Credit Access in CroatiaCroatia, a quaint European country tucked away in the Adriatic Sea, appears to thrive in the Mediterranean. Tourists flock to its squares, and its people show an optimism and cheery spirit. Economically, however, the country has struggled in the past due to external political factors that have had an impact on several parts of Europe throughout the 20thcentury.

The Croatian Economy

Croatia’s problems started long before it became an independent state. Prior to 1991, Croatia had been a part of Yugoslavia. Its communist-based planned economy was successful at first, but it quickly fell apart due to mismanagement and human error. After the planned economy and communist movement fell apart, Croatia experienced high episodes of hyperinflation and inequality. In the past two decades, however, the situation has gotten better.

Croatia has improved significantly from its earlier days of economic turmoil. Despite having a growing economy, the state struggles with the issue of credit access, especially for small businesses. Recently, this can be attributed in part to the 2010 European financial crisis that had an impact on smaller countries on the continent. Challenging market conditions had made it so that receiving credit was harder than usual. In 2008, only 42 percent of Croatians had access to financial services. Since then, Croatia’s economy has stabilized, but the issue of credit access still remains.

Credit in Croatia

The issue is significant. The term ‘credit access’ encompasses a wide variety of financial institutions not limited to strict agencies providing services. Underdeveloped ATMs and local banks create a roadblock to future growth. In order for progress to be made, there have to be several changes made in the infrastructure to unlock the potential in Croatia’s economy.

Legally, there are several hurdles that make changing credit access in Croatia an issue. First, there is the need to alter the legacy banks and institutions in the area. Historically, Croatia has not had a strong financial history, and a large part of its population has grown accustomed to the lack of resources.

In one report, the authors claimed only 14 percent of Croatians were being properly served by the nation’s financial markets. In order to improve this number, there needs to be an institutional change that starts at the legal level.

Currently, around 30 percent of individuals have stated that they had issues with making ends meet. This comes in the context of job insecurity with 29 percent of workers fearing they could lose their jobs in the next six months. The lack of credit access has compounded this worry since these individuals already find their financial situations to be unstable.

Solutions for Improving Credit in Croatia

In other nations, improving credit access has had tremendous success for the economy. Around the world, it has shown to decrease child labor and diversify assets for the poor. Studies have also linked improving credit access to positive agricultural growth. These improvements, undoubtedly positive in nature, have been accomplished at the small price of involving other nations in national affairs.

Similarly, to instigate change through credit access in Croatia, the state has to look to allied nations in Europe as models. Croatia’s membership in the EU may serve it well. Calling upon partnered countries to aid in this specific problem could actually strengthen The EU as a whole. Helping out with the credit issue in Croatia could lead to more benefits than expected with neighboring countries being able to benefit from a more stable trade partner. With an underserved population, there are also business opportunities for several nations to cash in on.

A Brighter Future

Recently, efforts have been made to improve credit access and the Croatian economy in general. To attract investors, the state has repeatedly made tax payments easier for companies. In 2012, Croatia created a private credit bureau to “collect and distribute information on firms” to improve the system and stimulate credit access. These changes have the potential to spur the economy in Croatia in the coming years.

The movement to focus on the economic situation in Croatia has significant implications. Not only could credit access improve but it could also help stimulate regional economic growth and increase jobs. New financial institutions would improve banks and create positions of skilled labor that could attract immigration as well. Improving the financial stature of Croatia could improve its economy in more ways than one.

– Mrinal Singh
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