquidity position for the group.
The ProCredit group has a simple business model:
providing banking services to a diverse range
of enterprises and mobilising deposits from the
ordinary people who live and work around our
branches. As a result, our banks have a transparent,
low-risk profile. We do not rely heavily
on capital market funding and have no exposure
to complex financial products. Furthermore, our
staff are well trained, flexible and able to provide
competent advice to clients, guiding them
through difficult times as well as good times. Despite
the turmoil of the global financial markets,
the performance of the ProCredit group has been
remarkably stable: we ended 2009 with a good
liquidity position, comfortable capital adequacy,
PAR over 30 days of 2.68%, and a modest profit.
Given the very difficult macroeconomic situation
in many of our countries of operation, this was a
strong performance.
Our shareholders have always taken a conservative,
long-term view of business development,
aiming to strike the right balance between a
shared developmental goal – reaching as many
small enterprises and small savers as possible –
and achieving commercial success.
Strong shareholders provide a solid foundation
for the ProCredit group. It is led by ProCredit
Holding AG, a German-based company that was
founded by IPC in 1998. ProCredit Holding is a
The international group
of ProCredit institutions;
see also
www.procredit-holding.com
ProCredit
Mexico
Banco ProCredit
Honduras
Banco ProCredit
El Salvador
Banco ProCredit
Nicaragua
Banco ProCredit
Colombia
Banco ProCredit
Ecuador
Banco Los Andes
ProCredit Bolivia
ProCredit Holding Germany
ProCredit Bank Serbia
ProCredit Bank
Bosnia and Herzegovina
ProCredit Bank Kosovo
ProCredit Bank Albania
ProCredit Bank Macedonia
ProCredit Bank
Sierra Leone
ProCredit
Savings and Loans Ghana
ProCredit Bank
Democratic Republic of Congo
Banco ProCredit Mozambique
ProCredit Bank Ukraine
ProCredit Bank Moldova
ProCredit Bank Romania
ProCredit Bank Georgia
ProCredit Bank Armenia
ProCredit Bank Bulgaria

32
Annual Report 2009
public-private partnership. The private shareholders
include: IPC and IPC Invest, an investment
vehicle set up by IPC and ProCredit staff
members; the Dutch DOEN Foundation; the US
pension fund TIAA-CREF; the US Omidyar-Tufts
Microfinance Fund; and the Swiss investment
fund responsAbility. The public shareholders
include the German KfW Bankengruppe (KfW
banking group); IFC, the private sector arm of the
World Bank; the Dutch development bank FMO;
the Belgian Investment Company for Developing
Countries (BIO) and Proparco, the French Investment
and Promotions Company for Economic
Co-operation. The group also receives strong
support from the EBRD and Commerzbank, our
minority shareholders in Eastern Europe, and
from the Inter-American Development Bank (IDB)
in Latin America. With the strong support of its
shareholders and other partners, the ProCredit
group ended the year with a total capital adequacy
ratio of 16% – a figure that reflects their confidence
in the group.
ProCredit Holding is not only a source of equity
for its subsidiaries, but also a guide for the development
of the ProCredit banks, providing the
personnel for their senior management and offering
support in all key areas of activity. The
holding company ensures the implementation of
ProCredit corporate values, best practice banking
operations and Basel II risk management
principles across the group. The group’s business
is run in accordance with the rigorous regulatory
standards imposed by the German banking
supervisory authority (BaFin).
ProCredit Holding and the ProCredit group place
a strong emphasis on human resource management.
Our “neighbourhood bank” concept is not
limited to our target customers and how we reach
them; it also concerns the way in which we work
with our staff and how we encourage them to
work with their customers. The strength of our relationships
with our customers will continue to be
central to working with them effectively in 2010
and achieving steady business results.
A responsible approach to neighbourhood banking
requires a decentralised decision-making
process and a high level of judgment and adaptability
from all staff members, especially our
branch managers. Our corporate values embed
principles such as open communication, transparency
and professionalism into our day-to-

The ProCredit Group: Responsible Banks for Small Businesses and Ordinary People 33
day business. Key to our success is therefore
the recruitment and training of dedicated staff.
We maintain a corporate culture that promotes
the professional development of our employees
while fostering a deep sense of personal and social
responsibility. This entails not only intensive
training in technical and management skills, but
also frequent staff exchanges between our member
institutions. In this way, we take full advantage
of the opportunities for staff development
that are created by the existence of a truly international
group.
A central plank in our approach to training is the
ProCredit Academy in Germany, which provides a
part-time “ProCredit Banker” training programme
over a period of three years for high-potential
staff from each of the ProCredit institutions. The
curriculum includes intensive technical training
and also exposes participants to subjects such
as anthropology, history, philosophy and ethics
in an open and multicultural learning environment.
Our goal in covering such varied topics is
to give our future managers the opportunity to
develop their knowledge and views of the world.
At the same time, we aim to improve their communication
and staff management skills. The first
ProCredit Academy participants graduated in
September 2008. The group also operates three
Regional Academies in Latin America, Africa and
Eastern Europe to support the professional development
of middle managers at the local level.
The group’s strategy for 2010 will reflect the prevailing
conditions of the countries in which we
work. We will further expand our business as the
“house bank” of choice for small and very small
enterprises, offering tailored loans and other
banking services. In our lending activities, we will
increase the minimum loan size for enterprise clients
to EUR/USD 1,000-2,000 in most countries
since we have found that below this limit there
is broad access to loans from consumer finance
providers, a situation which prevents us from
maintaining loyal client relationships and keeping
arrears levels at a sustainable level in that
particular segment. It follows that for these client
groups we would rather offer deposit accounts
and other banking services. Furthermore, we believe
that our development impact can be more
significant if we focus on issuing slightly larger
loans to businesses with the greatest capacity
for job creation. Our other priorities in the coming
year will be to focus on loan portfolio quality and
on further improving the efficiency of our banking
services.
Strong investment in our staff will also remain a
key priority since it is their skills which enable
us to build strong, broad-based relationships
with our clients, which are a particularly important
factor of success in volatile macroeconomic
conditions. As a group of responsible banks for
ordinary people with prudent policies and welltrained
staff to ensure our steady performance,
we look forward to consolidating our position as a
“house bank” for small businesses, their employees,
and the ordinary people who live and work in
the neighbourhoods around our branches.

34
Annual Report 2009
ProCredit in Eastern Europe
ProCredit operates in 11 countries across Eastern
Europe. It is a leading provider of banking services
to very small, small and medium-sized businesses
in the region. It prides itself on the high standard
of transparent, professional services it provides to
all its clients – the ordinary people who live and
work in the vicinity of the 539 ProCredit branches
across the region.
2009 proved to be a very challenging year for
Eastern Europe. The region had enjoyed several
years of sustained economic growth, in part
fuelled by the rapid expansion of banking sectors
dominated by Western European banks. The effects
of the global financial crisis and the ensuing
global recession were bound to be felt across
the region. In nearly all the countries in which we
operate, banking sector growth stalled and there
was a strong GDP decline in 2009. The nature
and severity of the impact differed from country
to country. At one extreme was Ukraine, in which
GDP is estimated to have declined by more than
15%, whilst other countries such as Kosovo and
Albania experienced a less severe recession.
As a rule for banking sectors across Eastern Europe,
though, 2009 was a year dominated by
concerns first about liquidity and then about
non-performing loans. The performance of the
ProCredit group in Eastern Europe this year as
regards liquidity and loan portfolio quality highlights
both the important development role that
the ProCredit banks play in the region and their
relatively low risk profile.
The ProCredit banks in Eastern Europe quickly
built a comfortable liquidity buffer in 2009, despite
the strong withdrawals of customer funds
that most of our markets experienced in the last
quarter of 2008. This reflected the trust and confidence
of our retail deposit clients.
ProCredit has focused for many years on promoting
a savings culture amongst its clients. Setting
money aside can help protect savers against the
uncertainties of life, and since the ratio of deposits
to GDP in Eastern European countries is well
below Western European levels, we believe that
mobilising savings is an important development
priority. Accordingly, ProCredit banks fund most
of their lending activities from local savings. The
ratio of deposits to loans in the ProCredit banks
in the region is close to 90%. Thus, in 2009 we
did not have to rely on unpredictable capital markets
for funds.
And our experience in 2009 confirmed that our
clients appreciate the transparent, responsible
approach we take. We offer simple and reliable
retail banking services, including flexible savings
and deposit accounts to accommodate depositors’
long- and short-term needs. Our belief in
transparent, direct communication is particularly
important in fostering clients’ trust in these difficult
times. We understand that our clients want to
know in simple language how to save safely; they
also want to access their money when they need
it. Thanks to the trust that the public has placed
in ProCredit, the group reported solid growth in
customer deposits in 2009, although we did not
participate in the very aggressive pricing campaigns
that many other banks undertook to shore
up their liquidity positions. All the ProCredit institutions
in Eastern Europe ended the year with
a comfortable liquidity position, most without a
significant increase in the average cost of funds.
ProCredit banks were also in a strong position to
manage loan portfolio growth and quality. They
had never participated in the aggressive consumer
and corporate lending in which other banks
had engaged, and which is now creating significant
loan portfolio problems in the region. We
had always maintained that consumer loans have
only limited development impact and risk creating
overindebtedness if aggressively advertised
and disbursed without adequate analysis of clients’
ability to repay a loan – and this is precisely
the approach that financial institutions usually
took to consumer lending in much of Eastern Europe
in recent years.
Instead, at ProCredit we focus on providing responsible
banking services to small entrepreneurs
and family businesses. We aim to be their
banking partner of choice, able to understand
their needs and offer sound, professional advice.
We believe that these businesses are still an important
driving force behind economic growth
and job creation across Eastern Europe. We
continued lending strongly to small businesses
throughout 2009, although other banks significantly
scaled back their lending activities. The
only segment in which we slowed lending was

ProCredit in Eastern Europe 35
Belarus
Russia
Germany
Poland
Czech Republic
Ukraine
Slovakia
Switzerland
Austria
Slovenia
Hungary
Romania
Moldova
Italy
Croatia
Bosnia
and
Herzegovina
Serbia
Montenegro Kosovo
Macedonia
Albania
Bulgaria
Georgia
Armenia
Azerbaijan
Turkey
Greece
that of very small “microenterprise loans” with
volumes of less than EUR 2,000. In this segment,
we found many families to indeed be overindebted
due to excessive use of consumer loans,
and businesses to be less viable than in the past.
Looking ahead, we plan to stop serving this segment
of the market and focus above all on small
and medium-sized clients taking loans in the size
range from EUR 2,000 – EUR 150,000.
Our approach is to provide business loans based
on a careful, individual analysis of each client’s
ability to meet his or her obligations. We have
decentralised decision-making systems in place
and a body of highly qualified staff who are able
to conduct an efficient and reliable risk assessment
even in more volatile economic conditions.
ProCredit is guided by a responsible, long-term
attitude towards business development. We aim
to build lasting relationships with our clients and
do not forget that a loan is also a debt.
These values are particularly pertinent when
managing potential arrears in cases where clients
have to adapt to lower-than-expected sales.
In anticipation of the difficulties we felt would
emerge in 2009, we introduced more conservative
lending policies and more intensive arrears
management procedures in response to greater
credit risk. Our staff focused on working closely
with our clients to help them understand and
respond to changing conditions. This approach
meant that our Eastern European banks ended
the year with a PAR (>30 days) of 2.81% and a PAR
(>90 days) of 1.93%. Only in our two most difficult
markets, Ukraine and Bosnia, did the PAR (>30
days) rise above 5% during the year. Relative to
the banking sectors as a whole, this was a significant
achievement.
Our lending activities aim in particular to foster
local production and service industries, and include
the provision of agricultural loans. We are
keen to support a sector that has been particularly
neglected by other banks and that is vital
for employment and social cohesion outside the
main urban areas. We also provide housing improvement
loans to help families renovate their
homes and improve energy efficiency.
Given our focus on quality rather than quantity,
the group did not increase the number of
branches significantly in 2009, and the number
of staff was also reduced. In 2010 we expect
the macroeconomic situation in Eastern Europe
to continue to be difficult. Our focus will still be
on the quality of our staff and on deepening our
relationships with our clients. Only our newer
banks, in Armenia and Moldova, are likely to add
branches. In all countries, we aim to consolidate

36
Annual Report 2009
our position as the most reliable banking partner
for small and medium-sized enterprises.
Our staff is the key element in our approach to being
a stable, down-to-earth and personal banking
partner. The ProCredit group has a strong commitment
to staff training, professional development
and the cultivation of an open, honest communication
culture. Staff exchanges, cross-border
training programmes and regional workshops
are an important part of our approach. We have
an Eastern European Academy, located near Skopje
in Macedonia, which is dedicated to the training
of ProCredit middle managers. The Academy
is an important channel for rapid and consistent
communication region-wide and one that helps
us adapt quickly to face new challenges: More
than 200 managers have already graduated from
the six-week intensive course since the facility
was founded. A language centre at the Academy
also provides residential English courses, maximising
the potential for international exchange
within the group. Like all prudent banks, we will
continue to focus on efficient cost management
in 2010 and beyond. Investment in our staff is,
however, an ongoing commitment and will remain
a central plank in the ProCredit Bank approach.
A qualified, motivated and professional team lies
at the root of our lasting success across Eastern
Europe.

