Could you tell us a little about the history of the Economic Bank?
Kosova had a relatively developed banking system until 1990. The main bank here then was BANKOS, also known as Banka e Kosoves. Once Serbia destroyed the banking system in Kosova, all the economic activities were under Serbia's unconstitutional administration. Only a small island remained in the ocean, which was the economy of Gjakova, which with Ante Markovic's law were transformed into share holding associations. Therefore Serbia had no way to implement administration in these companies. These companies used this chance, they separated 2.5 million DEM and they established the Economic Bank in Gjakova. It was the only bank that served the majority of the population, the Albanians. But our bank was not closed to the other communities. We had a few Serb clients; we also had Montenegrins, Turkish, Roma, and other clients. Our history is long; we started work with 18 shareholders, when we were established in 1991. Before the war we worked with 6.500 enterprises.
In the beginning we only worked in Gjakova. Afterwards we started developing in other towns of Kosova, we had 7 centers and one microcenter in Podujeva. We also had our unit in Presheva, in Serbia. In 1994, our headquarters moved to Prishtina. The war destroyed the bank capital though. The equipment in all units was either destroyed or stolen. In Ferizaj the bank building was even mined. Before the war, we had our Internet website, developed through Dardania Net, we provided many services to the population. This would be the short history of our bank. After the war we worked until 15.11.1999, then UNMIK introduced new regulations for licensing, so we had to harmonize everything with the new law. Since that time you will notice that additional capital was provided, since most of it was deposited and I don't want to exaggerate, but about 99% of our commitments were destroyed. Our clients' warehouses and offices were burnt, their goods were stolen or taken for police and military forces needs or just given to the Serb population as "presents"; so we were in a very difficult position. Therefore we ended operations without any available capital. According to the new regulations we had to secure new capital, and we did this mainly through some enterprises that used to be our previous shareholders, but new shareholders also appeared. Our headquarters were destroyed during the NATO bombing, and when we moved into these offices we thought that we would be here only temporarily. The rental prices have increased astronomically since, so we remained in this building and adapted it for providing basic banking purposes. Currently, we only have one unit in Prishtina, and branches in Gjakova, Prizren, Peja, while the unit in Ferizaj is being completed; and very soon we will open units in Gjilan and Mitrovica as well.
What is today your vision of the banking sector in Kosovo?
We are the only bank that has banking software that was bought from abroad. It is open use software and our clients, no matter where they have opened their accounts, can deposit or withdraw money in anyone of our centers throughout Kosova. This is one of our advantages compared with other local banks.
Would you consider this to be your biggest competitive advantage?
Yes, it is one of our advantages because our clients can deposit or withdraw money from their accounts without any difficulties, no matter in what town they are. It is an advantage especially for the trading people; they don't have to use cash. It stands the same for regular citizens, no matter in what part of Kosova they travel. All they have to do is to carry their bankcard. I am aware that this banking system is very ordinary in western countries. But for Kosovar conditions, where after the war phone lines and many other things were lacking, such system was very important and not very easy to establish.
Is it true that you have a disadvantage with other banks in terms of the location of your offices?
Yes, it is true. But we have our offices in Prizren and Gjakova that are much better than this one. The rent in those towns is lower. There we have 6.000 square meters and 10 wickets, while here we have only 5 cashier desks. In Gjakova, we have the bank safes that would be very expensive to build here. You have seen the characteristics of the banks here, we all look like prisons ! Time will pass and this will change also. All the banks here are relatively small. Our bank was registered with capital of little more than 3 million. At the end of the year we had deposited around 10 million Euros. Global transfers were roughly above 30 million Euros. We have granted a few loans, above 5.5 million Euros; therefore we have no big problems despite the fact that there are not enough legal regulations. The situation is good; we will see what will happen in the future. The risk is enormously big thought, until UNMIK compiles regulations on mortgages room for movement is very small.
Our staff is relatively young but qualified, except for the management that is older. The advantage is that most of them speak English relatively well and other foreign languages also. Our total number of employees is 75. The information system that we posses is very sophisticated, otherwise with these same conditions we would have employed at least another 30 people. Every day we have the information about balance, in branches and in general for the bank. Our workers will help each other, when they have nothing to do regarding their own job. The security system is very good, which is one of the advantages we have.
What do you think of UNMIK´s role in the banking sector? Do you think that the game is being played evenly and fairly for everyone involved?
According to our Business Plan we thought that the World Bank, International Monetary Fund, European Agency and others were going to orient part of their efforts towards developing all banks, although we knew that they did not have lots of money. Maybe they had, had bad experiences in other parts of the world, and were afraid the same might happen to them in Kosova. Kosova has always had very qualified banking staff. They have worked with different banks, the World Bank, European Bank, Asian Bank, African Bank, etc. Just BANKOS that I mentioned in the beginning had correspondence with 180 banks throughout the world. Therefore in ex-Yugoslavia, whose constitutive element Kosova uses to be, the banking system was more specific than in East, in socialist countries. That was an independent system, and it affected the economy directly.
The economy took loans from banks, the bank used its own resources, but also the loans from the World Bank, western banks, Japanese, European, American, etc, so they used loan lines, especially for developing the sectors, like industry, agriculture, but also transport and others. I didn't want to criticize UNMIK, because we have no possibility to criticize it. But it is natural that they don't work only with one or two banks, because all the banks were registered according to the Kosovar laws, therefore they are Kosovar banks, no matter that the shareholders even in our banks can be local or foreigner. Therefore all the transactions for UNMIK, OSCE, NGO's, governmental organizations, they were all done through one bank and it is called MEB.
