FACTORS OF CREDIT GROWTH IN THE REAL SECTOR IN BOSNIA AND HERZEGOVINA:EVIDENCE OF CERTAIN COUNTRIES OF THE WESTERN BALKANS

Bank loans represent an essential source of financing for the real sector, especially in countries where the basic structure of the financial system consists of commercial banks. In the last few years, lending to small and medium-sized enterprises in Bosnia and Herzegovina has slowed down mainly due to the fact that banks do not trust enterprises, the lack of quality collateral, the poor financial performance of the company, bad bank placements and other factors. The banking system in Bosnia and Herzegovina was completely liberalized, which resulted in increased competition on one hand, and on the other hand, increased the concentration of foreign capital. The growth rate loan to the real sector will be used as the dependent variable while the growth rate of average salary, the growth rate liquidity assets according to total assets, the growth rate of EURIBOR, the growth rate of return on assets, the growth rate of capital adequacy ratio and growth rate deposit according to loans will be used as independent variables. In this paper, the STATA 13.0 software package will be used. This data analysis will include quarterly basis data for the period: 2007q1 – 2017q4 due to its higher significance. The basic results of the regression analysis also showed a positive relationship between the growth rate of loans to the real sector and a growth rate of salary, and the growth rate of EURIBOR. Similarly, there is a positive relation between the growth rate of loans to the real sector and the growth rate of return on an asset. In contrast, the weaker relationship was recorded with the following independent variables: the capital adequacy ratio and growth rate of liquidity asset to total assets. Keywords: Credit expansion, EURIBOR, deposits, real sector, variance inflation factor. JEL: G2, G20, G21.