ProCredit in Eastern Europe 37
Name
ProCredit Bank
Albania
ProCredit Bank
Armenia
ProCredit Bank
Bosnia and Herzegovina
ProCredit Bank
Bulgaria
ProCredit Bank
Georgia
ProCredit Bank
Kosovo
ProCredit Bank
Macedonia
ProCredit
Moldova
ProCredit Bank
Moldova
ProCredit Bank
Romania
ProCredit Bank
Serbia
ProCredit Bank
Ukraine
Highlights*
Founded in October 1998
42 branches
39,443 loans / EUR 153.6 million in loans
192,840 deposit accounts / EUR 246.5 million
867 employees
Founded in December 2007
9 branches
3,847 loans / EUR 23.5 million in loans
15,479 deposit accounts / EUR 13.0 million
239 employees
Founded in October 1997
26 branches
39,762 loans / EUR 119.7 million in loans
105,106 deposit accounts / EUR 124.1 million
662 employees
Founded in October 2001
86 branches
55,504 loans / EUR 550.8 million in loans
227,104 deposit accounts / EUR 334.7 million
1,797 employees
Founded in May 1999
59 branches
63,993 loans / EUR 220.9 million in loans
400,215 deposit accounts / EUR 159.0 million
1,680 employees
Founded in January 2000
62 branches
99,336 loans / EUR 471.7 million in loans
399,539 deposit accounts / EUR 638.3 million
1,177 employees
Founded in July 2003
41 branches
31,999 loans / EUR 135.8 million in loans
134,603 deposit accounts / EUR 142.3 million
689 employees
Founded in December 1999
1 branch
7,108 loans / EUR 13.0 million in loans
85 employees
Founded in December 2007
27 branches
6,715 loans / EUR 22.4 million in loans
22,646 deposit accounts / EUR 12.7 million
533 employees
Founded in May 2002
43 branches
35,533 loans / EUR 180.5 million in loans
136,576 deposit accounts / EUR 133.3 million
1,006 employees
Founded in April 2001
79 branches
118,249 loans / EUR 472.9 million in loans
450,656 deposit accounts / EUR 345.7 million
1,864 employees
Founded in January 2001
64 branches
25,510 loans / EUR 188.3 million in loans
121,435 deposit accounts / EUR 104.7 million
1,417 employees
Contact
Legal address: Sami Frasheri St., Tirana
Mailing address: Dritan Hoxha St., Tirana
P.O. Box 2395
Tel./Fax: +355 4 2 271 272 / 276
info@procreditbank.com.al
www.procreditbank.com.al
31/99 Moskovyan St.
0002 Yerevan
Tel./Fax: + 374 10 514 860 / 853
info@procreditbank.am
www.procreditbank.am
8 Emerika Bluma
71000 Sarajevo
Tel./Fax: +387 33 250 950 / 971
info@procreditbank.ba
www.procreditbank.ba
26 Todor Aleksandrov Blvd.
1303 Sofia
Tel./Fax: +359 2 813 5100 / 5110
contact@procreditbank.bg
www.procreditbank.bg
154 D. Agmashenebeli Ave.
0112 Tbilisi
Tel./Fax: +995 32 20 2222 / 24 3753
info@procreditbank.ge
www.procreditbank.ge
16 “Mother Tereze” Boulevard
10000 Prishtina
Tel./Fax: +381 38 555 777 / 248 777
info@procreditbank-kos.com
www.procreditbank-kos.com
109a Jane Sandanski Blvd.
1000 Skopje
Tel./Fax: +389 2 321 99 00 / 01
info@procreditbank.com.mk
www.procreditbank.com.mk
65 Stefan cel Mare Ave.
office 900, Chisinau
Tel./Fax: +373 22 836555 / 273488
office@procredit.md
www.procredit.md
65 Stefan cel Mare Ave.
office 901, Chisinau
Tel./Fax: +373 22 836555 / 273488
office@procreditbank.md
www.procreditbank.md
62-64 Buzesti St., Sector 1
011017 Bucharest
Tel./Fax: +40 21 201 6000 / 305 5663
headoffice@procreditbank.ro
www.procreditbank.ro
17 Milutina Milankovica
11070 Belgrade
Tel./Fax: +381 11 20 77 906 / 905
info@procreditbank.rs
www.procreditbank.rs
107a Peremohy Ave.
03115 Kyiv
Tel./Fax: +380 44 590 10 17 / 01
info@procreditbank.com.ua
www.procreditbank.com.ua
* The figures in this section have been compiled on the basis of the financial and operational reporting performed in accordance with
group-wide standards; they may differ from the figures reported in the bank’s local statements.

38
Annual Report 2009
Our Clients
Snežana and Mira Vidaković,
Producers of Children’s Clothing
Like many people in Bosnia and Herzegovina,
Snežana and Mira Vidaković were unable to find
secure jobs in their fields after graduating from
university. The two sisters from Bijeljina had
studied social work and economics but decided in
1994 to apply their love of fashion and talent with
a needle to a business of their own. They launched
Tik Aleksandar d.o.o., a company that produces
children’s clothing which they sell to retailers in
neighbouring cities. Snežana, 46, and Mira, aged
40, are both married with children and have managed
to boost their families’ income by devoting
themselves to the business.
The sisters did not only need a strong will and
perseverance to achieve success – they also required
external financial support. The first few
institutions they turned to refused to grant a loan,
however, and Tik Aleksander was slow to develop.
By chance, a loan officer from ProCredit Bank visited
the business in 2003 as part of a direct promotion,
and the sisters were encouraged to apply
for a loan. They needed working capital and a new
sewing machine, and the bank was able to provide
EUR 2,500 to cover these costs. As the business
grew, they needed additional fixed assets and
took out two loans for a total of EUR 30,000. These
funds helped them increase production and take
on more staff – they now employ nine people.
“I have been a customer of ProCredit Bank for six
years, and I am very pleased that the potential of
our business was recognised at the outset. The
bank supported us when others refused us as
clients. I have been very satisfied with the loan
conditions and the personal approach of my loan
officer,”
says Snežana.
“It is crucial for our business that we are able to
receive funding without unnecessary complications,
and ProCredit Bank is always prepared to
listen and try to help,”
she added.
Snežana and Mira have been using payment services
since they became customers of ProCredit
Bank in 2003. Their employees also receive their
salaries through the bank.
Looking ahead, the sisters plan to continue developing
their business. They hope to buy a new
building for the company so that they can stop
paying rent for their premises. Both are confident
that their long-term banking partner will support
them in this project.

Our Clients 39
Ivica Zovko, Electrician
Ivica Zovko started working as an electrician in
1980. At that time, during the communist regime,
he was one of very few self-employed entrepreneurs
in Herzegovina. When the war broke out, he
moved to Germany and spent four years working in
the same field. After returning in 1994, he decided
to set up his own business, Vimar d.o.o. The word
“Vimar” is formed from the initials of everyone in
his family: Vjeko, Ivica, Miroslav, Anica and Rafael.
When Ivica was starting his business, he ran a
small shop from home selling plumbing tools. A
year later, he began offering a general plumbing
and electrical service and installed many central
heating systems. In the years that followed, the
eldest son, Miroslav, became a director of the
company at the age of 35, and Vjeko, now 25, assumed
responsibility for the plumbing service.
The third son, Rafael, is now 18 and also recently
became involved in the business.
Ivica decided to open a current account at ProCredit
Bank in 2005 after a friend, who is also an employee
of the bank, recommended the institution.
In 2007, Ivica and Miroslav wanted to expand
the scope of their business, and this involved the
purchase of some new equipment. They turned
to ProCredit Bank for a loan, and soon received
financing in the amount of EUR 90,000 to invest
in new tools, pipe threading machines and drain
equipment. This enables them to improve the various
operations of the business and significantly
increase their profits.
Ivica is now using a framework agreement worth
EUR 250,000. This consists of an overdraft facility
and two loans that were used to fund construction
of a head office building and to purchase a
company van for call-out jobs and to transport
goods. To support the ongoing growth of his business,
Ivica has hired three employees to help him
and his sons over the past four years.
“I am pleased that ProCredit Bank approved my
first loan and gave my business a boost of funds.
I do all of my banking with ProCredit, and I plan to
remain a customer so that my business continues
to develop well. Without the financing we received,
we simply wouldn’t be where we are today,”
Ivica explains.
Making use of the institution’s full range of financial
services, Ivica also saves with ProCredit
Bank and frequently uses its Internet banking
and payment services. Despite today’s challenging
economy and the uncertainty that lies ahead,
he is confident that he can continue to make his
business a success with ProCredit on his side.

40
Annual Report 2009
Adis Spiljak,
Farm Manager
Adis Spiljak, aged 31, grew up in a family that has
a long tradition in farming. His parents and grandparents
owned a herd of milk cows and sold their
produce to a larger dairy. Even as a child, seeing
the cattle made him realise that diary products are
in high demand. In his mid-twenties, Adis decided
to start up his own diary business, Agromilk. He
donated his cows to neighbours – small farmers
in Konjic – and these people still deliver the milk
he processes.
In order to develop his business, Adis needed
financing from a reliable institution. His friend
recommended ProCredit for its experience in
working with small rural enterprises, and Adis
soon arranged to meet one of the bank’s agricultural
loan officers. In 2004, he applied for a loan
in the amount of EUR 10,000 to upgrade his milk
processing equipment. After making these investments,
the quality and range of his products was
greatly improved, and Agromilk began selling milk,
cheese, and yoghurt to nearby grocery stores.
In 2005, Adis met with the managers of some
chain stores to present his company and products.
Orders increased rapidly as a result, and
Adis needed additional capacity to continue
meeting demand. Returning to his trusted banking
partner, he took out two additional loans with
a combined volume of EUR 20,000 to buy more
equipment and increase his storage. Agromilk is
now a firmly established company whose products
can be bought across the Federation of Bosnia
and Herzegovina.
Reflecting the impressive growth of the business,
the total number of staff has doubled from four
to eight people over the last five years. Similarly,
the number of farmers who supply fresh milk has
grown from 40 in 2004 to over 100. Looking to
the future, Adis hopes to expand his business
even further, and he knows that he can rely on
ProCredit Bank to provide the right advice and financial
support when it is needed.
“It is truly satisfying to see how Agromilk has
developed over time. The business has given
everyone involved a better quality of life, and I am
especially happy that this will secure a good future
for my one-year-old daughter. Things would
not have been possible without financial support
at the times when I needed it most, so I truly value
my relationship with ProCredit Bank. My loan
officer is always able to offer sound advice about
my financing options,”
he says.

Our Clients 41
Admir Mišut,
Confectioner and
Deposit Customer
After finishing high school, Admir Mišut, who is
now 24, started to work in a pastry shop in Sarajevo.
When he was younger, his parents used to
encourage him to be careful with money and to
save regularly so that he could meet his personal
goals. These lessons have stayed with him into
his adult years.
Admir learnt about ProCredit Bank in 2006 when
the bank sponsored a basketball tournament. He
had already noticed a branch close to his apartment,
but he had never stepped inside. When he finally
did so, he was pleasantly surprised: the staff
were friendly and professional, and they took the
time to explain the various products on offer.
“I could see that ProCredit Bank is a reliable institution
that does not charge high fees, so I decided
to open a ‘Savings Plan’ account. I like this option
because it lets me make regular deposits automatically,
and the interest rate is very good,”
he says.
In addition to using the Savings Plan, Admir
opened a current account to receive his salary,
and he has since started using a debit card to
make cashless payments. What he likes most
about working with ProCredit Bank is the open attitude
of the staff, as he explains:
“I was reluctant to take just a few notes and coins
to the bank, but the staff encouraged me to make
small deposits on a regular basis. They emphasised
that people should try to save some of their
income, no matter how insignificant the amount
may seem.”
In 2009, Admir used the money he had saved up
over three years to visit Portugal and cheer for the
Bosnian football team during the qualifiers for the
FIFA World Cup. He says that his efforts to save
more than paid off – even if the team did not make
it. It had long been his dream to go on such a trip,
and he was able to do so without borrowing.
Admir is now saving again, but this time for the
wedding that he and his fiancée are planning. He
aims to open a term deposit account to secure a
higher return on his funds, and he knows that he
can trust ProCredit Bank to take care of his money.
“I will definitely continue using this bank’s
services. I’m planning to open my own pastry
shop, and I know that the staff will offer excellent
advice and provide the right kind of financial
support for me,”
he says.

42
Annual Report 2009
Financial Statements
For the year ended 31 December 2009.
Prepared in accordance with International Financial Reporting Standards.
Responsibilities of the Management and Supervisory Boards for the preparation and approval of
the annual financial statements
The Management Board of the Bank is required to prepare financial statements of the Bank for each
financial year which give a true and fair view of the financial position of the Bank and of the results
of its operations and cash flows, in accordance with International Financial Reporting Standards,
and is responsible for maintaining proper accounting records to enable the preparation of such financial
statements at any time. It has a general responsibility for taking such steps as are reasonably
available to it to safeguard the assets of the Bank and to prevent and detect fraud and other
irregularities.
The Management Board is responsible for selecting suitable accounting policies to conform with applicable
accounting standards and then apply them consistently; making judgements and estimates
that are reasonable and prudent; and preparing the financial statements on a going concern basis
unless it is inappropriate to presume that the Bank will continue in business.
The Management Board is responsible for the submission to the Supervisory Board of its annual
report on the Bank together with the annual financial statements, following which the Supervisory
Board is required to approve the annual financial statements for submission to the General Assembly
of Shareholders for adoption.
The financial statements set out on pages 4 to 59 were authorised by the Management Board on 15
February 2010 for issue to the Supervisory Board and are signed below to signify this.
On behalf of ProCredit Bank d.d., Sarajevo.:
Frieder Woehrmann
Director of the Bank
Sabina Mujanović
Executive Director of
Finance sector

Financial Statements 43

44
Annual Report 2009

Financial Statements 45
Statement of Comprehensive Income
For the year ended 31 December 2009
Notes Year ended Year ended
(all amounts are in BAM thousands, unless otherwise indicated) 31 Dec 2009 31 Dec 2008
Interest and similar income 6 40,375 57,903
Interest expense and similar charges 6 (15,028) (19,177)
Net interest income 25,347 38,726
Fee and commission income 7 5,674 5,612
Fee and commission expense 7 (1,371) (1,049)
Net fee and commission income 4,303 4,563
Net trading income 8 19 201
Other operating income 9 770 1,126
Operating income 30,439 44,616
Personnel expenses 10 (17,942) (19,228)
Depreciation and amortisation 18,19 (3,963) (3,734)
Other operating expenses 11 (13,534) (15,611)
Net impairment losses 12 (11,149) (6,711)
Loss before tax (16,149) (668)
Income tax benefit/(expense) 13 1,489 (83)
Loss for the year (14,660) (751)
Other comprehensive income – –
Total comprehensive loss for the period (14,660) (751)
The accompanying notes on pages 49 to 71 form an integral part of these financial statements.

