Gather 'Round! Two New Vignettes Before Breaking Out the Bedroll

With that, we turn to two new vignettes. The first comes from Cardno and uses local business advisory service providers – paid purely on a success fee basis – to generate financing for SMEs in Bosnia and Herzegovina.

Promoting Access to Finance through Financial Consulting Assistance

The challenge: One of the key obstacles in access to finance for SMEs is the difficulty in approaching financial sources and applying for investment or credit. Most are not able to prepare the sophisticated business plans and financial projections that lenders and investors need, because they are not financial professionals – they are entrepreneurs.  

The solution: Cardno initiated a “Qualified Business Financial Consultant” (QBFC) program while implementing the USAID Bosnia & Herzegovina Fostering Interventions for Rapid Market Advancement (FIRMA) Project (2009-2015). FIRMA recruited a group of 30 local professionals, all with experience in business consulting, and “qualified” them in a week-long training focused on business plan preparation and financial projection. Subsequently, when the project identified a beneficiary in its light manufacturing sector that needed growth finance, it assigned one of these “QBFCs” to assist it in developing a fully competent application for credit, identifying a suitable source of finance, and accompanying the firm to the lender or investor to advocate for the financing.

How it mobilized private capital: These QBFCs were paid a fixed amount by the project on a purely success fee basis, when loan funds were actually transferred into the beneficiary’s account. The project organized periodic networking events between bank loan officers and QBFCs, so that they would come to know and trust each other. At a cost of no more than $150,000 ($70,000 to oversee the program and $80,000 paid to QBFIs), this initiative succeeded in stimulating $25 million in bank credit to over 50 Bosnian SMEs.

How it was inclusive: The targeted SME borrowers would likely not have been able to access financing without the QBFC support. And without the financing they would not have been able to start-up or expand their businesses nor create jobs.

How it was innovative: A pay-for-performance model was used. QBFIs were paid on a purely success fee basis – when loan funds were actually transferred into the beneficiary’s account.

Lessons learned: The program could have been larger. While project-organized meetings of QBFCs and bank loan officers helped launch the program, a more regular schedule of networking events (quarterly), plus more active promotion of it to SMEs, could have increased outreach and impact.

This vignette was submitted by Cardno, a global development firm operating in more than 100 countries across a range of physical, economic, and social infrastructure programs. Please contact David King ( or Carolina Ravinskas ( for more information. Click here to learn more about the FIRMA project, and click here to visit Cardno’s website.

The second vignette illustrates USAID creation of a specialized financial institution (in this case an SME bank in Kosovo) to meet a market gap. USAID has a long tradition of standing up and capitalizing specialized facilities such as housing finance institutions, agricultural banks and small business funds.

Kosovo Business Finance Project: American Bank of Kosovo

The challenge: At the close of the Kosovo crisis in 1999, there were no banks operating in Kosovo. Without a source of financing to restart Kosovar businesses, the economy would be unable to recover and unemployment would remain endemic. Kosovo desperately needed a business bank.

The solution: USAID provided the capital and technical assistance needed to launch a for-profit bank. After unsuccessfully seeking to entice an international bank to set up shop in Kosovo, USAID provided funding and technical assistance to build its own. Funds were channeled through an implementing partner (Deloitte Touche Tohmatsu Emerging Markets Ltd) in the form of a grant to a Kosovar not-for-profit (overseen by a USAID-represented board). The non-profit used the funds to capitalize an SME lending fund, which then formed a bank which acquired a banking license as the American Bank of Kosovo (ABK).

How it mobilized private capital: USAID’s $10 million investment ABK launched a bank which has since issued several billions of dollars in loans and is currently (operating as Raiffeisen Bank Kosovo) one of the two largest banks in Kosovo with a loan book of around $900 million.

How it was inclusive: The bank targeted SMEs, and during the life of the project issued Euro 65 million to 2,400 businesses, creating 20,000 jobs.

How it was innovative: While the Mission did not make a direct equity investment, it found an innovative way to capitalize the bank, and in a way which allowed for recovery of that capitalization. Two years after it was formed, the ABK was profitable and was sold to Raiffeisen Bank, with a recovery of $9 million. This was used to endow the Kosovo American Education Fund, which supports Kosovar graduate students to study in the US. It was further innovative in that the project incorporated a success fee arrangement to the implementing partner which was instrumental in the success of the project.

Lessons learned: In some cases there is a rationale to use our resources to directly capitalize a specialized financial institution or fund. Properly structured and incentivized, these entities can achieve their development goals and be spun off as sustainable entities (and in some cases allowing for a return and repurposing of the funding used for initial capitalization).

Contact Lawrence Camp ( or Paul Davis ( for more information.

Next Up: Out of Wind River Range and into Oregon Territory: The Four Lenses - When and When Not to Facilitate Private Capital