Feature story

Montenegrin NGO provides micro-credits and hope

Subscribe to feature stories email alerts

Related links Montenegro homepage Small business homepage

Refugee-turned-entrepreneur Slobodan Golubović

Alter Modus' Luka Đurović

Micro-credits built Ratimir Sorat's greenhouse business

Retailer Dijana Aligrudić

EBRD loan opens door to more finance

Dire need born of crisis is a great motivator and brings out the entrepreneur in people, says Luka Đurović, programme manager of a specialised microfinance organisation set up in Montenegro initially to help refugees and internally displaced people.

“I am always amazed what people can do with just their 10 fingers,” muses Mr Đurović of Alter Modus. A non-governmental organisation (NGO), Alter Modus is backed by the EBRD and donor governments to provide micro-credits to the most marginalised people in Montenegro.

Alter Modus results from various 1990s conflicts involving parts of the former Yugoslavia. Many people displaced by conflict took refuge in Montenegro, also an ex-Yugoslav republic. Refugees and internally displaced people at times accounted for up to 20 per cent of Montenegro’s population. Nowadays, they account for just over 4 per cent.

“Alter Modus was started in 1997 by a group of young people, myself included, who worked for Danish Refugee Council (DRC),” Mr Đurović recalls. “We saw that people had ideas to start earning their own way, all they needed was a little financial backing.”

Self-reliance programmes funded by the Danes and the United Nations High Commissioner for Refugees had their limitations: “The provision of grants or subsidised loans, coupled with the limited mandated of DRC and growing donor fatigue, were not going to meet the needs of refugees over the long run. So we started an NGO to provide long-term, viable credit services to marginalised people,” Mr Đurović adds.

Poverty has wide impact

Today Alter Modus doesn’t limit its small loans (averaging just over €1,600) to people whose lives were torn apart by war. Poverty affects a much wider group: an estimated 12 per cent of the population lives below the poverty line, and one-third is classed as economically vulnerable.

“We provide loans to people with potential, who have demonstrated they can do a lot with a little, who have good business proposals and are well regarded in their communities,” says Mr Đurović. “Over half of our clients are women: at the end of the day, Alter Modus is about alleviating poverty and it’s been proven that women will bring more of the money they earn home to their families.”

In 2004 the US/EBRD SME Financing Facility loaned €1 million to the NGO whose credit portfolio now stands at €5.5 million. The facility also funded technical assistance to strengthen the skills of Alter Modus’ management team and staff, particularly in assessing credit worthiness among their poor clientele. EBRD’s backing has opened the door for Alter Modus to receive financial backing from commercial sources.

Expensive, but popular

Micro loans are very expensive, with about 30 per cent annual interest. That rate is required to ensure the finance programme is sustainable, as managing the small loans requires a lot of staff time. Still, clients flock to Alter Modus as micro-finance is still far cheaper than the 120 per cent charged by loan sharks -- the only other credit recourse for poor entrepreneurs in Montenegro and many other countries. Larger banks are simply not interested in lending to poor clients who would likely find the banks’ paperwork and collateral requirements too onerous, anyway.

Mr Đurović says Alter Modus has never had to advertise. “It’s all by word of mouth, which means demand is more or less in balance with our ability to lend.”

Entrepreneur has ‘blind’ faith

Slobodan Golubović is a typical Alter Modus customer. As a result of the Dayton Peace Accords which ended conflict in Bosnia and Herzegovina, he and his family left their home in the Bosnian capital of Sarajevo and arrived as refugees in Montenegro.

“I managed to sell our flat in Sarajevo so I had a little capital,” remembers Mr. Golubović. “By chance I happened to find employment in Montenegro with a manufacturer of window blinds. After a while, I decided to go into that business myself.”

“I had an account with a national commercial bank and applied for a business loan but there was really no chance I’d get it,” says Mr Golubović. “Alter Modus was the only option open to me. The €1,200 they loaned me financed one-third the cost of my workshop.”

“I’ve since taken two more loans and, despite increasing competition, we keep growing because we provide good quality. The business started out with just me and my son, now we are five working here.”

Green thumb for business

Ratimir Sorat is another Alter Modus client who embodies the word ‘entrepreneur’. He ran his own hotel and grocery in the town of Rijeka Crnojeća until the state evicted the family business.

“We had to start again,” says Mr Sorat. He sold some land near Montenegro’s capital, Podgorica, and bought a holding farther from the city. Alter Modus financed his initial investment in greenhouses. Now the family enterprise seems very prosperous, with a new house and swimming pool, grandchildren running riot and tomato, bean and pumpkin plants delivering bumper crops at regular intervals.

His four sons are all well-educated professionals: one engineer, three doctors. (His three daughters and wife rate no mention from the old-style rural patriarch.) “My sons’ salaries are just €250 per month, which might as well be zero,” says Mr Sorat. “There’s no point looking to the state or big industry for employment anymore, it doesn’t exist since the end of socialism. The future for people here is to start their own businesses. We have to take care of ourselves. All we need is a little credit to get going.”

Farm supplier triples staff

Computer programmer Dijana Aligrudić used Alter Modus credit to build her farm supplies business which she started because she could not find a job in computing. The business has grown from two to six workers, ample demonstration of the employment impact of investing in small businesses.

“I got the money from Alter Modus in just a couple of days. The application process was really simple, which pleasantly surprised me. Alter Modus’ respectful approach to clients who are not rich really isn’t the norm among banks in our parts. Their unfailing courtesy and efficiency are, for me, the most important qualities in our transactions which I emphasise in praising Alter Modus to our own customers – simple farmers in need of loan support to start or develop their own businesses.”

Written by EBRD Senior Writer Kate Dunn.

Contact: EBRD Group for Small Business

18 May 2005