46
Annual Report 2009
Statement of Financial Position
For the year ended 31 December 2009
Notes At 31 Dec At 31 Dec
(all amounts are in BAM thousands, unless otherwise indicated) 2009 2008
Assets
Cash and cash equivalents 14 75,619 82,064
Obligatory reserves with Central Bank 15 26,691 58,917
Loans and advances to customers 16 220,224 307,348
Financial assets available for sale 17 227 225
Property and equipment 18 7,896 11,333
Intangible assets 19 967 992
Deferred tax assets 20 1,536 47
Other assets 21 2,318 2,838
Total assets 335,478 463,764
Liabilities
Deposits from customers 22 242,727 335,458
Borrowings 23 40,393 65,692
Subordinated debt 24 16,083 16,081
Provisions 25 332 322
Other liabilities 26 968 1,421
Current tax liability – 155
Total liabilities 300,503 419,129
Equity
Share capital 27 40,458 35,458
Share premium 293 293
Statutory reserves 1,633 1,623
(Accumulated losses)/retained earnings (7,409) 7,261
Total equity 34,975 44,635
Total liabilities and equity 335,478 463,764
The accompanying notes on pages 49 to 71 form an integral part of these financial statements.

Financial Statements 47
Statement of Changes in Equity
For the year ended 31 December 2009
Share Share Statutory Retained Total
(all amounts are in BAM thousands, unless otherwise indicated) capital premium reserve earnings equity
Balance at 1 January 2009 35,458 293 1,623 7,261 44,635
Issue of share capital 5,000 – – – 5,000
Loss for the year – – – (14,660) (14,660)
Appropriations to statutory reserve – – 10 (10) –
Balance at 31 December 2009 40,458 293 1,633 (7,409) 34,975
Balance at 1 January 2008 25,679 293 1,383 10,293 37,648
Issue of share capital 9,779 – – – 9,779
Loss for the year – – – (751) (751)
Appropriations to statutory reserve – – 240 (240) –
Dividend payment – – – (2,041) (2,041)
Balance at 31 December 2008 35,458 293 1,623 7,261 44,635
The accompanying notes on pages 49 to 71 form an integral part of these financial statements.

48
Annual Report 2009
Cash Flow Statement
For the year ended 31 December 2009
Notes Year ended Year ended
(all amounts are in BAM thousands, unless otherwise indicated) 31 Dec 2009 31 Dec 2008
Operating activities
Loss before tax (16,149) (668)
Adjustments:
Depreciation and amortisation 3,963 3,734
Impairment losses and provisions 12 11,149 6,711
Changes in other provisions 10 56
Property and equipment written off 533 20
Cash flows from operating activities before changes in operating assets and liabilities (494) 9,853
(Increase)/decrease in operating assets
Obligatory reserve with Central Bank 32,226 (4,719)
Loans and advances to customers 76,054 (6,085)
Other assets 442 (921)
Increase/(decrease) in operating liabilities
Deposits from customers (92,731) 55,591
Other liabilities (453) 526
Current tax liability (155) (219)
Net cash inflow from operating activities 14,889 54,026
Investing activities
Purchase of property and equipment (564) (3,729)
Purchase of intangible assets (469) (444)
Increase of financial investments available for sale (2) –
Net cash outflow from investing activities (1,035) (4,173)
Financing activities
Issued share capital 5,000 9,779
Proceeds from borrowings and subordinated debt 160 13,545
Repayments of borrowings and subordinated debt (25,459) (36,160)
Dividends paid – (2,041)
Net cash outflow from financing activities (20,299) (14,877)
Net (decrease)/increase in cash and cash equivalents (6,445) 34,976
Cash and cash equivalents at 1 January 82,064 47,088
Cash and cash equivalents at 31 December 14 75,619 82,064
The accompanying notes on pages 49 to 71 form an integral part of these financial statements.

Financial Statements 49
Notes to the Financial Statements
For the year ended 31 December 2009
(all amounts are in BAM thousands, unless otherwise indicated)
been consistently applied to all the years presented, unless otherwise
stated.
3.1 Foreign currency
1. Reporting entity
ProCredit Bank d.d., Sarajevo (further “the Bank”) is incorporated
to perform all banking activities in accordance with the law.
The Bank has been registered as a joint stock company domiciled
in Bosnia and Herzegovina. ProCredit Bank d.d., Sarajevo is part of
a global network of financial institutions, managed and controlled
by ProCredit Holding AG.
The Bank is incorporated to perform all banking activities in accordance
with the law and the main activities include commercial lending,
receiving of deposits, foreign exchange deals, and payment
operation services in the country and abroad and retail banking
services. In addition, it provides trade finance facilities to companies
for export and import purposes.
Transactions in foreign currencies are translated into the respective
functional currency of the operation at the exchange rate at
the date of transaction. Monetary assets and monetary liabilities
denominated in foreign currency at the reporting date are retranslated
into the functional currency using the exchange rates prevailing
at the balance sheet date. Income and expenses denominated
in foreign currency are translated into functional currency at the
exchange rates valid at the date of the transactions. Gains and
losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in
foreign currencies are recognized in the income statement. Nonmonetary
assets and items that are measured in terms of historical
cost in foreign currency are translated using the exchange rate at
the date of the transaction and are not retranslated at the balance
sheet date.
2. Basis of preparation
2.1 Statement of compliance
The financial statements of ProCredit Bank d.d., Sarajevo have
been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards
Board (IASB).
These financial statements were authorized for issue by the Board
of Directors on 15 February 2010.
2.2 Basis of measurement
The financial statements have been prepared on the historical cost
basis except for loans, receivables and borrowings that are stated
at amortised cost.
2.3 Functional and presentation currency
The Bank’s financial statements are presented in Bosnian Marks
(“BAM”), which is the Bank’s functional and presentation currency,
rounded to the nearest thousand.
2.4 Use of estimate and judgements
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting period. Although these estimates are
based on management’s best knowledge of current events and actions,
actual results ultimately may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future period affected.
Information about significant areas of estimation uncertainty
and critical judgments in applying accounting policies that have the
most significant effect on the amounts recognized in the financial
statements are described in note 5.
Exchange rates 31 Dec 2009 31 Dec 2008
BAM BAM
USD 1.364088 1.387310
EUR 1.955830 1.955830
3.2 Interest income and expense
Interest income and expense are recognized in the income statement
for all interest bearing instruments on an accrual basis using
the effective interest rate, i.e. at the rate that discounts estimated
future cash flows to net present value over the life of the underlying
contract. Such income and expense is presented as interest
and similar income or interest expense and similar charges in the
income statement. Interest income and expense also includes fee
and commission income and expense in respect of loans to and receivables
from customers or borrowings from other banks, recognized
on an effective interest basis.
The effective interest method is a method of calculating the amortised
cost of a financial asset or a financial liability and of allocating
the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts over the expected life
of the financial instrument or, when appropriate, a shorter period
to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Bank estimates
cash flows considering all contractual terms of the financial instrument
but does not consider future credit losses. The calculation
includes all fees and points paid or received between parties to
the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts.
3.3 Fee and commission income and expenses
Fees and commission income and expenses mainly comprise fees
received from enterprises arising from domestic and foreign payments,
the issue of guarantees and letters of credit and credit card
business. Fees and commissions, except for those which form part
of the effective interest rate of the instrument, are generally recognized
on an accrual basis when the service has been provided.
3. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
3.4 Dividends
Dividend income is recognised when the right to receive income is
established.

50
Annual Report 2009
3.5 Income tax expense
Income tax charge is based on taxable profit for the year and comprises
current and deferred tax.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect
of previous years. The statutory corporate profit tax rate for 2009,
applicable to taxable profits is 10% (2008: 10%).
Deferred income tax is provided in full, using the balance sheet
method, for all temporary differences arising between the tax basis
of assets and liabilities and their carrying values for financial
reporting purposes. The movement of deferred tax liabilities and
deferred tax assets reflects the tax consequences that would follow
from the manner in which the enterprise expects, at the balance
sheet date, to recover or settle carrying amount of its assets and
liabilities, based on tax rates enacted or substantially enacted at
the balance sheet date. Currently enacted tax rates are used in the
determination of deferred income tax.
Deferred tax assets are recognized for unused tax losses to extend
that it is probable that future taxable profit will be available against
which the deferred tax assets can be utilised.
3.6 Financial assets and financial liabilities
Classification
The Bank classifies its financial assets and liabilities in the following
categories: loans and receivables, held to maturity investments,
financial assets at fair value through profit or loss, available
for sale financial assets and other financial liabilities. The classification
depends on the purpose for which the financial assets and liabilities
were acquired. Management determines the classification
of its investments upon initial recognition. At the balance sheet
date the Bank did not have held to maturity investments nor financial
assets at fair value through profit and loss.
a) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the Bank provides money, goods or services
directly to a debtor with no intention of trading with the receivable
and include loans to and receivables from banks, loans to and
receivables from customers and obligatory reserves with the Central
Bank.
b) Financial assets available for sale
Available-for-sale financial assets are non-derivative investments
that are designated as available-for-sale or are not classified as another
category of financial assets.
Financial assets designated as available for sale are intended to be
held to an indefinite period of time but may be sold as a response
to needs in liquidity of change in interest rate. Available for sale
financial assets include equity securities.
c) Other financial liabilities
Other financial liabilities comprise all financial liabilities which are
not designated at fair value through profit or loss. Other financial liabilities
include borrowings, deposits, subordinated liabilities and
other liabilities.
Recognition and derecognition
Purchase and sales of financial assets available for sale are recognised
on the trade date which is the date when the Bank commits to
sell the instrument.
Loans and receivables and other financial liabilities are recognized
when cash is advanced to borrowers or received from lenders.
The Bank derecognises financial assets (in full or part) when the
contractual right to receive cash flows for the financial instrument
have expired or when it loses control over the contractual rights on
those financial assets. This occurs when the Bank transfers substantially
all the risks and rewards of ownership to another business
entity or when the rights are realised, surrendered or have
expired.
The Bank derecognises financial liability only when the financial liability
ceases to exists, ie when it is discharged, cancelled or has
expired. If the terms of a financial liability change, the Bank will
cease recognising that liability and will instantaneously recognise
a new financial liability, with new terms and conditions.
Initial and subsequent measurement
Loans and receivables are initially recognised at fair value plus
transaction costs. Subsequently, they are measured at amortised
cost using the effective interest method.
Available-for-sale financial assets are initially recognised at fair
value plus transaction cost that are directly attributable to its acquisition
or issue.
Available-for-sale financial assets are subsequently measured at
their fair value. Gains and losses from a change in the fair value of
available-for-sale financial assets are recognized directly in a fair
value reserve within equity. Equity instruments classified as available
for sale that do not have a quoted market price in an active
market and whose fair value cannot be reliably measured are stated
at cost.
Impairment of financial assets
a) Loans and receivables
The Bank assesses at each reporting date whether there is objective
evidence that a financial asset or group of financial assets is
impaired. If there is objective evidence that impairment of a loan or
a portfolio of loans has occurred which influences the future cash
flow of the financial asset(s), the respective losses are immediately
recognised. Impairment losses on loans and receivables are measured
as the difference between the carrying amount of the financial
asset and the present value of estimated future cash flows, including
amounts recoverable from guarantees and collateral, discounted
at the original effective interest rate of loans. Depending on the
size of the loan, such losses are either calculated on an individual
loan basis or are collectively assessed for a portfolio of loans. The
carrying amount of loans and receivables is reduced through the
use of an allowance account and the amount of the loss is recognised
in the income statement. We do not recognise losses from expected
future events. Interest on impaired assets continues to be
recognized through unwinding of the discount in interest income.
Individually assessed loans and advances
For individually significant loans (exceeding EUR 30,000), it is assessed
whether objective evidence of impairment exists, i.e. any
factors which might influence the customer’s ability to fulfil his
contractual payment obligations towards the bank:
• delinquencies in contractual payments of interest or principal
• breach of covenants or conditions
• initiation of bankruptcy proceedings
• any specific information on the customer’s business (e.g.
reflected by cash flow difficulties experienced by the client)
• changes in the customer’s market environment
• the general economic situation.

Financial Statements 51
Additionally, the aggregate exposure to the client and the realisable
value of collateral held are taken into account when deciding
on the allowance for impairment.
If there is objective evidence that an impairment loss has been incurred,
the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of its estimated
future cash flows discounted at the financial asset’s original
effective interest rate (specific impairment). If a loan has a variable
interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate determined under the contract.
The calculation of the present value of the estimated future cash
flows of a collateralised financial asset reflects the cash flows that
may result from foreclosure less costs for obtaining and selling the
collateral.
Collectively assessed loans and advances
There are two cases in which loans are collectively assessed for
impairment:
• individually insignificant loans that show objective evidence of
impairment;
• the group of loans which do not show signs of impairment, in
order to cover all losses which have already been incurred but
not detected on an individual loan basis.
For the purposes of the evaluation of impairment of individually
insignificant loans, the loans are grouped on the basis of similar
credit risk characteristics, i.e. according to the number of days they
are in arrears. Arrears of 30 or more days are considered to be a
sign of impairment. This characteristic is relevant for the estimation
of future cash flows for the so defined group of such assets,
based on historical loss experiences with loans that showed similar
characteristics.
The collective assessment of impairment for individually insignificant
loans (lump-sum impairment) and for unimpaired loans (portfolio-based
impairment) belonging to a group of financial assets is
based on a quantitative analysis of historical default rates for loan
portfolios with similar risk characteristics in the individual subsidiaries
(migration analysis), grouped into geographical segments
with a comparable risk profile. After a qualitative analysis of this
statistical data, the holding company’s management prescribed
appropriate rates to the banks of the ProCredit group as the basis
for their portfolio-based impairment allowances. Deviations from
this guideline were allowed, if necessitated by the specific situation
of a ProCredit institution.
Future cash flows in a group of financial assets that are collectively
evaluated for impairment are estimated on the basis of the contractual
cash flows of the assets in the group and historical loss experience
for assets with credit risk characteristics similar to those in
the group. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that
did not affect the period on which the historical loss experience is
based and to remove the effects of conditions in the historical period
that do not exist currently. The methodology and assumptions
used for estimating future cash flows are reviewed regularly by the
Bank to reduce any differences between loss estimates and actual
loss experience.
If the Bank determines that no objective evidence of impairment exists
for an individually assessed financial asset, whether individually
significant or not, it includes the asset in a group of financial
assets with similar credit risk characteristics and collectively assesses
them for impairment (impairment for collectively assessed
loans).
Reversal of impairment
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed by adjusting the allowance
account. The amount of the reversal is recognised in the income
statement.
Writing off loans and advances
When a loan is uncollectible, it is written off against the related allowance
for loan impairment. Such loans are written off after all the
necessary procedures have been completed and the amount of the
loss has been determined. Subsequent recoveries of amounts previously
written off decrease the amount of the allowance for loan
impairment in the income statement.
Loans and advances with renegotiated terms
Loans and advances with renegotiated terms which are considered
to be individually significant are provisioned on an individual basis.
The amount of the loss is measured as the difference between
the restructured loan’s carrying amount and the present value of its
estimated future cash flows discounted at the loan’s original effective
interest rate (specific impairment). Loans and advances with
renegotiated terms which are individually insignificant are collectively
assessed for impairment.
b) Financial assets available for sale
The Bank assesses at each balance sheet date whether there is objective
evidence that a financial asset or group of financial assets
is impaired.
In the case of equity investments classified as available for sale, a
significant or prolonged decline in the fair value of the security below
its cost is considered in determining whether the assets are impaired.
If any such evidence exist the cumulative loss – measured
as the difference between the acquisition cost and the current fair
value, less any impairment loss on that financial asset previously
recognised in profit or loss – is removed from other comprehensive
income and recognised in the income statement.
Impairment losses recognised in the income statement on equity
instruments are not reversed through the income statement at
any point thereafter. If, in a subsequent period, the fair value of a
debt instrument classified as available for sale increases and the
increase can be objectively related to an event occurring after the
impairment loss was recognised in profit or loss, the impairment
loss is reversed through the income statement.
3.7 Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted
balances held with Central bank, current accounts with
domestic and foreign banks and highly liquid financial assets with
original maturities of less than three months, which are subject to
insignificant risk of changes in their fair value, and are used by the
Bank in the management of its short-term commitments.
3.8 Property and equipment
Property and equipment are tangible assets that are held for use in
the supply of services, for rentals to others or administrative purposes.
Property and equipment are stated at historical cost less accumulated
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.

