Regulation proponents that would allow the operation of these financial institutions claimed that they would reduce the borrowing costs. – NBS strives for a high standard which will protect the debtors.
There is no reason for Serbia not to pass a law on non-banking financial institutions or the Alternative investment funds act, claimed the representatives of the Project for Better Business Conditions of the United States Agency for International Development (USAID).
According to them, by providing investment funds, such as entrepreneurial capital and credit union funds, about € 870 million of microcredit would be invested in our economy in a four years’ time. This would accelerate the development of micro, small and medium-sized enterprises and create more than 100,000 new jobs.
Regulation proponents claim that by the arrival of non-bank financial institutions, our financial system would become more diversified and more competitive, which would reduce borrowing costs.
Expert on the financial market development of the USAID Project for Better Business Conditions, Sandra Rodic, notes that Serbia is the only European country in which the economy is financed almost exclusively by borrowing from commercial banks. Banks in our country account for more than 90% of the financial sector and in the countries of the European Union less than 75%.
-The advantage of non-banking institutions is also that they advise their clients to safely, professionally and smartly manage their borrowed funds – says Rodic.
Professor at the University Of Belgrade Faculty Of Economics, Milojko Arsic, considers that, after progress in establishing macroeconomic stability for development of small and medium-sized enterprises as initiators of economic growth, specific policies are necessary. One of such is the adoption of the law on the establishment of non-banking financial institutions which exist in most European countries. Arsic argues that they would not endanger the stability of the financial system, since the consequences of their high risk in business and possible losses would not be borne by the state, but by the capital owners, while National Bank of Serbia has enough employees to effectively control them.
In the presentation of the results of this year’s seventh “Polls of 1,000 companies” conducted by our USAID in 2011, it was noted that “the extremely limited access to various sources of financing for micro, small and medium enterprises in Serbia is one of the biggest obstacles to the growth of the domestic economy, and that more than two thirds of companies (69 %) did not borrow money for development financing in 2017, compared to the 31% in 2011. This year’s survey showed that 84 companies finance their growth from their own funds, while other funding models are almost not used at all. This raises many questions, and one of them is – how many banks have contributed to this with their high interest rates and margins.
Aleksandar Gracanac, from the Entrepreneurship Sector in the Serbian Chamber of Commerce, reminds that for the period of 2015 to 2020, it is anticipated that alternative sources of financing will be improved by enacting the law on microfinance.
According to Katarina Obradovic-Jovanovic, Assistant Minister in the Sector for Development of micro, small and medium-sized enterprises of the Ministry of Economy, this government department has done a lot to create various possibilities for financing the private sector, while the new legal regulation, which should enable the operation of funds, is under the authority of the National Bank of Serbia and Ministry of Finance.
Svetlana Tolmacheva-Dingarac, chairman of the Prokredit Bank’s Board of Directors, however, claims that the banking market in Serbia is highly competitive and that banks are now financing “everything that is sustainable and profitable”. Beginners in business, the so-called startups, are rarely supported by banks because their risk is too high.
-Risky ventures would not be financed by any other financial institution, at least not in the way banks approve loans, says Obradovic – Jovanovic. Non-performing loans are not only a risk for the ones who gave such a loan, but also for the ones who took it. A family may start a risky business, and receive a loan from some non-bank institution, and if that family puts a mortgage on their apartment, they would be in the risk of losing it.
The National Bank has announced to the “Politika” that by a governor decree, a working group was formed on February 22, 2016 to draft proposals for improving the legal framework in the field of financial services, which would allow the establishment and operation of non-deposit financial institutions (NDFI). It is of key importance, that high standards are established, primarily to protect users of financial service, with the application of the European Union directive.
