Credit to Success
About this good practice
In the framework of the country wide programme “Credit to Success”, the Croatian Ministry of Business and Crafts (MINGO) developed a partnership with financial intermediaries and local administrations to offer affordable loans to microenterprises. In the framework of this partnership, MINGO and local administrations provide the funds to subsidize interest rates while the financial institutions are in charge of assessing proposals received from the microenterprises and the disbursement of the loans.
The Programme offered a 5% interest rate subsidy from the ministry. In some regions, the further involvement of regional and local administrations allows more interest rate reduction.
In terms of products features, the loans offered under this program range from EUR 4.000 to 26.000 with an annual interest rate of maximum 8%, but the Ministry subsidized 5% of the interest rate, so the max. interest rate was 3%. The repayment period is up to 4 years including a 6-month grace period. Eligibility criteria were the same as traditional loans and were established by the Croatian agency for SMEs in cooperation with MINGO. The subsidy component helps the main target group since many microbusinesses operating in Croatia cannot bear the market interest rate.
For KKC area, the Programme was implemented from 2015th to 2017th and from 2019 onwards. Data are given only for the period 2015 to 2017. Credit potential is HRK 41 million for 35 loans.
Resources needed
The partnership framework includes national, regional and local administration involvement with traditional financial institutions.One employee and a committee composed of three representatives ofKKC and four representatives of banks(each member of the bank has its own deputies)work on applications.
Evidence of success
Total of32.5 mil.HRK(79%)was invested in the construction,purchase and adaptation of business premises and employed49workers. 8.5 milHRK(21%)was invested in the purchase of equipment and20workers employed.35loans was approved in total,8of them were big loans in which the46%of the total amount(32.5mil.HRK)was invested.It was invested in entrepreneurial zones,primarily for the purchase/construction of business premises(Dravska-3;Radnička-1;East-1)and to a lesser extent on the purchase of equipment
Potential for learning or transfer
The key lesson learned from implementing this programme is that cheaper credit lines established by subsidizing interest rates can be highly motivational for entrepreneurs. The good results of the programme indicate that the Good Practice can be replicated in other locations.
Further information
Website
Good practice owner
You can contact the good practice owner below for more detailed information.
Ministry of Entrepreneurship and Crafts of the Republic of Croatia