EBRD @25: Women entrepreneurs lead Western Balkans towards greater prosperity

EBRD @25: Women entrepreneurs lead Western Balkans towards greater prosperity
Two women entrepreneurs from Bosnia wearing EBRD 'Business Lens' sunglasses.
By Clare Nuttall in Bucharest May 5, 2016

Arijana Maksimcuk and Lisjeta Mita are women in a man’s world on two counts. Managing businesses in countries where female participation in the workforce has fallen in recent decades, they are also active in the high-tech and automotive sectors – two areas traditionally dominated by men.

Both women are recipients of funding under the European Bank for Reconstruction and Development’s (EBRD) Women in Business programme, which launched in the Western Balkans in February 2015. The programme aims to boost women’s participation in the workforce, ultimately contributing to economic growth in a region hit by recession and plagued by some of Europe’s highest unemployment rates.

Telemax, where Maksimcuk works alongside her husband and son, has won a series of major contracts to design and install telecommunications, power and safety equipment. Its clients include several government ministries in the Republika Srpska (Bosnia & Herzegovina’s smaller entity), state railways operator Railways of RS, and the Nalko state prison.

The company’s flagship headquarters in the Bosnian city of Banja Luka is “definitely the first building in the Republika Srpska with intelligent installation and based on energy-efficient technology,” Maksimcuk tells bne IntelliNews. As well as showcasing the company’s latest technologies, Maksimcuk says her “employees enjoy being here, this kind of working environment is not usual in our country.”

Pristina-based AutoMita is also a family business. The auto dealership and service centre was launched back in 1988 by Mita’s parents, but ten years ago she and her brother inherited the business and drew up ambitious plans for its expansion.

Mita acknowledges this is an unusual career for a Kosovan woman, but explains that, “When I was growing up we lived next door to the business. I grew up in the auto industry so it seems normal to be working here.” She is currently in charge of the financial side of the business after gaining experience in areas from spare parts to customer service, while her brother handles sales and marketing.

While both AutoMita and Telemax are successful, Mita and Maksimcuk reached out to local banks working with the EBRD’s Women in Business programme as their businesses grew. Mita realised she needed to invest in a specialised software programme for the auto industry – a must as AutoMita continued to expand – while Maksimcuk sought funding first to equip Telemax’s headquarters and later for staff training.

Under the EBRD programme, funding is extended to commercial banks for on-lending to women-led enterprises, which are also eligible to receive advice and training. The first loan, of €2mn, was issued to UniCredit Bank Banja Luka in February 2015, and since then the EBRD has also started working with banks in Albania, Kosovo, Macedonia and Serbia.

The EBRD decided to launch the programme after working with women entrepreneurs across Eastern Europe and the former Soviet Union. “Our experience with programmes advising women entrepreneurs, particularly in the Caucasus, showed that even where advice helped them grow their businesses, this has its limitations, because they met a block when they needed financing. By the same token, there is also a clear need for know-how to complement financing and improve an enterprise’s competitiveness,” says Charlotte Ruhe, director, small business support at the EBRD.

The EBRD is working with the Swedish International Development Agency (Sida). As well as Sida, donors include Italy, Luxembourg and the EBRD Shareholders Special Fund. So far the EBRD has launched its Women in Business programme in 16 countries across the wider region, and plans to roll it out across the Southern and Eastern Mediterranean countries (Semed) in future.

Low risk

Explaining the need for the programme, Ruhe cites numerous problems faced by women entrepreneurs in the Western Balkans. “The challenges faced by women entrepreneurs are extensive, and many come from traditional attitudes about the family. Women are expected to manage everything at home as well as running a business. Networking opportunities are often completely lacking,” she tells bne IntelliNews.

“There is a view that women entrepreneurs are high risk, though this is not borne out by the evidence. Collateral might also be a problem, as a lot of women-led businesses are in the services sector, so their main asset may be the family home. In other cases, it may be a family business, where the ownership of assets has not been transferred to the woman,” she explains. While available collateral and requirements set by banks can be very different across countries, in general, service sector enterprises face more challenges in this area and women-led enterprises predominate in the services sector.

Kosovan entrepreneur Flaka Hajdini, founder of a business producing surgical caps and masks, confirms that securing finance is a challenge. Hajdini’s inspiration to launch her business came while she was still a student, and was visiting her mother in hospital as she recovered from surgery. She financed her start-up through a combination of a loan from the EBRD’s local partner bank TEB, the UNDP and support from her family.

