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Banking on success

1 January 2000
How does a town of 8,000 people function without a bank? How can businesses access credit? How can local authorities operate? How can people receive and transfer funds? Once the town of Drvar had four banks. Today, there is not even one bank - just a post office with a few minimal currency services - and even that is closed much of the time.

Such a situation is becoming more common in rural towns in western Europe, North America and Australia as banking chains close smaller, less profitable branches. But in Dvrar alternative payment methods - credit and debit cards, electronic transfer, telephone and internet banking are not available, for Drvar is in Bosnia-Herzegovina, where a nationwide banking system exists only on paper.

The fact that there is no bank is only one of Drvar's many problems. Drvar is situated in western Herzegovina, in a valley squeezed between two mountain ranges and between two borders. To the east is Republika Srpska, the self-governing entity that occupies half of Bosnia; to the west is Croatia. The geography mirrors the complex ethnic and political faultlines that erupted into the savagery of ethnic cleansing during the Bosnian war.

In 1992, when the war began, Drvar and its nearby villages housed 18,000 people- not rich, not poor - but just a normal small town. Most people worked in the local timber industry or related activities. The municipal offices stood at one end of the main street, and the railway station at the other. In between were several shops, supermarkets, banks, cafes and blocks of drab municipal apartments. The town boasted a sports stadium and olympic-sized swimming pool, half a dozen large factories and many small businesses.

Unlike many Bosnian towns, Drvar was not multi-ethnic. Over 90 percent of the population were Serbs. Many Serbs also lived in the adjoining areas of Croatia around the town of Knin At the outbreak of war, Knin Serbs seized the area and drove out local Croatians. In turn, the Croats of Herzegovina (the western and southern areas of Bosnia-Herzegovina) bombarded and burnt Drvar and the Serbian villages, driving much of the Serbian population from the town into Serbian-occupied areas in Croatia and elsewhere. Croats, displaced from central Bosnia, occupied the ruined town. Within a few months, the population had fallen to less than 4,000.

Today, five years after the Dayton agreement that ended the war, the population has crept up to 10,000, divided almost equally between displaced Croatians and returnee Serbs. Most of the rubble and obvious damage has been cleared away and the town council is functioning again. A Serb mayor has been appointed in the hope of attracting further Serb returnees; his deputy is a Croat. Mayor Rajko Dahjanovic is optimistic. "Things are improving"he says. "People are returning and the town is slowly being rebuilt."

The late autumn reflects the beauty of the town's spectacular setting but otherwise Drvar seems lifeless and depressed. The few small shops are doing little business and only the cafe shows signs of life. Whole blocks of offices and buildings have been so damaged that they are no longer inhabited, the railway hasn't run for years, and the sports arena and swimming pool are but sad piles of concrete. And of course there is no bank. Yet the mayor's optimism is well founded, for, however slowly and cautiously, economic life is returning to Drvar.

One of the driving forces behind this modest economic revival is a project funded by the European Union called the Quick Impact Facility - QIF for short. QIF is run by the Bosnia office of international development agency, CARE International, and is staffed by a mixture of local and overseas experts. QIF looks for viable business opportunities that are unable to access even the modest amounts of capital needed to begin production. In a town like Drvar where banks no longer exist, there is no source of credit for any business, and even if there was a bank it would be unlikely to lend to a business without sound collateral - and little collateral exists in an isolated and damaged town. So QIF provides advice on business development issues, such as available credit sources, and, in some cases, gives grants to buy vital equipment and raw materials.

One of the businesses supported by QIF sits high in the hills above Drvar. The Termont Timber Factory was founded in 1988 but ceased production during the war. The owner, Zrilic Vlakto, retreated to Banja Luka but was determined to restart production in Drvar. He was able to do so with QIF's assistance in the form of a starting grant of 136,000 German Marks (about £45,000) which he used to buy the heavy specialist machinery he needed. Output has expanded hugely with the main product being pre-fabricated doors and windows. Termont now employs 50 people - nearly all of who are returnees to the area - and has plans to expand to a workforce of 130 next year.

But QIF help is not given unconditionally. Businesses need to be carefully assessed and detailed business plans must be drawn up. Each new business must create at least 20 new jobs, and half of these jobs must go to returnees - people forced from their homes, who are now returning to rebuild their lives. There are always many more candidates for jobs than there are vacancies, so QIF works with locally-based NGO partners and businesses to assess people's skills and to ensure that the most suitable candidates are selected, trained and monitored.

Those living and working in the town acknowledge that QIF has been one of the driving forces behind economic revival in Drvar. Dahjanovic, the mayor, says: `I have to thank QIF and CARE for everything they have done for Drvar. We have worked very successfully together. QIF has supported good sustainable businesses and the new jobs created will attract more young people to return. Zrilic Vlakto, of the Termont Timber Factory, is equally complimentary: "QIF is responsible for getting all this started. In Banja Luka, they call Termont the refugee company but that's something to be proud of. We have to learn to live together again."

QIF and the local authorities have further ideas for investment in Drvar. An integrated milk collection, dairy and marketing operation is planned to serve the local area and trade links are being restored with neighbouring Croatia. There are even plans to classify Drvar as a special enterprise zone, although will take some time to develop. One day there may even be a bank again in Drvar. Then Drvar really will have restored links with the greater world outside.

Kaye Stearman is a press officer at CARE International UK. She visited Bosnia as a guest of QIF and CARE Bosnia in November/December 2000.