Jugoslavs Buy Nearly Everything On Credit

Press, Volume XCVII, Issue 28766, 11 December 1958, Page 14

Jugoslavs Buy Nearly Everything On Credit

Reuter Correspondent)

BELGRADE. Credit facilities are used by almost every family in Jugoslavia to buy almost anything, from bedroom furniture to a new winter coat, from a pair of shoes to a sack of coal. Unlike most Western countries, the Jugoslav hire purchase system is directly run by the State. There are almost no limits to what can be bought on credit Only bookshops run their own hire purchase. schemes. AH other shops accept cheques provided by the State-run communal bank and get their money back from the bank, without waiting for all the payments to" be made by the customer. The State runs the risk, collects the interest. The system works on the simple principle that the communal bank is willing to advance up to a certain percentage of a worker’s wage packet, depending on the value of the goods to be bought. The loan is repaid by monthly deductions from wages, plus 6 per cent, interest, which goes to the bank and thus into State funds.

With Jugoslav wages among the lowest, in Europe and prices of such commodities as furniture and clothing comparatively high, the credit scheme is highly popular. For many people, it is the chief means of making ends meet. Millions of Jugoslavs manage to look smartly dressed, thanks only to buying their clothes on hire purchase. Many homes are fitted out with modern furniture and labour-saving gadgets, such as imported refrigerators and vacuum cleaners, bought on credits repayable in two or three years.

Latest figures show that from 1956 until the end of 1957, 3.800.000 Jugoslavs acquired loans from the communal bank for such purchases, or about one in two of the working population. In this time, they borrowed no less than about £133,000,000, or one and a half times as much as it costs to build Jugoslavia’s biggest factory.

By the end of 1957 alone, about £81.600,000 was owing by 2,144,000 persons, mostly in the form of one-year credits for clothing, household linen, and other medium-priced items. Jugoslav wages range between an average of £ll 18s to £23 16s a month.

Thus, it is hard to save, and hire purchase is often the only way to buy a man's suit (£lO 14s-£l9), a radio set (£45), or a suite of bedroom furniture (£lO3£180).

A recent investigation into living standards conducted by a Jugoslav newspaper showed that almost every family in Jugoslavia was repaying some kind of credit. As a class, whitecollar workers seek credits most frequently. This is the class most anxious to improve living conditions by buying new furniture, better clothes, and labour-saving gadgets. Apart from major items such as expensive clothing, furniture and radio sets, hire purchase is used on a big scale to buy ordinary household goods, like towels, linen, baby wear, electric heaters and fires, and cooking stoves. Coal Bought in Summer

In summer and autumn, many Jugoslavs obtain credits to stock up with coal, a costly item in a country where central heating is essential in winter.

Until a year ago, a Jugoslav could go to the communal bank and obtain a cheque representing one-third of his wages spread over two years to buy electrical appliances for his home, or onethird of his wages for three years to pay for furniture. To obtain these credits, he had to make a cash payment of 5 per cent, of the total sum. At the end of 1957, however, the Government imposed a credit squeeze. It was feared that too many people were beginning to chase too few goods. Credit was drastically curtailed. Instead of getting one-third loans, people were cut down to one-fifth, and the cash payments they had to make were increased. Under these restrictions, credits for textiles, the most popular items, were cut down to onefifth of a worker’s wages for 10 months, that is. an advance of only two months’ pay, and then only if 20 per cent, of the total price could be paid immediately. The restrictions meant many people were prevented from obtaining credit because their wages were too low. Compared with the same period of 1957, 'credit grants slumped by about £25,000.000 in the first eight months of 1958. Last year, until the restrictions were imposed, the credits accounted for 33 per cent, of the total increase in purchasing power. The restrictions were shortlived, however. With credits more difficult to get. many shops complained that they had stocks of furniture, radio sets, and other goods on their hands, and little prospect of selling them. There were complaints that the Government restrictions had achieved

more than was originally intended. This year, the restrictions have been eased, and a new rush to the communal bank is expected. Now it is possible to get one quarter of a year’s wage as a credit for textiles, and similar amounts based on longer term repayment for other goods. For textiles, a 20 per cent, cash payment is still necessary, but the cash payment on furniture and radio sets has been cut to 5 per cent, and that on other goods to 10 per cent. A fiveyear credit can also be obtained for buying a car. Not only workers can benefit from the credits. Pensioners can also draw up to one-quarter of their pensions. Television, now being turned into a national network for the first time, is expected to increase the demand for credits. Television sets cost about £220 here. “Written Off” The credit system has its problems. . In the last few years, the communal bank has written off millions of unrecoverable dinars lent to seasonal workers or others who cannot now be traced, or to people who just cannot pay.

These abuses have occurred in spite of a strict rule that all credit applications must be signed by at least twd guarantors, who are legally liable for repayment if the person concerned disappears. In practice, however, the money cannot be recovered if the guarantors themselves cannot pay. The bank also refuses to accept guarantors who themselves owe money for credits, which, makes it difficult to find guarantors in a country where almost every householder is a debtor in one way or another.

Sometimes, people take two or more credits by the simple expedient of going to different branches of the communal bank and because the firms where creditholders work often fail to check their records. Repayment is watched over by the firms, which are bound to deduct repayments plus interest from theif workers’ monthly pay packets and send the money thus collected to the bank. Other abuses include the black market sale of communal bank cheques in exchange for cash—the bank refuses to give straightforward cash loans.

Some shops are also willing, for a 10 per cent, cash discount, to take communal bank cheques and to pay cash for them instead of supplying goods. Thus, many people in need of ready money go to the bank, obtain a cheque for furniture or other goods, then “cash” the cheque. Others buy goods on credit, and immediately sell them for cash.