THE FIRST INTERNATONAL SME CONFERENCE IN MIONTENEGRO- MICROFINACE -RECOMMENDATIONS, CONCLUSIONS, FURTHER STEPS

The First International Conference for Small and Medium Enterprises “Microfinance in Montenegro ” has been organized by Montenegrin Union of Employers (MUE) together with International Organization of Employers (IOE), on February 28, 2006 . There are announced the participants – the representatives of Government of Republic of Montenegro, International Labour Organization (ILO), European Bank for Reconstruction and Development (EBRD), International and European SME Associations, Associations of Employers, SME and micro credit institutions from Serbia, Montenegro and Bosnia and Herzegovina.

We are thankful to the Swiss Agency for development and cooperation for financial support in the organization of this Conference.

Conference is organized with an aim of contributing to more organized consideration of present situation in SME sector through definition and examination of concrete issues and problems SME in Montenegro encounter. Conference is on Microfinance since the recently conducted questionnaires among MUE members indicate that existing problems, such as financial resources lack and access. These problems are identified by those who want to launch their own business as well as those who have already set up enterprises. Besides, there is a need to educate additionally the entrepreneurs and acquaint them with terms, models, real possibilities and scope of microfinance process as well as provide them with more quality image of microfinance sector in Montenegro .

Through the presentations and discussions given by the SME representatives, the representatives of Government of Republic of Montenegro, Central Bank of Republic of Montenegro , University, IOE, ILO, EBRD and the other international institutions and organization, the following recommendations and conclusions have been brought:

•  SME – THE BASE OF ECONOMIC DEVELOPMENT IN MONTENEGRO

1. Small and Medium Enterprises present the base of economic development and principal starting force and as such they are the indispensable factor in the process of integration of Montenegro in European Union as well as in global economic development.

2. Regarding importance of SME for Montenegro, Conference participants agree that there are still obstacles for economic growth and development, such as: unfavourable SME finance conditions, insufficient number of recently organized enterprises, slow process of introduction, implementation and development of technology and innovations, insufficient developed SME services market, insufficient level of knowledge of employers and employees, as well as institutional and legal barriers on central local level.

3. With an aim of elimination of mentioned barriers, it is necessary to provide strategic approach, organized and harmonized measures and activities of social partners: Montenegrin Union of Employers, Trade Union and Government of Republic of Montenegro, but the other domestic national, local and international organizations and institutions as well, so as to act in direction of creation of favourable conditions for development and sustainability of SME sector in Montenegro. Provision of further and more intensified support to SME sector will contribute to employment generation, elimination of grey economy, poverty reduction as well as other consequences resulted by the transitional process, that is – sustainable economic development in Montenegro . Considering this, through active participation of social partners, partnership between private and public sector on central and local level, partnership of interested actors with donors, all economic development actors should take actions in the following directions:

a) Activation of all instruments necessary for further implementation of policy support for small and medium enterprises and entrepreneurship in general. Considering this, further regulatory and ambience reforms should be performed on national level, and especially on local level with an aim of creation of more stimulating conditions for establishment of new and development of current SMEs.

b) The activities aimed at support to development of innovative system in Montenegro , opening of business incubator and scientific technological parks, equal regional SME development and entrepreneurship should be performed in the following period.

c) Forum of Small and Medium Enterprises of Montenegro established on May 16 th in 2005, by Montenegrin Union of Employers, Association of Trade Union, governmental Agency for SME and Fund for development should perform its activities in a more intensified way. The existence and work of this entity should be promoted as place and body for dialogue between public and SME sector that contribute to more quality creation of information exchange, and thus more efficient creation and implementation of support policy for SME sector.

B) MICROFINANCE IN MONTENEGRO – GREAT SUPPORT FOR BUSINESS ESTABLISHMENT AND SME SECTOR DEVELOPMENT

1. The Conference participants agree that microfinance presents very important kind of support for so-called start up, that is business establishments. Considering outlined experiences in the neighbouring area, expressed need for financial and non-financial support for business establishment but maintaining of the current business as well, microfinance system in Montenegro requires further development and enforcement. There is a real need and possibility, regarding market demands, for creation of new microfinance institutions as well as creation of new and work of new forms of so-called non-finance support whose aim is easier access to advisory and other business services with an emphasized concept of partnership and quality communication and information exchange between commercial, public and civil sector.

2. Microcredit process should contribute to self-employment and current entrepreneurs' dealings. Legal solutions, that beside microcredit, should include micro savings and micro insurance, should be passed.

3. It is necessary that Central Bank of Republic of Montenegro ; Government of Republic of Montenegro (Agency for SME, Employment Bureau), University and other interested subjects should start working on creation of Strategy of microfinance sector in Montenegro .

4. The microfinance process has been applied in different parts of world and there are different institutions performing microfinance activities. Although there is no country noting specific form, we can mention the following types of organizations performing microfinance activities: non-governmental organizations, non-bank financial institutions, credit unions, banks for agriculture, bank with social character, other institutions.

Data indicate that traditional banks in countries in the process of transition provide services for about 20% of active employed part of population. The other part of actively employed population does not have access to bank resources, since this part of population cannot meet conditions (guaranties) required by banks. As a result of such policy microcredit has been developed with an aim to provide population having idea for launching a business, but without necessary means, with credit access. The decision on creation of Guidebook for microfinance should be brought, so as to present borrowers, system institutions and microfinance institutions with main ideas, concepts, methods and microfinance programs based on domestic and foreign experiences .

5. Regarding Montenegro , there are more demands for microcredits than microcredit offers. Conducted researches indicate that portfolio growth ratio of microcredit sector in Montenegro amounts 40,9% in 2005, and 34,2% in 2004. The number of active borrowers has been increased in 2005 from 21.693 to 27.191. Regarding data in period from January 1 st in 2002 to December 31 st in 2005, it can be seen that 66.992 loans amounting 120,2 million € have been paid. Working team for Project of evaluation of economic and social potentials regarding microcredit sector in Republic in Montenegro should be formed.

This indicates that there is ambience for creation of new microfinance that is microcredit institutions and credit unions in Montenegro . Loan approval procedure could become faster and simpler. Loans would be approved under much more favourable circumstances than those existing on the financial market. Since guidelines and practical aid could be provided for borrowers so as to help them to invest their money in the best possible way, such organizations would be granted the educational role as well. Employment creation would be result of new businesses creation or expansion of those current ones .

Organization of one year period of specialized or M.A. degree in microfinance area should be considered with representatives of Faculty of Economy, Finance Department.

We support establishment of the Association of craft and small and medium enterprises of Montenegro as a collective MUE member, Montenegrin Union of Employers provided with technical and professional support, and this will continue in the future period.