Micro-economics Make
Macro Impact in Sipovo

When you drive along the short street of “Ulica Prve Sipovacke Brigade” in downtown Sipovo, you pass a car repair, a corner grocery store, and an apiary. Around the corner, you see a thriving herd of goats–all are healthy small businesses injecting much-needed revenue into the local economy. All were funded by The Salvation Army’s micro-enterprise project, a first for the Republic of Srpska, the new name for this part of Bosnia.

Initiated to stimulate the economy’s regrowth at the community level, the project provides loans to groups or individuals desiring to establish or reestablish small enterprises. Currently, banks are not giving loans. The Army maintains administrative and fiduciary control to date.

The programs basis is simple: Clients apply for a business loan from the Army’s micro-enterprise office, which is under the direction of Roger Markic and Mile Skalonja, who are residents of Sipovo. If approved for a loan, which requires a guarantor, the client agrees to pay back the loan within a specific time. Monies and interest from repayment go into a revolving fund to provide additional loans. “We intend this to be independent of The Salvation Army one day and to always be here, perhaps under the care of another NGO,” says Program Director Captain Pat Kiddoo, in charge of the Army’s work in Sipovo.

“The Army has provided 73 loans since the program started last year, and there is a 95 percent pay back rate,” she reports. In addition to an initial start up of $50,000 from the Bosnia fund, the Army was slated to obtain $250,000 DM in funding from the World Bank, which has now been held up due to political complications related to the Dayton accord. The average loan is only $1880 DM or $1060 U.S.

So far, nearly 650 applications have been received. Applicants must first provide a sound business plan with documented potential to succeed (if needed, Mile, who was the vice director of aluminum and gypsum factories before the war, helps applicants write them). The proposed business must also meet an identified community need and adhere to Salvation Army beliefs and principles (which means a business dealing primarily in the sale of alcohol or tobacco will not be accepted).

Kiddoo has high regard for Mile and Roger. “Roger is super organized,” she says. “He has already attended three World Bank conferences, and has done projection and analysis of the program and its funding.”

And what of the clients? From a $1500 DM loan, Dragon Oparnica purchased 25 hives to produce honey for food and medicinal purposes. He buys his bees in nearby Banja Luka, and keeps costs down by making his own frames for the honeycombs. He’s already attended an international conference of beekeepers in Belgrade. “Next year I hope to have enough honey to sell in Yugoslavia and Bulgaria,” he says.

Rajko Markic, a mechanic, borrowed $2000 DM to open a garage last year. So far, he’s repairing three to four cars a week (not bad for a town that has very few cars due to the war) and has totally repaid his loan. “I would like to talk to you about obtaining another loan,” he told Roger.

It only took $200 DM ($113 U.S.) to help Boro Gajanovic with her corner grocery store. Such a small loan had only a 10 week repayment schedule, and to date she is current with her payments.

For Goran Zekanovic, a loan enabled him to restart a business in goat farming he had just begun before he had to flee Sipovo in September 1995. “Nothing was left when I came back from being a refugee,” he says simply. “My house was completely burned. My goats were gone.” He now has 90 goats, purchased from his $3500 DM loan. He sells milk and cheese, and is well on his way to repaying the loan.

One of the most ambitious projects being undertaken is the establishment of a dairy by two local businessmen. For their loan of $55,000 DM ($15,000 for construction and $40,000 for equipment), they will be extended a two-year grace period before repayments will be required. They will have 11 years to repay it, at which time they will own the dairy. Until then, The Salvation Army reserves the right to take the equipment if something goes wrong.

Much planning went into this loan. “We first surveyed shops in town to see how much milk they were selling,” explains Davor Kopanja, an agriculturalist who works for the Army. “We conducted an interview with 100 people on the street to ask if they would buy cheese and milk.”

The dairy will obtain milk from farms nearby, process it, and distribute it, along with yogurt and cheese, to stores. With a capacity for processing 500 liters of milk per shift to start, it will eventually hit a target of three shifts producing 1500 liters per day.

“Before the war there were 3000 milking cows in Sipovo,” says Davor. “Today there are 300.”

Fifty-eight of those cows were provided through The Salvation Army. Plans are in process for the Army to purchase 102 cows from Germany guaranteed to give 15 liters of milk daily. “The Army is the first one to import cows into Srpska,” Davor explains. “These are Montefon cows, they are good­they are tough and suitable to the region.”

Upon arriving in Sipovo the cows will be quarantined for 30 days in stables donated by the state for The Salvation Army to use. Construction began in July for the dairy, which is being built on the ruins of an apartment building with the help of five summer service corps team members. It’s slated to be operational in October.