52
Annual Report 2009
Subsequent cost is included in the asset’s carrying amount or is
recognized as a separate asset, only when it is probable that future
economic benefits associated with the item will flow to the Bank
and the rest of the item can be measured reliably. All other repairs
and maintenance costs are charged to the income statement during
the financial period in which they are incurred.
Property and equipment are periodically reviewed for impairment.
Where the carrying amount of an asset is greater than its estimated
recoverable amount, it is written down immediately to its recoverable
amount.
Assets in course of construction are reported at their cost of construction
including costs charged by third parties. Upon completion,
all accumulated costs of the asset are transferred to the relevant
tangible property and equipment category and subsequently
subject to the applicable depreciation rates.
Gains and loses on disposal of property and equipment are recognized
in the income statement.
Depreciation is provided on all assets except assets in the course of
construction on a straight line basis so as to write off the cost of the
assets over their estimated useful lives to their estimated recoverable
amounts at the following annual rates:
Assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment. Assets that are subject
to amortisation are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating
units).
3.11 Leases
To date, premises rental contracts entered into by the Bank are operating
leases. The total payments made under operating leases
are charged to the income statement on a straight-line basis over
the period of the lease. When an operating lease is terminated before
the lease period has expired, any payment required to be made
to the lessor by way of penalty is recognized as an expense in the
period in which termination takes place.
3.12 Provisions
Provisions are recognized when the Bank has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources embodying economic benefits will
be required to settle the obligation, and a reliable estimate of the
amount of the obligation can be made.
Provisions for liabilities and charges are maintained at the level
that the Bank’s management considers sufficient absorption of
incurred losses. The management determines sufficiency of provisions
on the basis of insight in specific items, current economic circumstances,
risk characteristics of certain transaction categories,
as well as other relevant factors.
Provisions are released only for such expenditure in respect of
which provisions are recognized at inception. If the outflow of economic
benefits to settle obligations is no longer probable, the provision
is reversed.
in % 2009 2008
Buildings 2.5 2.5
Computers and
telephone equipment 20-33 20-33
Furniture and equipment 17 -25 17 -25
Leasehold improvements Over the Over the
lease period lease period
The assets’ residual values and useful lives are reviewed, and adjusted
if appropriate, at each balance sheet date.
3.9 Intangible assets
Intangible assets that are acquired by the Bank are stated at cost
less accumulated amortization and impairment losses.
Subsequent expenditure is capitalized only if all of the features required
by IAS 38 are satisfied. All other expenditure is expensed
as incurred.
Amortization is charged to the income statement on a straight-line
basis over the estimated useful lives as follows:
2009 2008
Software 5 years 5 years
Licenses and other intangible assets 5 years 5 years
3.10 Impairment of non-financial assets
3.13 Employee benefits
a) Defined contribution plans
The Bank, in the normal course of business, makes payments on
behalf of its employees for pensions, health care, employment and
personnel tax that are calculated on the basis of gross salaries and
wages, food allowances and travel expenses according to the legislation.
The Bank makes these contributions to the Government’s
health and retirement funds, at the statutory rates in force during
the year, based on gross salary payments.
The Bank pays contributions to public pension insurance fund on a
mandatory basis. Once the contributions have been paid, the Bank
has no further payment obligations. The regular contributions
constitute costs for the year in which they are due and as such are
included in staff costs. The cost of these payments is charged to
the income statement in the same period as the related salary cost.
b) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted
basis and are expensed as the related service is provided.
A provision is recognized for the amount expected to be paid under
short-term cash bonus or profit-sharing plans if the Bank has
a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation
can be estimated reliably.
c) Long-term employee benefits
According to local legal requirements, employees of the Bank are entitled
to receive one-time benefit on retirement, dependent on factors
such as age, years of service and salary they had with the bank.
Such payments are treated as other long-term employee benefits
and the liability recognized in the statement of financial position
is the present value of the defined benefit obligation at the reporting
date less the fair value of plan assets (if any), together with
adjustments for unrecognized actuarial gains or losses and past
service costs.
This obligation is calculated annually by independent actuaries
using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated
future cash outflows using average interest rate of long term
time deposit accounts kept with commercial banks in the country,
as the local capital market is not developed and neither high quality
corporate bonds nor government bonds exist on the market.

Financial Statements 53
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are recognized immediately
in profit and loss as well all past service cost.
3.14 Deposits, borrowings and subordinated liabilities
Deposits, borrowings and subordinated liabilities are the Bank’s
sources of debt funding.
The Bank classifies capital instruments as financial liabilities or
equity instruments in accordance with the substance of the contractual
terms of the instrument.
Deposits, borrowings and subordinated liabilities are initially measured
at fair value net of transaction costs, and subsequently measured
at their amortized cost using the effective interest method.
3.15 Retained earnings/accumulated losses
Any profit (after appropriations) or loss for the year is transferred
to reserves.
3.16 Share capital
Share capital represents the nominal value of paid-in ordinary
shares classified as equity and denominated in BAM. Dividends are
recognized as liability in the period in which they are declared.
3.17 Off- balance-sheet commitments and contingencies
In the ordinary course of business, the Bank enters into related
commitments which are recorded in off-balance-sheet accounts
and primarily comprise guarantees, letters of credit, undrawn
loans commitments and credit card limits. Such financial commitments
are recorded in the Bank’s statement of financial position if
and when they become payable.
3.18 Comparatives
Where necessary, comparative figures have been adjusted to conform
with changes in presentation in the current year.
3.19 New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations
are not yet effective for the year ended 31 December
2009, and have not been applied in preparting these consolidated
financial statements. None of these will have an effect on the financial
statements of the Bank, with the exception of:
• IFRS 9 Financial Instruments, published on 12 November 2009
as part of phase I of the IASB’s comprehensive project to replace
IAS 39, deals with classification and measurement of
financial assets. The requirements of this standard represent
a significant change from the existing requirements in IAS 39
in respect of financial assets. The standard contains two primary
measurement categories for financial assets: amortised
cost and fair value. A financial asset would be measured at
amortised cost if it is held within a business model whose objectives
is to hold assets in order to collect contractual cash
flows, and the asset’s contractual terms give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal outstanding. All other financial assets
would be measured at fair value. The standard eliminates
the existing IAS 39 categories of held to maturity, available for
sale and loans and receivables. For an investment in an equity
instrument which is not held for trading, the standard permits
an irrevocable election, on initial recognition, on an individual
share-by-share basis, to present all fair value changes from the
investment in other comprehensive income. No amount recognised
in other comprehensive income would ever be reclassified
to profit or loss at a later date. However, dividends on
such investments are recognised in profit or loss, rather than
other comprehensive income unless they clearly represent a
partial recovery of the cost of the investment. Investments in
equity instruments in respect of which an entity does not elect
to present fair value changes in other comprehensive income
would be measured at fair value with changes in fair value recognised
in profit or loss.
The standard requires that derivatives embedded in contracts
with a host that is a financial asset within the scope of the
standard are not separated; instead the hybrid financial instrument
is assessed in its entirety as to whether it should be
measured at amortised cost or fair value.
The standard is effective for annual period beginning on or after
1 January 2013. Earlier application is permitted.
It is not expected that IFRS 9 will materially impact the Bank’s financial
statements. Considering the nature of the Bank’s operations
and the classes of financial assets it holds, it is expected that
the classification and measurement of the Bank’s financial assets
will not change significantly under IFRS 9.
4. Financial risk management
The Bank’s activities expose it to a variety of financial risks; credit
risk, liquidity risk and market risk. The Bank has established an integrated
system of risk management by introducing set of policies
and procedures for analysis, evaluation, acceptance and risk management.
Taking risk is core to the financial business, and the operational
risks are an inevitable consequence of being in business.
The Management Board has overall responsibility for the establishment
and oversight of the Bank’s risk management framework.
Risk management is carried out by the Bank’s Risk Department under
policies approved by the Management Board. Risk Management
policies and systems are reviewed regularly to reflect changes in
market conditions, products and service offered.
The most important types of risk are credit risk, liquidity risk, market
risk and other operational risk. Market risk includes currency
risk, interest rate and other price risk.
Risk steering and risk controlling processes are adjusted in a timely
manner to reflect changes in the operating environment.
4.1 Credit risk
The Bank is subject to credit risk through its lending activities and
in cases where it acts as an intermediary on behalf of customer or
third parties. Credit risk arises from customer credit exposures
(classic credit risk), credit exposure from interbank placements and
issuer risk. It is divided into credit default risk and credit portfolio
risk in order to facilitate focused risk management.
4.1.1 Risk limit control and mitigation policies
The Bank takes on exposure to credit risk, which is the most important
risk for the Bank’s business; management therefore carefully
manages its exposure to credit risk. Credit exposures arise principally
in lending activities that lead to loans and advances and there
is also credit risk in off-balance-sheet financial instruments, such
as loan commitments.
Credit default risk from customer credit exposures is defined as the
risk of losses due to a potential non- fulfillment of the contractual
payment obligations associated with a customer credit exposure.
For risk management reporting purposes the Bank considers and
consolidate all elements of credit risk exposure (such as individual
obligor default risk and sector risk).

54
Annual Report 2009
The credit risk management and control are centralized in Risk and
Compliance Sector of the Bank and managed by Credit Risk Committee.
The Bank structures the levels of credit risk it undertakes by placing
limits on the amount of risk accepted in relation to one borrower, or
groups of borrowers, and to geographical and industry segments.
Exposure to credit risk is managed through regular analysis of the
ability of borrowers and potential borrowers to meet interest and
capital repayment obligations and by changing these lending limits
where appropriate. Exposure to credit risk is also managed in part
by obtaining collateral and corporate and personal guarantees.
(a) Collateral
The Bank measures the exposure to credit risk toward certain kind
of collateral. Accordingly, the Bank monitors its reliance on different
kinds of collateral. To the extent that real estate prices drop
significantly, the Bank expects that its credit risk losses on impaired
lending may increase significantly as the value of collateral
decreases.
The Bank employs a range of policies and practices to mitigate
credit risk. The Bank implements guidelines on the acceptability of
specific classes of collateral or credit risk mitigation. The principal
collateral types for loans and advances are:
• Cash,
• Bank and corporate guarantees,
• Mortgages over residential properties;
• Charges over business assets such as premises, inventory and
accounts receivable;
• Charges over financial instruments such as debt securities and
equities.
of their probability of default changes. The rating tools are kept under
review and upgraded as necessary.
The Bank regularly validates the performance of the rating and
their predictive power with regard to default events.
Bank’s internal ratings scale
Bank’s rating
Description of the grade
A
Investment grade
B
Standard monitoring
C
Special monitoring
D+E
Sub-standard
Criteria for classification of financial assets or contingent liabilities
into groups A, B, C, D and E are as follows:
Financial assets or contingent liabilities are classified into Group A
if they are towards:
• debtors who are not likely to default and who repay their
obligations on a timely basis; and
• exposures secured by pledging collateral graded as first class
collateral.
Financial assets or contingent liabilities are classified into Group B
if they are towards debtors:
• whose cash flows are assessed as adequate to duly fulfil their
due obligations, regardless of whether or not their present financial
position is assessed as weak, without signs of further
deterioration in the future; and
• who settle their liabilities with delay of up to 30 days (B1), occasionally
with delay between 31 and 90 days.
In order to minimize the credit loss the Bank will seek additional
collateral from the counterparty as soon as impairment indicators
are noticed for the relevant individual loans and advances. Debt securities,
treasury and other eligible bills are generally unsecured.
(b) Credit-related contingencies
The primary purpose of these instruments is to ensure that funds
are available to a customer as required. Guarantees and standby
letters of credit carry the same credit risk as loans and are secured
with similar collateral as are loans.
4.1.2 Credit risk management
The Bank accounts for counterparty risks arising from the loan
portfolio by making allowances for impaired loans. Individually impaired
loans are loans for which the Bank determines that there is
objective evidence of impairment and it does not expect to collect
all principal and interest due according to the contractual terms of
the loan. A financial asset or a group of financial assets is impaired
and impairment losses are incurred if, and only if, there is objective
evidence of impairment as a result of one or more events that occurred
after the initial recognition of the asset (a “loss event”) and
that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that
can be reliably estimated. The Bank assesses at each balance sheet
date whether there is objective evidence that a financial asset or
group of financial assets is impaired.
The Bank assesses the probability of default of individual counterparties
using internal rating tools tailored to the various categories
of counterparty. They have been developed internally and combine
statistical analysis with credit officer judgment and are validated,
where appropriate, by comparison with externally available data.
Clients of the Bank are segmented into four rating classes. The
Bank’s rating scale, which is shown below, reflects the range of default
probabilities defined for each rating class. This means that, in
principle, exposures migrate between classes as the assessment
Financial assets or contingent liabilities are classified into Group C
if they are towards debtors:
• for which it is assessed that their cash flows will not be sufficient
for regular repayment of matured liabilities, or
• that settle their liabilities with delay of up to 90 days, occasionally
with delay between 91 to 180 days, or
• that are clearly undercapitalized, or
• that do not have sufficient long term capital resources for financing
long term investments, or
• from whom the Bank does not receive currently satisfactory
information or adequate documentation concerning repayment
of liabilities.
Financial assets or contingent liabilities are classified into Group D
and E if they are towards debtors:
• for which a strong likelihood of loss of part or all of the financial
asset exists or of payment for contingent liabilities, or
• that settle their liabilities with delay of 90 to 180 days, occasionally
with delay between 181 to 360 days, or
• which are insolvent, or
• for which a motion for commencement of process of liquidation
or declaration of bankruptcy began and was filed at the provisional
court, or
• that are in the process of reform or in the process of liquidation,
or
• that have declared bankruptcy, or
• from whom no repayment is expected, or
• with questionable legal grounds for Bank to collateral.
Loans and advances with renegotiated terms include extended payment
arrangements, approved external management plans, modification
and deferral of payments. Once the loan is restructured, it
remains in this category independent of the satisfactory performance
after restructuring. Restructuring policies and practices are
based on indicators or criteria which, in the judgment of local man-