“As a start-up company it is quite difficult to get finance, especially when asking for a bank credit because women don’t have the collateral they need to take out a loan. I was able to get funding because I spent quite a lot of time searching for organisations that would support start-up companies,” she says. She also points to the importance of female role models. “In Kosovo the number of female managers is quite low. Supporting women in business will contribute to their emancipation and make it possible for them to support other women entrepreneurs.”

The EBRD had to work hard to bring banks on board, given the unfounded perception of female entrepreneurs as high risk. As well as sharing the risk through its first-loss policy, the EBRD also helps its partner banks in areas such as developing specialised products, removing unintended bias and generally becoming more women friendly. It hopes to persuade more banks to join the programme, in an attempt to increase competition.

In addition to finance, the programme provides a suite of training courses in areas such as online marketing, leadership and financial management for the family business. Mentoring is offered in partnership with the Cherie Blair Foundation.

The EBRD has also developed Business Lens, an online open source diagnostic tool that helps women conduct a SWAT analysis by answering a series of questions. This identifies where they may need assistance, and provides a link to apply for bank finance or directly to the EBRD for support.

So far, a total of €13.5mn has been lent to banks in the region, which had issued loans to 382 women-led businesses as of end-2015. “We are very happy with the strong launch of the programme. The loans taken our so far are on the smaller side, reflecting the fact that we are catching a lot of enterprises in the small and micro segment. We hope with time to see an increase in the size of the enterprises and their borrowing, indicating that we are also supporting the growth of women-led medium-sized enterprises,” says Ruhe. “There are some outstanding examples of fast-growing women-led enterprises. We have seen the women we work with become more ambitious after improving their businesses and benefitting from our advice, training and networking opportunities.”

Hajdini, for example, is now working with an EBRD-recommended consultant as she considers exporting to countries in the region, as well as Germany and Turkey. She also wants to expand into production of surgical gowns and cover shoes.

AutoMita started expanding from 2012, says Mita, citing a deal to become the exclusive importer of Renault Nissan vehicles from Slovenia for the Kosovan market and the company’s recent foray into the Albanian market, where it plans to expand in future. AutoMita has also been lobbying the Kosovan government to support the domestic market for new car sales, which is very small at present.

Jobs for the girls

Helping women-led businesses to grow is one way of combatting the extremely high levels of unemployment in the Western Balkans. A 2015 International Monetary Fund (IMF) report shows unemployment remained above 20% across the region even during the pre-crisis boom in the mid-2000s, but unofficial rates are considerably higher especially in Bosnia, Kosovo and Macedonia. Employment levels have also remained at under 45%. “Perhaps the biggest flaw in the Western Balkans economic model has been the chronic underutilisation of human resources,” the IMF report said.

This is particularly the case with women, whose participation in the workforce fell after the socialist system collapsed. This was partly a legacy of the breakup of Yugoslavia, which severed supply chains and removed access to traditional markets, followed by the economic devastation caused by the wars of the 1990s.

Maksimcuk, a former economist, and her husband launched Telemax after the Bosnian War had forced their former employers to shut down. “This business is not traditional in Bosnia, but after the war a lot of people founded new businesses with private capital. We lost our jobs and we had to live,” she says. However, she adds that, “If I had my life again, I would do exactly the same.”

Enterprise restructuring and privatisation are still ongoing, as the process was repeatedly delayed by popular resistance and the reluctance of politicians to make decisions that would result in mass layoffs. Serbia in particular is finally tackling the restructuring of major state-owned enterprises, which is expected to result in tens of thousands of people losing their jobs.

“In the Western Balkans a lot of women worked under the socialist system, when the enterprise provided childcare and the social system looked after them,” says Ruhe. Today, however, “The participation of women in the workforce is well below the level needed for these countries to reach their economic potential so a programme like this, which helps more women to grow their businesses, helps to support economic growth.”

She points to the precedent set in Europe in the 1970s, where rapid economic growth “was really a result of modern technologies in the household enabling women to get into the workforce”. In the Western Balkans, which currently lags far behind Western and Central Europe in terms of GDP per capita, a similar effect could help accelerate growth and lift living standards.

This is part of a series of articles marking the 25th anniversary of the foundation of the European Bank for Reconstruction and Development.