EBRD and EU support dairy producer in BiH: €20 million in credit lines for SMEs to meet EU standards

Nenad Vukoje and his wife started to produce yoghurt 18 years ago. They invested in a military-sized cauldron and a yoghurt cup filler, rented some small premises of 30 square metres and produced around 150 litres each day.

“We did not have any employees, it was just our family,” said Nenad. “It was through hard work and our ambition to succeed that we managed to increase our capacity every year. We purchased more equipment step by step until 2002 when we decided to build a new facility.”

The family continued to build its business and successfully expand production. Last year Padjeni invested more than BAM 1.6 million (equivalent to about €800,000) for this purpose and, for example, started to establish lacto-freeze stations for collecting raw milk.

Padjeni is one of almost 60 companies that have already benefited from an EBRD programme with the European Union (EU) to make small and medium-sized enterprises (SMEs) in Bosnia and Herzegovina more competitive locally and regionally as well as on the European and global markets.

The EU supports this project with €4 million in funding to provide advice on adequate equipment and technologies as well as incentive payments to businesses on successful completion of their upgrades.

The EBRD provides a total of €20 million in credit lines to participating banks for on-lending to businesses such as Padjeni. These funds help the companies to make investments to comply with EU directives in the fields of environmental protection, occupational health and safety, and product quality and safety.

A boost to the local economy

Padjeni’s success is benefiting the whole local economy: it has grown to more than 100 employees and works closely with up to 1,000 farming cooperatives, providing important job opportunities in the local agriculture sector.

“All our technical equipment is new and high-tech – we must invest in new technologies and products to survive in the market,” Nenad said. “The processing cycle is completely closed and constantly monitored using the HACCP management system and internal controls. Apart from our own lab, all our products are controlled in authorised external ones.”

Milk and dairy are among the most delicate agricultural products and require intense control, explained Nenad. That’s why two agricultural engineers work closely with Padjeni’s dairy suppliers in the field to ensure the raw milk they supply is to the required quality. Furthermore, four technicians monitor the production so that each product is safe and meets high standards.

Padjeni’s current dairy facility processes around 40,000 litres of milk for 30 end products, including some made of sour milk (yogurts, spreads), soft cheeses, mature cheeses, as well as traditional products (‘sack’ clotted cream or ‘torotan’ cheese).

Seizing trade opportunities with the EU

“Our plan is to continue to expand our business, primarily on the local market, but also in neighbouring countries, the EU and elsewhere,” Nenad explained. “It is important for us to adjust our production to the target markets, listen to new demands and adapt quickly to them.”

In 2017 Padjeni planned to increase the processing and sales of its products by over 20 per cent and exceeded this goal by more than 9 per cent. “This is a great success for us. We will build on this and soon start various new activities to reach out to new markets,” added Nenad.

For now, the dairy products are sold in Bosnia and Herzegovina and Montenegro, but the company also obtained a permit to export them to the EU as of 2016.

“A programme like this one by the EBRD and EU is very important for our future development,” said Nenad. “It provides a boost to new investments and new technologies, which are crucial elements to support both our business and our country’s economy.”

“We provide SMEs with much-needed access to finance to make the necessary investments to become more competitive, which in turn creates new employment and economic opportunities,” said Ian Brown, Head of the EBRD’s office in Bosnia and Herzegovina. “This is one of many ways in which the EBRD supports the country’s economy, which includes both support for businesses as well as investments into strategic transport links.”

Andrea Vera, Head of Operations Section for Economic Development, Trade, Infrastructure and Natural Resources at the EU Delegation to Bosnia and Herzegovina, highlights the need for Bosnia and Herzegovina to improve its business climate and create opportunities for economic recovery.

“This programme represents a continued EU effort to help Bosnia and Herzegovina in tackling the obstacles that hamper development of SMEs, which are the backbone of the economy. The EU has provided up to €60 million to support the SME sector in the country over the past 15 years. With our technical assistance and grant funding, SMEs have received tangible support to grow in competitive sectors such as tourism, agro-processing, and the wood and metal industries,” he said.

Social impact

Padjeni is proud to support its local community, around 250 households in 15 settlements. The company’s support includes, for example, a water-supply project worth more than BAM 1.5 million (equivalent to about €770,000), which is currently being finished in cooperation with the local authorities.

This project will ensure that more than 50 kilometres of the local water network and several pumping stations will function without difficulty, Nenad explained. “I am very happy about this because our community has believed in it since the very beginning, although unsuccessful attempts were made before.”