Financial Statements 55
agement, indicate that payment will most likely continue. These
policies are kept under continuous review.
Restructured credit exposures are not generally considered to be in
arrears but are treated according to their current status. The Bank
draws a distinction between standard restructured, watch restructured
and impaired restructured credit exposures. Restructurings
of credit exposures are generally necessitated by economic or payment
problems encountered by the client. If a credit exposure is
restructured, amendments are made to the parameters of the loan.
Otherwise, these credit exposures for which the terms have been
renegotiated would be past due or impaired.
4.1.3 Impairment and provisioning policies
The internal rating systems described in Note 4.1.2 focus more on
credit-quality mapping from the inception of the lending and investment
activities. In contrast, impairment provisions are recognized
for financial reporting purposes only for losses that have been
incurred at the balance sheet date based on objective evidence
of impairment. The impairment provision shown in the balance
sheet at year-end is derived from each of the internal rating grades.
However, the majority of the impairment provision comes from the
bottom two gradings. The table below shows the percentage of the
Bank’s on balance sheet items relating to loans and advances and
the associated impairment provision for each of the Bank’s internal
rating categories:
Bank’s rating Loans and Impairment Other Impairment
advances provision assets provision
to customers
in %
2009
Investment grade 89.3 1.7 73.7 1.4
Standard monitoring 7.9 21.2 7.4 30.0
Special monitoring 1.5 90.5 1.5 90.0
Sub-standard 1.3 100.0 17.4 100.0
100 5.9 100 4.8
2008
Investment grade 92.5 1.2 94.0 0.2
Standard monitoring 6.3 20.0 4.5 44.3
Special monitoring 0.65 70.8 0.6 70.0
Sub-standard 0.55 100.0 0.9 100.0
100 3.4 100 3.5
The internal rating tool assists management to determine whether
objective evidence of impairment exists under IAS 39, based on the
criteria set out in Note 3.6.
The Bank’s policy requires the review of individual financial assets
that are above materiality thresholds at least annually or more
regularly when individual circumstances require. Impairment allowances
on individually assessed accounts are determined by an
evaluation of the incurred loss at balance-sheet date on a case-bycase
basis, and are applied to all individually significant accounts.
The assessment normally encompasses collateral held (including
re-confirmation of its enforceability) and the anticipated receipts
for that individual account.
Collectively assessed impairment allowances are provided for: (i)
portfolios of homogeneous assets that are considered individually
insignificant; and (ii) losses that have been incurred but have not
yet been identified, by using the available historical experience,
experienced judgment and statistical techniques.
4.1.4 Maximum exposure to credit risk before collateral held or
other credit enhancement
Maximum exposure
2009 2008
Loans and advances to customers 220,224 307,348
– Overdrafts 1,210 911
– Housing 16,617 16,002
– Consumer 12,516 11,543
– Very small business 59,243 137,908
– Small and medium sized enterprises
(SMEs) 111,785 122,320
– Business overdrafts 18,853 18,664
Other assets 2,318 2,838
Credit risk exposure relating to
off-balance sheet items are as follows:
Loan commitments 13,130 11,970
Financial guarantees and
letters of credits 8,871 9,333
Total 244,543 331,489
The above table represents a worst case scenario of credit risk exposure
to the Bank at 31 December 2009 and 31 December 2008,
without taking account of any collateral held or other credit enhancements
attached.
For on-balance-sheet assets, the exposures set out above are
based on net carrying amounts as reported at the balance sheet.

56
Annual Report 2009
4.1.5 Assets exposed to credit risk
Set out below is an analysis of the gross and net (of allowances for
impairment) amounts of loans and advances to customers:
(a) Assets neither past due nor impaired
The credit quality of the portfolio of loans and advances that were
neither past due nor impaired can be assessed by reference to the
internal rating system adopted by the Bank.
31 Dec 31 Dec
2009 2008
Neither past due nor impaired 208,236 299,507
Past due but not impaired 21,412 14,299
Impaired 4,408 4,356
Gross 234,056 318,162
Specific impairment 58 268
Collective impairment 13,774 10,546
Total impairment 13,832 10,814
Net 220,224 307,348
Loans and advances to customers
Overdraft Housing Others Very small SMEs Others Total
business
31 December 2009 1,178 16,322 12,143 50,996 109,011 18,586 208,236
Total 1,178 16,322 12,143 50,996 109,011 18,586 208,236
31 December 2008 932 15,989 11,469 132,188 119,944 18,985 299,507
Total 932 15,989 11,469 132,188 119,944 18,985 299,507
(b) Assets past due but not impaired
Loans and advances less than 180 days past due are not considered
impaired, unless other information is available to indicate the
contrary.
Gross amount of loans and advances to customers by class that
were past due but not impaired were as follows:
Loans and advances to customers
Overdraft Housing Others Very small SMEs Others Total
business
31 December 2009
Past due up to 30 days 47 490 528 7,253 3,293 415 12,026
Past due up to 90 days 38 189 199 4,041 1,007 352 5,826
Past due up to 180 days 31 118 53 2,619 676 63 3,560
Total 116 797 780 13,913 4,976 830 21,412
Collateral 116 1,346 812 14,878 14,751 2,036 33,939
31 December 2008
Past due up to 30 days 1 256 145 6,987 1,683 44 9,116
Past due up to 90 days 2 33 29 2,660 356 39 3,119
Past due up to 180 days 2 – 24 1,860 119 59 2,064
Total 5 289 198 11,507 2,158 142 14,299
Collateral 5 829 208 12,057 5,505 194 18,798
Information disclosed in above tables is presented in gross
amounts.
(c) Assets impaired
The breakdown of the gross amount of individually impaired loans
and advances to customers by class, are as follows:
Loans and advances to customers
Overdraft Housing Others Very small SMEs Others Total
business
31 December 2009
Sub-standard 18 26 36 2,730 1,503 95 4,408
Total 18 26 36 2,730 1,503 95 4,408
Collateral 18 26 39 2,870 5,791 188 8,932
31 December 2008
Sub-standard – 1 24 1,640 2,635 56 4,356
Total – 1 24 1,640 2,635 56 4,356
Collateral – 174 24 2,097 13,069 311 15,675

Financial Statements 57
(d) Loans and advances with renegotiated terms
Renegotiated loans that would otherwise be past due or impaired
totalled BAM 5,761 thousand at 31 December 2009 (2008: BAM
358 thousand).
2009 2008
Loan portfolio 234,056 318,566
Restructured loans 5,761 358
Restructured loans in % of loan portfolio 2.5% 0.12%
(e) Loans and advances to customers
The Bank holds collateral against loans and advances to customers
in the form of mortgage interest over property, other securities
over assets and guarantees. Estimates of fair value of collateral are
based on the value of collateral assessed at the time of borrowing,
and generally are not updated except when a loan is individually
assessed as impaired. Collateral is not held over loans and advances
to banks and financial assets available for sale.
The breakdown of the gross amount of individually impaired loans
and advances by class, along with the value of related collateral
held by the Bank as security, are as follows:
Overdraft Housing Others Very small SMEs Others
business
31 December 2009
Individually impaired loans – – – – 944 –
Collectively impaired loans 1,312 17,145 12,959 67,639 114,546 19,511
Collateral 1,392 34,931 20,113 80,444 458,185 66,065
31 December 2008
Individually impaired loans – – – 26 2,571 –
Collectively impaired loans 937 16,291 11,806 145,522 122,210 19,203
Collateral 952 28,395 17,879 156,956 365,316 51,527
The disclosed value of collateral is determined by local chartered
surveyors and represents value estimated as realisable by the legal
owners of the assets. Management considers the loans covered by
collateral as impaired because experience shows that a significant
proportion of the collateral cannot be enforced due to administrative
and legal difficulties. The impairment provisions reflect the
probability that management will not be able to enforce its rights
and repossess collateral on defaulted loans.
As at 31 December 2009 the Bank did not have any repossessed
property or some other type of collateral.
4.1.6 Concentration of risks of financial assets with credit risk
exposure
The Bank monitors concentrations of credit risk by economic sector
and by geographic location. The structure of the loan portfolio
is regularly reviewed within the Bank in order to identify potential
events which could have an impact on large areas of the loan portfolio
(common risk factors) and, if necessary, limit the exposure
towards certain sectors of the economy.
Credit portfolio risk is limited by the Bank’s credit strategy; in particular
the focus on small and very small loans and the broad geographical
and economic sector diversification of the loan portfolio.
An analysis of such concentrations at the reporting date is shown
below:
Economic sector risk concentrations
Wholesale Agriculture, Production Individuals Tourism, Other Total
and retail forestry catering
and fishing
Loans and advances to customers
– Overdrafts – 25 – 1,185 – – 1,210
– Housing – – 221 16,396 – – 16,617
– Consumer – – – 12,516 – – 12,516
Loans to corporate entities
– Very small business 8,967 32,834 2,603 1,280 1,651 11,908 59,243
– Small and medium size enterprises (SMEs) 56,451 1,886 20,411 5,939 7,665 19,433 111,785
– Business overdrafts 12,073 172 2,642 1,639 160 2,167 18,853
Financial assets available for sale – – – – – 227 227
Other assets – – – – – 2,318 2,318
As at 31 December 2009 77,491 34,917 25,877 38,955 9,476 36,053 222,769
As at 31 December 2008 93,130 79,986 33,544 38,393 10,799 55,045 310,910
The Bank follows a guideline that limits concentration risk in the
loan portfolio by ensuring that large credit exposures (those exceeding
10% of regulatory capital) require approval by the Group
Risk Management Committee.
Larger credit exposures are analysed and monitored, both by the
responsible employees through regular monitoring activities ena-
bling early detection of risks, and through the regular reviews carried
out by the Credit Risk Management Committee of the bank. Full
information about any related parties is typically collected prior to
lending.
Geographic risk concentrations of the loan portfolio mainly relate
to the region of the Bosnia and Herzegovina.

58
Annual Report 2009
Bosnia and Non-OECD Total
Herzegovina
countries
Loans and advances to customers
– Overdrafts 1,210 – 1,210
– Housing 16,617 – 16,617
– Consumer 12,516 – 12,516
– Very small business 59,243 – 59,243
– Small and medium size enterprises (SMEs) 111,785 – 111,785
– Business overdrafts 18,853 – 18,853
Financial assets available for sale – 227 227
Other assets 2,318 – 2,318
As at 31 December 2009 222,542 227 222,769
As at 31 December 2008 310,701 209 310,910
In addition, the structure of the loan portfolio is regularly reviewed
within the Risk Department and Credit Risk Committee in order to
identify potential events which could have an impact on large areas
of the loan portfolio (common risk factors) and if necessary limit the
exposure toward certain sectors of the economy.
4.2 Market risk
The Bank takes on exposure to market risks. Market risk is the
risk that changes in market prices such as interest rates, equity
prices, foreign exchange prices and credit spreads will have an effect
(relating to changes in the obligor’s/issuer’s credit standing)
on the bank’s income. The objective of market risk management
is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk. Market risks arise
from open positions in interest rate, foreign currency and equity
products, all of which are exposed to general and specific market
movements and changes in the level of volatility of market rates
or prices such as interest rates, credit spreads, foreign exchange
rates and equity prices.
The Management Board sets limits and guidelines for managing,
analysis and controlling market risk exposures within acceptable
parameters while optimising the return on risk. Market risk is the
responsibility of the ALCO which is regularly monitored by Risk
Committees of the Bank. The Risk department is responsible for development
and implementation of risk management policies.
4.2.1 Foreign exchange risk
The Bank is exposed to currency risk through transactions in foreign
currencies. Assets and liabilities of the Bank are denominated
in more than one currency which means that bank is exposed to exchange
rate movements if it has open currency position.
The Bank is not allowed to enter any speculative positions on foreign
exchange markets. Derivatives can only be used for hedging
purposes to close positions of the Bank as well as for liquidity purposes.
Approved FX derivatives are currency forwards and currency
swaps. Foreign currency exposure arises from credit, deposit-taking
and trading activities. The Management sets limits on the level
of exposure by currency and in total for overnight position, which
are monitored on a daily basis by Treasury department. Bosnia is
under Currency board regime where local currency (BAM) is pegged
to EUR. The Bank’s balance sheet positions are mainly in local currency
and EURO so the Bank’s exposure toward foreign exchange
risk is low. The table below summarizes the Bank’s exposure to foreign
currency exchange rate risk at 31 December 2009. Included in
the table are the Bank’s assets and liabilities at carrying amounts
categorized by currency.
Concentration of currency risk of on- and off-balance sheet assets
and liabilities
The Bank had the following significant currency positions:
As at 31 December 2009 EUR and USD BAM Other Total
EUR linked
Assets
Cash and cash equivalents 56,054 2,168 16,647 750 75,619
Obligatory reserve with Central Bank – – 26,691 – 26,691
Loans and advances to customers 184,050 – 36,174 – 220,224
Financial investments available for sale 227 – – – 227
Property and equipment – – 7,896 – 7,896
Intangible assets – – 967 – 967
Deferred tax assets – – 1,536 – 1,536
Other assets 161 75 2,082 – 2,318
Total assets 240,492 2,243 91,993 750 335,478
Liabilities
Deposits from customers 161,217 2,204 79,306 – 242,727
Borrowings 37,156 – 3,237 – 40,393
Subordinated debt 16,083 – – – 16,083
Provisions – – 332 – 332
Other liabilities 129 – 839 – 968
Current tax liability – – – – –
Total liabilities 214,585 2,204 83,714 – 300,503
Net balance sheet position 25,907 39 8,279 750 34,975
Contingencies and commitments 1,607 79 20,315 – 22,001

