The main objective of the initiative is to offer SMEs more affordable credit lines by subsidizing interest rates on set amounts.
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. The loans offered under this program range
The partnership framework includes national, regional and local administration involvement with traditional financial institutions. This ensures the possibility for local government and cities to join the program and ensure more favorable conditions to clients.
Evidence of success
32.5 million HRK (79%) was invested in the construction,purchase and adaptation of business premises and employed 49 workers. 8.5 mil HRK (21%)was invested in the purchase of equipment and 20 workers employed. Approximately half of the amount of total loans, (46%) refers to 8 loans of 35 in total and were 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.