No transaction has been done through any other bank, apart from if one of our clients previously worked for UNMIK, then one small amount of money was directed through our banks. Recently, the payment of taxes and customs has started and it is taking place in all banks. This used to be a privilege of only one bank. I hope that they will soon realize that all the banks together will not be enough to develop, unless we sign an agreement, unless we activate all the banks. We won't have any success if we are not joined in different consortium or similar.
| The total deposit in Kosovar banks is 380 million Euros. This is an argument that proves that people did not trust banks and when they had to exchange the currency they deposited them. Why didn't they trust the banking sector is another long history. In 1990, USD300 million that were savings of Kosovar citizens remained in Central Yugoslav Bank. Although the state was guaranteeing, it did not give them that money back yet. Now, there is another system, every bank guarantees for their own clients. Thus the banks first of all have to think about their clients, people who deposited their money. I have to add that most of the deposits are being kept outside of Kosova and is not used for development of Kosova. Why does one bank keep all that money abroad? For example, one bank has deposits of 300 million and gives loans up to 10 million, and my bank has deposits of 10 million, but still gives loans 5.5 million. We always take the risk, the others won't take the risk because there is no infrastructure, UNMIK and the government of Kosova has not compiled the legislation, that would allow bank give loans and invest in the economy of Kosovo. This is a unique thing in the world, a poor country, relatively undeveloped, it keeps it deposits abroad, and on the other side it looks for finances for developing. This is a reality that has to be overcome.
What makes the IT Systems of the Economic Bank better than the rest and how would this be an advantage in the future?
From the very beginning of our banking activities, we started with very efficient and very sophisticated software program that was brought by one company in Switzerland. I had an opportunity to spend lots of time abroad, in Geneva and other branches where they are installed in order to be trained and transfer all the knowledge from those companies to our staff. Until today, the advantage of this software enables us to work online with our branches and we now have 4 branches installed in Kosova - those are Prishtina, Peja, Gjakova and Prizren. The banking is functioning very well, because we are able to follow the work in all branches and by the end of the day we can do the processing of all the data in much more accurate way. Currently, there is no banking network that could enable us to work online with other local banks. We are only recently connected with the Banking and Payment Authority of Kosova and we are establishing the so-called clearing system of payment with other banks. We have another advantage: we are connected with a fax modem to one commercial bank that is located in Frankfurt. We established a unique system in order to send a money transfer in all countries of the European Union within 24 hours and in any part of the world within 48 hours. This system will make us unique when comparing with the other banks in Kosova. Let me just mention that two weeks ago, we were visited by external audit for IT, an American person, and he was very satisfied with our system. He compiled a draft report, which will be finalized in few days. And since there are no remarks and no suggestions from such commission that was performed by IT, it tells enough that we've been working without any problem.
Who are your main customers?
Currently our clients are small and medium companies, and especially the successful companies, because there is many of them that just started developing. We also try to follow the family businesses. Our purpose is to activate small and medium capacities that we can do with small amount of money. We try to finance those businesses that employ more people, and also those that used modern and developed technology. With our financial capacities we have no possibility to finance big enterprises. Other local banks have no capacities either. If there is an interesting program, than we can only finance it if all local banks gather as a consortium. But we are only discussing this form; there is nothing concrete regarding that. We are very interested in stimulating the production, so in our structure the manufacturing enterprises are most important, because they are a priority for development of Kosova. We finance little or not at all for the socially owned enterprises, not because we do not trust them but because the ownership issue is not solved yet. We do work with big companies such as PTK and others, but mostly we just do transactions for them, payment of salaries to their workers through our banks. But it is very difficult to give loans to big enterprises.
Would an association with a foreign investor benefit the future services of Economic Bank?
Yes, definitely. We have already contacted some banks and we are still thinking about that possibility. One of those banks has requested to buy more than 50% of our shares. But our first objective is to finalize our three-year business plan. Citizens present 60% of our deposit structure. We think that by next year we will be linked to some banks, not only in a correspondent capacity but also by actively cooperating, maybe starting by using credit lines for the production of equipment that is not produced here. These are some plans for the future. Europe does not trust Balkan countries, except in giving donations and it especially does not trust Kosova, due to the recent war.
What do you think is necessary for Kosovo to be portrayed as a trustworthy and desirable investment destination? Do you think that there is enough being done to inform potential investors?
I do not think that Europe does not trust us; I think it knows little about us, and everything it knows is negative. Propaganda has done its part. Our people are hardworking; they are also very ambitious. When they are organized, they work a lot and very well. I am very sure that while spending time here, you have noticed that all the time there is something being built, and mainly with personal resources, without any aid from banks, the government or foreign donors. Those houses that were built by donor support had 70 square meters. The big houses that you see, I assure you that they are built based on their own financial resources. The people here used their earnings from trading, services, work and also the salaries that they earned as Diaspora in foreign countries. Our people work very hard abroad, they don't eat properly in order to save money. They bring all their savings here. This is characteristic of undeveloped countries. But unfortunately, we are spending a lot of money for non-economic projects, therefore a big amount of capital is shut out, or it is spent in parallel structures, like for example there are gas stations in every corner.
There is no strategic policy for development, because our government was established very recently. The biggest capital that we have is young people capable for work. If we don't use this capital very soon, I have fears that there will be problems in the future, because people are getting educated and prepared for work, but there is no work for them. This issue has to be solved in near future, I believe that it is in Europe's interest, that they except the donations and establish political relationships that are very important, it should consider the possibility for relocation of small and medium capacities from Europe to Kosova. For example, big companies like Mercedes or similar, it would be very good if they could build a small factory here for producing semi-processing products. And our people that work in those factories in foreign states could come and work here, instead of spending their capacities elsewhere. I think that this is more important than giving money. There are experts from abroad that are willing to come here and train the young people for specific duties. I might be wrong, but I think that this is one of the ways for development of Kosova. Only developed we could easier integrate in Balkans and Europe.
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