Financial Statements 59
The local currency (BAM) is pegged to EUR under a currency board
arrangement.
A 10% fall in currencies (other than EUR) against BAM, with other
variables held constant would result in a decrease of the result of
the year by BAM 79 thousand (2008: BAM 96 thousand).
A 10% rise in such currencies would result in an increase of the result
of the year of BAM 79 thousand (2008: BAM 96 thousand).
As at 31 December 2008 EUR and USD BAM Other Total
EUR linked
Assets
Cash and cash equivalents 40,366 2,441 38,294 963 82,064
Obligatory reserve with Central Bank – – 58,917 – 58,917
Loans and advances to customers 246,318 – 61,030 – 307,348
Financial investments available for sale 225 – – – 225
Property and equipment – – 11,333 – 11,333
Intangible assets – – 992 – 992
Deferred tax assets – – 47 – 47
Other assets 594 39 2,205 – 2,838
Total assets 287,503 2,480 172,818 963 463,764
Liabilities
Deposits from customers 176,316 2,463 156,679 – 335,458
Borrowings 63,112 – 2,580 – 65,692
Subordinated debt 16,081 – – – 16,081
Provisions – – 322 – 322
Other liabilities 458 – 963 – 1,421
Current tax liability – – 155 – 155
Total liabilities 255,967 2,463 160,699 – 419,129
Net balance sheet position 31,536 17 12,119 963 44,635
Contingencies and commitments 1,782 884 18,637 – 21,303
4.2.2 Interest rate risk
Interest rate risk specifies the risk that movements in market interest
rates will adversely affect on Bank’s capital and interest earnings.
Two subcategories are identified as the economic value risk
and interest earnings risk. The principal risk to which non-trading
portfolios are exposed is the risk of loss from fluctuations in the
future cash flows or fair values of financial instruments because
of a change in market interest rates. The Bank’s operations are
subject to the risk of interest rate fluctuations to the extent that
interest earning assets and interest bearing liabilities mature at
different times and different amounts. The ALCO is a body which is
responsible for managing the compliance with set limits. Both the
bank’s ALCO and the bank’s Risk Management Committee have the
authority to approve interest rate exposure modifications within
the set limits. Principally, the interest rate risk is managed through
monitoring interest rate gaps and by having the pre-approved limits
for repricing bands. As tools for monitoring and analysis of interest
rate changes the bank uses the interest rate gap analysis;
the modified duration gap calculated separately for each material
operating currency.
Scenario analyses of yield curve shifts are carried out separately
for each material operating currency as total economic value impact
in present value and cumulative interest earnings impact
(profit or loss) for a 3-month and 1-year period in present value.
The analyses are completed separately for both the most expected
scenario and the worst case scenario.
The scenario analysis provides an estimate on how the changes in
the interest rate structure may affect the earnings and the economic
value of the Bank.
The Bank seeks to ensure that the balance sheet structure is as
balanced as possible across all maturities. If is it is not possible,
derivative may be used, but only for hedging purposes.

60
Annual Report 2009
Interest sensitivity of assets and liabilities
The table below summarizes the Bank’s exposure to interest rate
risks. Included in the table are the Bank’s assets and liabilities at
carrying amounts, categorized by the earlier of contractual repricing
or maturity dates.
As at 31 December 2009 Up to 1 – 3 3 – 12 1 – 5 Over Non-interest Total
1 month months months years 5 years bearing
Assets
Cash and cash equivalents 45,099 – – – – 30,520 75,619
Obligatory reserve with Central Bank 26,691 – – – – – 26,691
Loans and advances to customers 29,981 18,144 64,346 96,414 11,339 – 220,224
Financial investments available for sale – – – – – 227 227
Property and equipment – – – – – 7,896 7,896
Intangible assets – – – – – 967 967
Deferred tax assets – – – – – 1,536 1,536
Other assets – – – – – 2,318 2,318
Total assets 101,771 18,144 64,346 96,414 11,339 43,464 335,478
Liabilities
Deposits from customers 30,956 15,716 76,216 57,327 737 61,775 242,727
Borrowings – 15,559 8,146 4,303 3,170 9,215 40,393
Subordinated debt – – – – 16,083 – 16,083
Provisions – – – – – 332 332
Other liabilities – – – – – 968 968
Current income tax payable – – – – – – –
Total liabilities 30,956 31,275 84,362 61,630 19,990 72,290 300,503
Balance sheet interest sensitivity gap 70,815 (13,131) (20,016) 34,784 (8,651) (28,826) 34,975
As at 31 December 2008 Up to 1 – 3 3 – 12 1 – 5 Over Non-interest Total
1 month months months years 5 years bearing
Assets
Cash and cash equivalents 51,096 5,281 – – – 25,687 82,064
Obligatory reserve with Central Bank 58,917 – – – – – 58,917
Loans and advances to customers 32,696 27,911 104,442 131,259 11,040 – 307,348
Financial investments available for sale – – – – – 225 225
Property and equipment – – – – – 11,333 11,333
Intangible assets – – – – – 992 992
Deferred tax assets – – – – – 47 47
Other assets – – – – – 2,838 2,838
Total assets 142,709 33,192 104,442 131,259 11,040 41,122 463,764
Liabilities
Deposits from customers 9,215 28,502 96,824 109,797 1,532 89,588 335,458
Borrowings – 20,157 15,275 6,454 2,510 21,296 65,692
Subordinated debt – – – – 16,081 – 16,081
Provisions – – – – – 322 322
Other liabilities – – – – – 1,421 1,421
Current tax liability – – – – – 155 155
Total liabilities 9,215 48,659 112,099 116,251 20,123 112,782 419,129
Balance sheet interest sensitivity gap 133,494 (15,467) (7,657) 15,008 (9,083) (71,660) 44,635
Based on the above interest rate sensitivity, at 31 December 2009,
if interest rates had been 1% lower with all other variables held
constant, result for the year would have been BAM 499 thousand
(2008: BAM 586 thousand) higher. Conversely, the same effect
with opposite result would have been in a case of 1% increase of
interest rates.
The interest rate sensitivity analysis includes all variable interest
rate assets and liabilities and assumes that all short term fixed rate
assets and liabilities will be reinvested upon maturity.

Financial Statements 61
4.3 Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in
meeting obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset.
The Supervisory Board has approved Liquidity Risk Management
Program. The Bank manages liquidity risk by seeking to apply the
optimum combination of maturity and foreign currency structure
of the assets and liabilities. The Bank has a loan portfolio that is
the largest single component on the asset side, and is primarily
funded through locally mobilized deposits. The loan portfolio is
characterized by a high concentration of short- and medium-term
loans to micro and small businesses (high diversification). The
loans are disbursed as annuity term loans which provide a more
stable cash flow.
Sources of liquidity are regularly reviewed by Treasury Department
and the ALCO Risk Committee of the Bank to maintain a wide diversification
by currency, geography, provider, product and term.
The primary responsibility for identifying, assessing, addressing,
monitoring and communicating its liquidity and funding risk lies
with the Bank. The treasury manages the liquidity situation on a
daily basis. Liquidity risk is monitored in the regular ALCO meetings,
in which member of management boards participate. The
risk management department is responsible for controlling and
monitoring liquidity risk, including ensuring that it is in line with
the Liquidity Risk management program and the limits which it sets
and also is responsible for monitoring to ensure that the measures
defined by the ALCO are being put into practice.
The Bank’s liquidity management process, as carried out within the
Bank and monitored by Treasury Department includes:
• Day-to-day funding, managed by monitoring future cash flows
to ensure that requirements can be met. This includes replenishment
of funds as they mature or are borrowed by customers;
• Maintaining a portfolio of marketable assets that can easily be
liquidated as protection against any unforeseen interruption to
cash flow;
• Monitoring balance sheet liquidity ratios against internal and
regulatory requirements;
• Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement
and projections for the next day, week and month respectively, as
these is key period for liquidity management. The starting point
for those projections is an analysis of the contractual maturity of
the financial liabilities and the expected collection date of the financial
assets.
Treasury Department also monitors unmatched medium-term assets,
the level and type of undrawn lending commitments, the usage
of overdraft facilities and the impact of contingent liabilities
such as standby letters of credit and guarantees.
The table below analyses the assets and liabilities of the Bank into
relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. Other assets and
liabilities which do not have contractual maturity are classified into
relevant maturity groupings in accordance with the Bank’s plan.
As at 31 December 2009 Up to 1 – 3 3 – 12 1 – 5 Over Total
1 month months months years 5 years
Assets
Cash and cash equivalents 75,619 – – – – 75,619
Obligatory reserve with Central Bank 26,691 – – – – 26,691
Loans and advances to customers 29,981 18,144 64,346 96,414 11,339 220,224
Financial investments available for sale 196 – – – 31 227
Property and equipment – – – – 7,896 7,896
Intangible assets – – – – 967 967
Deferred tax assets – – – 1,536 – 1,536
Other assets 2,318 – – – – 2,318
Total assets 134,805 18,144 64,346 97,950 20,233 335,478
Liabilities
Deposits from customers 92,731 15,716 76,216 57,327 737 242,727
Borrowings 145 3,995 3,728 29,355 3,170 40,393
Subordinated debt – – 436 – 15,647 16,083
Provisions 332 – – – – 332
Other liabilities 968 – – – – 968
Current tax liability – – – – – –
Total liabilities 94,176 19,711 80,380 86,682 19,554 300,503
Net liquidity gap 40,629 (1,567) (16,034) 11,268 679 34,975
Contingencies and commitments 14,286 1,721 4,2533 1,741 – 22,001

62
Annual Report 2009
As at 31 December 2008 Up to 1 – 3 3 – 12 1 – 5 Over Total
1 month months months years 5 years
Assets
Cash and cash equivalents 76,783 5,281 – – – 82,064
Obligatory reserve with Central Bank 58,917 – – – – 58,917
Loans and advances to customers 32,696 27,911 104,442 131,259 11,040 307,348
Financial investments available for sale 196 – – – 29 225
Property and equipment – – – – 11,333 11,333
Intangible assets – – – – 992 992
Deferred tax assets 47 – – – – 47
Other assets 2,838 – – – – 2,838
Total assets 171,477 33,192 104,442 131,259 23,394 463,764
Liabilities
Deposits from customers 98,803 28,502 96,824 109,797 1,532 335,458
Borrowings 62 14,929 10,995 37,196 2,510 65,692
Subordinated debt – – 434 – 15,647 16,081
Provisions 322 – – – – 322
Other liabilities 1,421 – – – – 1,421
Current tax liability 155 – – – – 155
Total liabilities 100,763 43,431 108,253 146,993 19,689 419,129
Net liquidity gap 70,714 (10,239) (3,811) (15,734) 3,705 44,635
Contingencies and commitments 3,387 4,208 11,702 2,006 – 21,303
Off-balance sheet item maturity
(a) Loan commitments
The dates of the contractual amounts of the Bank’s off-balancesheet
financial instruments that commit it to extend credit to customers
and other facilities are summarized in the table below.
(b) Financial guarantees and letters of credits
Financial guarantees and letters of credits are also included in the
table below based on the earliest contractual maturity date.
(c) Operating lease commitments
Where the Bank is the lessee, the future minimum lease payments
under non-cancellable operating leases are summarized in the table
below.
No later than 1 – 5 Over Total
1 year years 5 years
As at 31 December 2009
Loan commitments 13,351 – – 13,351
Financial guarantees and letters of credit 7,130 1,741 – 8,871
Operating lease commitments 249 1,181 12,941 14,371
Total 20,730 2,922 12,941 36,593
As at 31 December 2008
Loan commitments 12,099 – – 12,099
Financial guarantees and letters of credit 7,327 2,006 – 9,333
Operating lease commitments 40 2,246 19,555 21,841
Total 19,466 4,252 19,555 43,273
4.4 Operational risk
Operational risk is recognised as an important risk factor for the
Bank, given that the Bank relies on a high degree of decentralised
processing and decision-making. In line with Basle II, the Bank defines
operational risks as the risk of loss resulting from inadequate
or failed internal processes, people and systems and/or external
events. This category includes all “risk events” in the areas of personnel,
processes, and information technology. To further expand
the processes for managing operational risks, a new Operational
Risk Policy was implemented in the Bank in 2009. The principles
outlined in this document have been designed to effectively manage
the operational risk exposure, and they are in compliance with
the Basle II requirements for the “standard approach”.
The overall framework to manage operational risks is as a complementary
and balanced system with its key components Corporate
Culture, Governance Framework, Policies and Procedures, Risk Assessments,
New Risk Approvals (NRAs), Key Risk Indicators and the
Risk Event Database. While the Corporate Culture, the Governance
Framework, and Policies and Procedures are installed to set the
basic organisational requirements, Risk Assessments, New Risk
Approvals (NRAs), Key Risk Indicators and the Risk Event Database
are the key instruments to execute the risk management process.
The overall objectives of ProCredit bank’s approach to the management
of operational risks are:
• to understand the drivers of the bank’s operational risks;
• to be able to identify critical issues as early as possible;
• to avoid losses caused by operational risks; and
• to ensure efficient use of the bank’s capital.
To deliver on these goals the following tools and processes have
been implemented in detail, being part of the framework components
as depicted above. They are presented as they are used with-

