Evaluation of the USAID-Kosovo SME and Agriculture - Economic ...

Development Associates, Inc.surrounding countries and Turkey. Local producers cannot compete with these low cost importswith their comparatively high cost raw materials and machinery. Another contributing factor isthe difficulty in the system of VAT reimbursements. The supply of reliable energy is also afactor especially in rural areas where the service can be very sporadic.Creation of local capacity to continue SME development after USAID funded technicalassistance is endedCurrent resource availability of FINCA/K (4.9 M Euro in Total Assets – September 2003) as ofFebruary 2004 was 90% utilization for the net loan portfolio. Combined with future access toKfW loan capital and the possible access to savings facilities, FINCA/K will be a strong capitalbase. With a competent, well-trained staff, FINCA/K is well positioned to contribute to thecurrent local capacity to continue SME development in Kosovo.Sufficiency of fee structure to maintain service deliveryThe February 2004 OSS (133 %) and FSS (118 %) demonstrate the sufficiency of FINCA/Kscurrent fee structure to maintain service delivery in the future. 29 Current market interest rates inKosovo are 1.5 % to 3% per month (AMIK Member Statistics), with repeat clients receivingdiscounted rates. FINCA/K SEL rates are currently 3% per month declining and 2% flat for VBgroups with discounts for successive loan cycles. Serving the micro clients is a core priority ofFINCA but a very expensive undertaking due to distribution costs. These costs include operatingcosts for 5 offices and 10 regional collection centers. There are very high fixed costs with LocalOffices, transportation costs to region, office rent and support staff and security for working onlyon a cash basis. “VB is a break-even operation only” Yuriy Shulhan, Country Director,FINCA/K. Consumer and small loans subsidize village-banking operations. With the highconcentration of International organizations in Kosovo, achieving a goal of keeping qualifiedstaff is difficult thus requiring relatively high salaries.LESSONS LEARNEDTechnical lessonsStrict control methods must be maintained to minimize costs maximizing asset utilization for theprovision of financial services.increased understanding of the opportunity costs (startup grant) of the heavy use of T/Afunds; andDefined Ratios for T/A and lending funds use to better control initial costs.29 See Exhibit 14 in Volume 2. Operating Self Sufficiency = operating income/operating expenses (includingfinancial expenses and loan loss reserves). Financial Self Sufficiency=operating income/operating expenses +(inflation, equity, not including expatriate costs paid by the HO)Evaluation of the USAID/Kosovo SME 76 May 2004and Agriculture/Agribusiness ProgramsVolume I