Annual Report 2009 - ProCredit

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.