Financial Statements 63
in the process to manage operational risks. These processes are
subdivided into the phases of identification, evaluation, treatment,
monitoring, documentation and communication, and follow up. All
corresponding details have been implemented in the Bank by approving
the Group Operational Risk Policy.
As of December 2009, no significant legal proceedings were pending.
4.5 Fair values of financial assets and liabilities
The table below summarizes the carrying amounts and fair values
of those financial assets and liabilities not presented on the Bank’s
balance sheet at their fair value.
Carrying value
Fair value
2009 2008 2009 2008
Assets
Loans and advances to customers 220,224 307,348 219,292 305,668
Liabilities
Deposits from customers 242,727 335,458 244,656 337,729
Borrowings 40,393 65,692 35,613 60,947
Subordinated debt 16,083 16,081 15,597 14,279
Financial assets available for sale are carried at cost as they do not
have a quoted market price in an active market and their fair value
cannot be reliably measured.
(i) Loans and advances to customers
The fair value of loans and advances is calculated based on discounted
expected future principal and interest cash flows. Loan
repayments are assumed to occur at contractual repayment dates,
where applicable. The estimated fair values of loans reflect changes
in credit status since the loans were made and changes in interest
rates in the case of fixed rate loans. The carrying value of loans
with variable interest rate approximates their fair value.
(ii) Deposits from customers, borrowings and subordinated debt
The estimated fair value of deposits with no stated maturity, which
includes non-interest-bearing deposits, is the amount repayable
on demand.
The estimated fair value of fixed interest-bearing deposits and
other borrowings not quoted in an active market is based on discounted
cash flows using interest rates for new debts with similar
remaining maturity.
The fair value of the term deposits at variable interest rates approximates
their carrying values as of the balance sheet date.
4.6 Capital management
The Bank’s objectives when managing capital, which is a broader
concept than the ‘equity’ on the face of balance sheets, are:
• To comply with the capital requirements set by the regulators
of the banking market in local environment;
• To safeguard the Bank’s ability to continue as a going concern
so that it can continue to provide returns for shareholders and
benefits for other stakeholders; and
• To maintain a strong capital base to support the development
of its business.
Capital adequacy and the balance of capital are monitored regularly
by the ALCO and Bank’s Management Board, based on the
relevant internal acts and regulations prescribed by the supervisory
authority (Banking Agency of Federation of Bosnia and Herzegovina).
The required information and reports are submitted to the
Banking Agency on a quarterly basis.
The table below summarizes the composition of regulatory capital
and the capital adequacy ratio of the Bank for the years ended 31
December 2009 and 2008 prepared in accordance with Banking
Agency regulations.
2009 2008
Bank’s net capital according to
Banking Agency regulations 52,689 63,431
Risk of Risk Weighted Assets
and Loan Equivalent 259,094 342,469
Weighted operational risk 44,865 2,948
Total weighted risk 303,959 345,417
Capital adequacy ratio 17.3% 18.4%
The Banking agency regulations for calculation of capital assignment
for operational risk has changed in 2009, resulting in lower
capital adequacy ratio. For comparative purposes, by using the
2008 methodology this ratio would be at 20.2% as at 31 December
2009.
A minimum capital requirement according to the Banking agency
regulations amounts to 12%.
5. Critical accounting estimates and judgments
The Bank makes estimates and assumptions that affect the reported
amounts of assets and liabilities within the next financial year.
Estimates and judgments are continually evaluated and based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
(a) Impairment losses on loans and advances
The Bank reviews its loan portfolios to assess impairment at least
on a quarterly basis. In determining whether an impairment loss
should be recorded in the income statement, the Bank makes judgments
as to whether there is any observable data indicating that

64
Annual Report 2009
there is a measurable decrease in the estimated future cash flows
from a portfolio of loans before the decrease can be identified with
an individual loan in that portfolio. This evidence may include observable
data indicating that there has been an adverse change in
the payment status of borrowers in a Bank, or national or local economic
conditions that correlate with defaults on assets in the Bank.
Management uses estimates based on historical loss experience
for assets with credit risk characteristics and objective evidence
of impairment similar to those in the portfolio when scheduling
its future cash flows. The methodology and assumptions used for
estimating both the amount and timing of future cash flows are reviewed
regularly to reduce any differences between loss estimates
and actual loss experience.
Assets accounted for at amortised cost are evaluated for impairment
on a basis described in note 3.6.
(b) Taxation
The Bank provides for tax liabilities in accordance with the tax laws
of Federation of Bosnia and Herzegovina. Tax returns are subject
to the approval of the tax authorities who are entitled to carry out
subsequent inspections of taxpayers’ records.
(c) Regulatory requirements
The Federation of Bosnia and Herzegovina is entitled to carry out
regulatory inspections of the Bank’s operations and to request
changes to the carrying values of assets and liabilities, in accordance
with the underlying regulations.
8. Net trading income
2009 2008
Positive foreign exchange differences 49,494 57,101
Negative foreign exchange differences (49,475) (56,900)
19 201
9. Other operating income
2009 2008
Reimbursements from insurance – 520
Income from disposal property, plant
and equipment 233 12
Other 537 594
770 1,126
10. Personnel expenses
2009 2008
Salaries and wages 9,514 10,299
Taxes and contributions 6,173 6,538
Other long-term employee benefits (Note 25) (82) 56
Food allowances and transportation 2,134 1,685
Other 203 650
17,942 19,228
6. Net interest income
The number of persons employed by the Bank at the year end was
662 (2008: 888).
2009 2008
Interest and similar income
Loans and advances to customers 39,617 55,475
Cash and cash equivalents 392 735
Obligatory reserve with the Central Bank 366 1,693
40,375 57,903
Interest expense and similar charges
Current accounts and
deposits from customers (11,677) (13,822)
Borrowings and subordinated debt (3,351) (5,355)
(15,028) (19,177)
7. Net fee and commission income
2009 2008
Fee and commission income
Foreign payment transactions 979 1,059
Domestic payment transactions 1,166 1,102
Guarantees and letters of credit 342 386
Foreign exchange transactions 854 850
Western Union and card business 302 303
Penalty income for premature
deposits withdrawal 430 –
Accounts maintenance fees 765 418
Other payment transaction fees 570 581
Other fees and commissions 266 913
5,674 5,612
Fee and commission expense
Banks (287) (275)
Other (1,084) (774)
(1,371) (1,049)
11. Other operating expenses
2009 2008
Rent 3,440 3,419
Promotion and marketing 743 1,561
Consulting services 1,048 920
Insurance premiums 2,151 2,814
Post and telecommunication services 772 842
Stationery 307 611
Maintenance of fixed assets and equipment 734 783
Other taxes and contribution 74 111
Utilities and electricity 863 973
Administrative, court and other legal fees 664 385
Transport 308 414
Other consumables 97 251
ProCredit Group consulting services 812 952
Disposal of property, plant and equipment 526 16
Allowance losses for maintenance fee 217 68
Other 778 1,491
13,534 15,611
12. Net impairment losses
2009 2008
Loans to individuals (Note 16) 598 131
Loans to corporate entities (Note 16) 10,473 6,519
Other assets (Note 21) 78 61
11,149 6,711

Financial Statements 65
13. Income tax benefit/(expense)
16. Loans and advances to customers
Income tax recognised in the income statement includes current
and deferred tax.
2009 2008
Current tax expense – 104
Net deferred tax credit (Note 20) (1,489) (21)
Total income tax (benefit)/expense (1,489) 83
Further information about deferred income tax is presented in Note
20. The official tax rate within the country is 10% (2008: 10%).
2009 2008
Loans to individuals
– short term 3,529 7,584
– long term 117,265 194,322
120,794 201,906
Loans to corporate entities
– short term 18,326 17,381
– long term 94,936 98,875
113,262 116,256
Reconciliation of the accounting profit and income tax expense
2009 2008
Loss before tax (16,149) (668)
Tax calculated at a tax rate
of 10% (2008:10%) (1,615) (67)
Tax effects of items which
are not deductible:
– non-taxable income (9) (7)
– non-deductible expenses 135 157
Income tax (benefit)/expense
for the year (1,489) 83
The Bank’s tax liabilities are ascertained in tax statements prepared
by the Bank and might be a matter of subsequent inspection
and consequent adjustment by tax authorities in a five year period
after recognition. The Bank’s Management Board is not aware of
any circumstances, which may give rise to a potential material liability
in this respect.
14. Cash and cash equivalents
2009 2008
Cash in hand 14,206 20,071
Current accounts with other banks 16,282 5,505
Balances with the Central Bank other
than obligatory reserve 9,909 27,734
Money market placements 35,222 28,754
75,619 82,064
15. Obligatory reserve with the Central Bank
Gross loans and advances to customers 234,056 318,162
Less: allowance for impairment (13,832) (10,814)
Net loans and advances to customers 220,224 307,348
Current (net) 112,471 164,852
Non-current (net) 107,753 142,496
Loans and advances to customers are presented including accrued
interest in the amount of BAM 1,734 thousand (2008: BAM 2,466
thousand), and net of deferred fees in the amount of BAM 1,613
thousand (2008: BAM 2,910 thousand).
The movement in impairment allowance for loans and advances to
customers is as follows:
Individuals
Overdraft Housing Others Total
Balance at 1 January 2009 26 277 233 536
Net charge to
income statement (Note 12) 98 231 269 598
Amounts written off (21) 20 (60) (61)
Balance at
31 December 2009 103 528 442 1,073
Corporate entities
Very small SMEs Others Total
business
Balance at 1 January 2009 7,427 2,417 434 10,278
Net charge to
income statement (Note 12) 8,203 1,854 416 10,473
Amounts written off (7,234) (566) (192) (7,992)
Balance at
31 December 2009 8,396 3,705 658 12,759
2009 2008
Obligatory reserve with the
Central Bank 26,691 58,917
26,691 58,917
The Central Bank determines the requirement for banks to hold obligatory
reserves in the form of amounts required to be deposited
with the Central Bank. In 2008, minimum obligatory reserve was
calculated in amount of 18% of the average amount of total deposits
and the borrowings for each working day during 10 calendar
days following the period of maintaining the obligatory reserve. On
14 October 2008, the rate of minimum obligatory reserve was decreased
to 14%. The obligatory reserve requirement at 31 December
2009 amounted to 7% for liabilities with maturity above 1 year,
and for liabilities with maturity up to 1 year 14%. The obligatory
reserve is maintained through the average balance on the ordinary
reserve account with the Central Bank.
The interest rate on the obligatory reserve is 0.5% (2008: 1.0%).
Individuals
Overdraft Housing Others Total
Balance at 1 January 2008 37 235 134 406
Net charge/(release) to
income statement (Note 12) (11) 22 120 131
Amounts written off – 20 (21) (1)
Balance at
31 December 2008 26 277 233 536
Corporate entities
Very small SMEs Others Total
business
Balance at 1 January 2008 5,792 2,078 241 8,111
Net charge to income
statement (Note 12) 5,563 688 268 6,519
Amounts written off (3,928) (324) (75) (4,327)
Unwinding of discount – (25) – (25)
Balance at
31 December 2008 7,427 2,417 434 10,278

66
Annual Report 2009
17. Financial assets available for sale
2009 2008
Investment in ProCredit Regional
Academy EE LLC Skopje 196 196
SWIFT shares 31 29
227 225
As at December 17, 2007 the Bank signed an Agreement for establishment
of ProCredit Regional Academy EE LLC Skopje, together
with 7 other banks from the ProCredit banking network.
Financial assets available for sale are carried at cost as they do not
have a quoted market price in an active market and their fair value
cannot be reliably measured.
18. Property and equipment
The cost of property and equipment and related depreciation for
2009 is presented below:
2009 Buildings Leasehold Furniture & Assets in course Total
improvements equipment of construction
Cost
Balance at 1 January 2009 727 4,432 15,149 1,066 21,374
Additions 1 274 256 33 564
Transfers – 41 537 (578) –
Disposals and write off – (713) (1,121) – (1,834)
Balance at 31 December 2009 728 4,034 14,821 521 20,104
Accumulated depreciation
Balance at 1 January 2009 288 1,778 7,975 – 10,041
Charge for the year 27 583 2,859 – 3,469
Disposals and write off – (274) (1,028) – (1,302)
Balance at 31 December 2009 315 2,087 9,806 – 12,208
Carrying amount at
31 December 2009 413 1,947 5,015 521 7,896
1 January 2009 439 2,654 7,174 1,066 11,333
The cost of property and equipment and related depreciation for
2008 is presented below:
2008 Buildings Leasehold Furniture & Assets in course Total
improvements equipment of construction
Cost
Balance at 1 January 2008 448 3,959 11,874 1,671 17,952
Additions 137 451 2,296 845 3,729
Transfers 142 138 1,170 (1,450) –
Disposals and write off – (116) (191) – (307)
Balance at 31 December 2008 727 4,432 15,149 1,066 21,374
Accumulated depreciation
Balance at 1 January 2008 256 1,300 5,451 – 7,007
Charge for the year 32 585 2,704 – 3,321
Disposals and write off – (107) (180) – (287)
Balance at 31 December 2008 288 1,778 7,975 – 10,041
Carrying amount at
31 December 2008 439 2,654 7,174 1,066 11,333
1 January 2008 192 2,659 6,423 1,671 10,945

