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Bosnia’s Postconflict Microfinance Experiment: A New Balkan Tragedy

As the small Balkan nation of Bosnia and Herzegovina (hereafter Bosnia) began its struggle to recover from the break-up of the former Yugoslavia in 1991 and the vicious civil war that ensued (1992-95), the microfinance sector was portrayed as being one of the decisive interventions that would remedy matters. Widespread claims were made that microfinance would play a vitally important role in promoting needed new jobs and incomes, addressing rising social exclusion and rising poverty, help to empower Bosnia’s women, and, overall, it would facilitate a sustainable ‘bottom-up’ economic development trajectory. Indeed, until quite recently, the microfinance sector that was subsequently established by the international development community was very widely seen as having made a huge positive impact. Such was the presumed progress made that the former President of Women’s World Banking, Nancy Barry, had no hesitation in claiming that, ‘Any war-torn country should look to Bosnia as a role model’ (quoted in Dolan 2005). This chapter takes issue with this uplifting narrative. We argue that the evidence actually shows that the microfinance model is responsible for giving rise to a hugely destructive sub-prime-style episode, one that has materially benefitted a tiny elite working within and around the microfinance sector while simultaneously destroying many of the most important pillars of the Bosnian economy, polity and society.

Microfinance, Bosnian Economic Development, Poverty Trap, Ponzi Finance

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