Financial Statements 67
19. Intangible assets
2009 Software Licenses and Total
other intangible
assets
Cost
Balance at 1 January 2009 262 1,788 2,050
Additions 3 466 469
Balance at
31 December 2009 265 2,254 2,519
Accumulated amortisation
Balance at 1 January 2009 132 926 1,058
Charge for the year 40 454 494
Balance at
31 December 2009 172 1,380 1,552
Carrying amount at
31 December 2009 93 874 967
1 January 2009 130 862 992
2008 Software Licenses and Total
other intangible
assets
Cost
Balance at 1 January 2008 175 1,431 1,606
Additions 87 357 444
Balance at
31 December 2008 262 1,788 2,050
Accumulated amortisation
Balance at 1 January 2008 92 553 645
Charge for the year 40 373 413
Balance at
31 December 2008 132 926 1,058
Carrying amount at
31 December 2008 130 862 992
1 January 2008 83 878 961
20. Deferred tax assets
Deferred income taxes are calculated on all temporary differences
under the balance sheet method using an effective tax rate of 10%
(2008: 10%).
In accordance with Law on corporate profit tax, tax losses can be
carried forward for relief against profit of future accounting periods,
but for not longer than 5 years. The Bank has recognised
deferred tax asset for the carry forward of unused tax losses as
the Management board estimates that there will be future taxable
profit against which the Bank can utilise the benefits thereof.
Movement in deferred tax assets
Loan Other Tax loss Total
impairment items carry forward
Balance at 1 January 2009 40 7 – 47
Origination and reversal of temporary differences 27 (3) 1,465 1,489
Reduction in tax rate – – –
Balance at 31 December 2009 67 4 1,465 1,536
Balance at 1 January 2008 26 – – 26
Origination and reversal of temporary differences 88 7 – 95
Reduction in tax rate (74) – – (74)
Balance at 31 December 2008 40 7 – 47

68
Annual Report 2009
21. Other assets
2009 2008
Prepaid rent 492 816
Prepaid income tax 903 855
Advance payments 123 461
Receivables from card operators 209 290
Other assets 703 457
Impairment allowance (112) (41)
2,318 2,838
Current (net) 2,318 2,838
Non-current (net) – –
Movement in allowances for other assets impairment are as follows:
2009 2008
Balance at 1 January 41 38
Net charge to income statement (Note 12) 78 61
Amounts written off (7) (58)
Balance at 31 December 112 41
22. Deposits from customers
2009 2008
Corporate
– Current accounts and demand deposits 43,247 44,956
– Term deposits 40,163 135,454
Individual customers
– Current accounts and demand deposits 43,236 44,554
– Term deposits 116,081 110,494
242,727 335,458
Current 184,663 223,640
Non-current 58,064 111,818
Deposits from corporate customers include BAM 6,262 thousand
(2008: BAM 8,269 thousand) linked to EUR by revaluation clauses.
23. Borrowings
The Bank has not had any defaults of principal, interest or other
breaches with respect to its borrowings.
As of 31 December 2009 Bank has signed contract with ProCredit
Holding AG in amount of EUR 15 million, which has not been drawn
as yet. Amounts presented in the note above relates to the accrued
commitment fee.
24. Subordinated debt
2009 2008
Subordinated debt 16,083 16,081
16,083 16,081
Current 436 434
Non-current 15,647 15,647
Subordinated loan agreement has been signed between ProCredit
Bank d.d. Sarajevo and ProCredit Holding AG on 31 August 2005.
The loan bears interest of 8.9 % p.a. The loan shall expire on 7 September
2015 and is repayable upon maturity.
Additional Subordinated loan agreement has been signed between
ProCredit Bank d.d. Sarajevo and ProCredit Holding AG on 26 September
2007. The loan bears interest of 10.51 % p.a. The loan shall
expire on 26 September 2022 and is repayable upon maturity.
The Bank has not had any defaults of principal, interest or other
breaches with respect to its subordinated debt.
25. Provisions
2009 2008
Provisions for contingencies
and commitments 221 129
Provisions for other long-term
employee benefits 111 193
332 322
Movement in provisions for contingencies and commitments are as
follows:
2009 2008
Balance at 1 January 129 123
Net charge to income statement 92 6
Balance at 31 December 221 129
2009 2008
The Commission of the European Union 8,810 20,569
Kreditanstalt fur Wiederaufbau 6,099 8,309
The European Fund for Southeast Europe 14,819 19,886
Commerzbank 6,875 10,996
European Bank for
Reconstruction and Development – 2,370
ProCredit Holding 88 23
International Fund for
Agricultural Development 3,227 2,552
Partners for Development 475 987
40,393 65,692
Current 7,868 25,944
Non-current 32,525 39,748
The Bank obtains long term financing from institutions sponsored
by European Union at interest rates at which such institutions ordinarily
lend in Bosnia and Herzegovina and other emerging markets
and which may be lower than rates at which the Bank could source
the funds from other local lenders. As a result of such financing,
the Bank advances funds to specific customers at favourable rates.
Movement in provisions for other long-term employee benefits are
as follows:
2009 2008
Balance at 1 January 193 137
Net (release)/charge to
income statement (Note 10) (82) 56
Balance at 31 December 111 193
26. Other liabilities
2009 2008
Payables to suppliers 281 217
Accrued expenses 281 851
Other liabilities 406 353
968 1,421

Financial Statements 69
27. Share capital
In BAM’000
Share capital
2009 2008
On issue at 1 January 35,458 25,679
New shares issued 5,000 9,779
At 31 December 40,458 35,458
In number of shares
Ordinary shares
2009 2008
On issue at 1 January 3,545,777 2,567,862
New shares issued 500,000 977,915
At 31 December 4,045,777 3,545,777
The Bank’s share capital consists of 4,045,777 ordinary shares. All
shares have a par value of BAM 10 and are fully paid.
Share premium represents the excess of paid-in amount over the
nominal value of the issued shares.
Statutory reserves represent additional capital set aside by appropriation
from net income. These reserves are used to cover losses
and are not distributable.
The shareholder structure of the Bank was as follows:
Name
% of voting share capital
2009 2008
ProCredit Holding AG 93.3 92.3
Commerzbank AG 6.7 7.7
100% 100%
28. Commitments and contingencies
The following table indicates the contractual amounts of the Bank’s
contingencies and commitments by category:
2009 2008
Guarantees
– in domestic currency 7,185 6,667
– in foreign currency 1,566 1,889
Letter of credits 120 777
Undrawn lending commitments 13,351 12,099
22,222 21,432
Less: Provision for contingencies
and commitments (note 25) (221) (129)
22,001 21,303
29. Related party transactions
Parties are considered to be related if one party has the ability to
control the other party or exercise significant influence over the
other party in making financial or operational decisions. A number
of banking transactions are entered into with related parties in the
normal course of business. These include loans, deposits and borrowings.
These transactions were carried out on commercial terms and at
market rates. The volumes of related party transactions, outstanding
balances at the year-end, are as follows:
Related party transactions for 2009
ProCredit Bank’s Bank’s management Total
Holding management close family members
Loans
Loans outstanding at 1 January – 327 3 330
Loans issued during the year – 188 18 206
Loan repayments during the year – (235) (21) (256)
Loans outstanding at 31 December – 280 – 280
Interest income earned – 20 – 20
Impairment losses for loans – 1 – 1
Deposits
Balance at beginning of year – 114 10 124
Deposits received during the year – 615 114 729
Deposits repaid during the year – (646) (121) (767)
Balance at 31 December – 83 3 86
Interest expenses on deposits – 3 – 3
Borrowings
Loans outstanding at 1 January 16,081 – – 16,081
Loans issued during the year 1,523 – – 1,523
Loans repayments during the year (1,521) – – (1,521)
Balance at 31 December 16,083 – – 16,083
Interest expenses on borrowings 1,524 – – 1,524
Consulting fee 1 650 – – 650
1
Consulting fee relates to management fee for providing
management services and support.

70
Annual Report 2009
Related party transactions for 2008
ProCredit Bank’s Bank’s management Total
Holding management close family members
Loans
Loans outstanding at 1 January – 184 – 184
Loans issued during the year – 195 3 198
Loan repayments during the year – (52) – (52)
Loans outstanding at 31 December – 327 3 330
Interest income earned – 18 – 18
Impairment losses for loans – 1 – 1
Deposits
Balance at beginning of year – 146 3 149
Deposits received during the year – 684 42 726
Deposits repaid during the year – (716) (35) (751)
Balance at 31 December – 114 10 124
Interest expenses on deposits – 5 – 5
Borrowings
Loans outstanding at 1 January 26,138 – – 26,138
Loans issued during the year (19,836) – – (19,836)
Loans repayments during the year 9,779 – – 9,779
Balance at 31 December 16,081 – – 16,081
Interest expenses on borrowings 2,093 – – 2,093
Transfers under license and finance agreements 1 771 – – 771
1
Transfers under license and finance agreements related to
management fee for providing management services and
support.
Key management compensation
2009 2008
Salaries and other short-term benefits 293 253
Other long-term employee benefits 3 5
296 258
Key management includes Management Board members and other
executive management and their close family members.

Financial Statements 71
Additional information
The address of its registered office is as follows:
Head office: Sarajevo
Address: Emerika Bluma 8
Bosnia and Herzegovina
Branch offices:
Sarajevo
Address: Muvekita 1
Ilidža
Address: Ibrahima Ljubovića 20
Bihać
Address: Safvet-bega Bašagića 18
Tuzla
Address: Džafer Mahala 29
Mostar
Address: Biskupa Čule bb
Banja Luka
Address: Kralja Petra I Karađorđevića 91
Brčko
Address: Bosne Srebrene 22
Bijeljina
Address: Karađorđeva 6/Atinska 1
Travnik
Address: Bosanska bb
Zenica
Address: Maršala Tita bb
Outlets:
Novo Sarajevo / outlet;
Address: Topal Osman paše 26
Otoka / outlet;
Address: Gradaćačka 1
Ciglane / outlet;
Address: Husrefa Redžića 1
Ilidža / outlet;
Address: Hrasnička cesta 4
Cazin / outlet;
Address: ZC”Stara Čaršija”
Bošnjačkih šehida 1
Tuzla / outlet;
Address:Bulevar 15.maja bb
Posušje / outlet;
Address: Fra Grge Martića bb
Mostar / outlet;
Address: Braće Fejića bb
Banja Luka / outlet;
Address: Brace Potkonjaka 2
Gradačac / outlet;
Address: H. K. Gradaščevića bb
Zavidovići / outlet;
Address: 8. Marta bb
Prijedor / outlet;
Address: Svetosavska 12
Doboj / outlet;
Address: Svetog Save 95
Bijeljina / outlet;
Address:Trg Kralja Petra I Karađorđevića 1
Pale / outlet;
Address: Milana Simovića bb
Zalužani-Trn / outlet;
Address: Put srpskih branilaca 167
Employees
As of 31 December 2009 ProCredit Bank d.d., Sarajevo employed
662 persons (2008: 888 persons).
Directors
The names of the Directors of the Bank serving during the financial
year and to the date of this report are as follows:
Director
Frieder Woehrmann
Executive Director of Finance Sector
Sabina Mujanović
Executive Director of Retail and Payments Sector
Edin Hrnjica
Executive Director of General services sector
Vedran Hadžiahmetović
Executive Director of Small and Medium Business Sector
Senad Redžić
Executive Director of Risk and Compliance sector
Radomir Savić

72
Annual Report 2009

Financial Statements 73

74
Annual Report 2009
Contact Addresses
Head Office
Emerika Bluma 8
Sarajevo
Tel. +387 33 250 950
Fax +387 33 250 971
www.procreditbank.ba
info@procreditbank.ba
Branches
Banja Luka
Brace Potkonjaka 2
Tel. +387 51 431 530 / 430 000
Fax +387 51 431 537
Banja Luka
Kralja Petra I Karađorđevića 91
Tel. +387 51 229 340 / 343
Fax +387 51 229 373
Bihać
Safvet-bega Bašagića 18
Tel. + 387 37 313 203
Fax +387 37 319 121
Bijeljina
Karađorđeva 6 / Atinska 1
Tel. + 387 55 220 980 / 225 955
Fax + 387 55 220 980
Bijeljina
Trg Kralja Petra I Karađorđevića 1
Tel. + 387 55 224 541
Fax + 387 55 224 540
Brčko
Bosne Srebrene 22
Tel. +387 49 231 960
Fax +387 49 231 966
Cazin
ZC “Stara čaršija”
Bošnjačkih šehida 1
Tel. +387 37 539 116 / 117
Fax +387 37 511 693
Ciglane
Husrefa Redžića 1
Tel. +387 33 554 955 / 995
Fax +387 33 554 996
Doboj
Svetog Save 95
Tel. +387 53 206 290
Fax +387 53 206 292
Gradačac
H.K. Gradaščevića bb
Tel. +387 35 821 715
Fax +387 35 821 727
Ilidža
Ibrahima Ljubovića 20
Tel. +387 33 761 580 / 622 869
Fax +387 33 761 681
Ilidža
Hrasnička cesta 4
Tel. +387 33 771 130 / 137
Fax +387 33 771 131 / 132
Mostar
Biskupa Čule bb
Tel. +387 36 449 720
Fax +387 36 449 729
Novo Sarajevo
Topal Osman paše 26
Tel. +387 33 710 705
Fax +387 33 717 497
Mostar
Braće Fejić bb
Tel. +387 36 502 050
Fax +387 36 502 051
Otoka
TC Otoka - Merkur
Gradačačka 1
Tel. +387 33 716 485 / 486
Fax +387 33 716 487
Pale
Milana Simovića bb
Tel. +387 57 202 140
Fax + 387 57 202 181

Contact Addresses 75
Posušje
Fra Grge Martića bb
Tel. +387 39 685 020
Fax +387 39 685 021
Prijedor
Svetosavska 12
Tel. +387 52 243 666
Fax +387 52 243 635
Sarajevo
Muvekita 1
Tel. +387 33 561 970
Fax +387 33 561 978
Travnik
Bosanska bb
Tel. +387 30 510 510 / 512
Fax + 387 30 510 522
Trn-Zalužani
Put Srpskih Branilaca 167
Tel. +387 51 366 440 / 442
Fax +387 51 366 441
Tuzla
Džafer Mahala 29
Tel. +387 35 301 200
Fax +387 35 258 340
Tuzla Business Center
Bulevar 15. maja bb
Tel. +397 35 319 800
Fax +397 35 319 800
Zavidovići
8. Marta bb
Tel. +387 32 868 530
Fax +387 32 868 531
Zenica
Corner of Maršala Tita and
Islambegovića put
Tel. +387 32 449 960 / 961
Fax +387 32 449 964