The next time the banking industry does something that raises your hackles and you find yourself dreaming of a world without financial institutions, consider what it would really be like living in a bankless society.
Then you might have a slight idea of some of the difficulties facing Kosovars every day.
The inhabitants of Kosovo, the ex-Yugoslavian province, have lived through tumultuous years, and only recently have conditions started to improve. After the NATO-led bombing campaign designed to end the humanitarian crisis in Kosovo, a great deal of the country’s infrastructure needs rebuilding. According to Steven Symansky, advisor in the fiscal affairs department of the Washington D.C.-based International Monetary Fund (IMF), the United Nations took care of peacekeeping and humanitarian and legal issues, while the European Union was in charge of re-establishing economic institutions. The World Bank and the IMF were asked to help.
Symansky wrote a report detailing the requirements for establishing a central bank and the necessary government institutions to run a country, including such functions as finance, treasury and tax services.
“The idea is that the experts set up the system and then, as soon as possible, they would bring the Kosovars in and train them so they would be ready to take over the system,” he explained.
And this is where the story takes a Canadian high-tech turn.
FreeBalance Inc. is an Ottawa-based producer of financial systems designed for the public sector. In the fall of 1999 Grice Mulligan, senior director of public-sector solutions, made a software presentation to Ali Hashim of the World Bank and Bill Allen of the IMF. A few months later Symansky, who learned of the software from Allen, contacted Mulligan and said he thought he had a project FreeBalance could work on. Mulligan was put in touch with Allan Pearson, who at the time was the co-head of the Central Fiscal Authority in Pristina, the capital of Kosovo. The CFA is part of the overall UN mission in Kosovo, responsible for creating and maintaining a financial infrastructure.
“I sent to Allan Pearson a package of the software, we discussed it after he reviewed it and I explained to them how we could get it configured. Next thing I know they are asking me to come over,” Mulligan said.
Keeping track of the money
One of the difficulties war-torn nations have is keeping accurate books, but that is one thing donor nations insist on. Mulligan said nations with archaic or inefficient financial methods are at times only able to track about 15 cents on the dollar and without a more efficient financial system, the likelihood of continued help is non-existent.
According to Mulligan, the situation in Kosovo had become dire. Solutions that were offered were costly and took too long to implement. He said the spreadsheet analysis that was done concluded Kosovo would be bankrupt by September, yet unless they had a financial system in place no one would give them more money.
FreeBalance, Symansky said, eased that situation. “You can do the accounting by hand, you don’t need to have a FreeBalance up and running right at the beginning…to convince a donor, but the software makes it a hell of a lot easier,” he explained. Generating reports, Symansky said, it now doe with the “flick of a switch” and an e-mail.
Mulligan said the two advantages of FreeBalance are cost and speed of implementation. The first five user licences are free, and the Kosovo implementation took less than four weeks.
Philip Clark, treasury of the CFA in Pristina, agrees FreeBalance Financials performed as advertised.
“It is a good package in so far as it is reasonably easy to install,” he said. “Their marketing practice of offering five free user licences really makes it a fairly…easy package to install and have up and running reasonably quickly.”
He did, though, chuckle a bit when told of how Mulligan characterized the implementation. “It takes a bit more effort than he actually admits.”
two steps forward, one back
“There are so many difficulties, it is hard to sort of summarize them in a phone call,” Clark explained. “We are attempting to establish government here and of course every step we take, it is like two steps forward and one step back in many ways.
“We are training quite a few locals and we have them using the system – very rudimentary usage at the moment,” he added.
Mulligan said language was at the forefront of the problems. “The person (who is entering the data) doesn’t speak English and the person who is translating it for me doesn’t speak accounting [so] it is very difficult for me to tell whether or not the translation was accurate.”
He added that the people at the CFA will eventually translate the software into Albanian and Serb, the two official languages of the region. The system is designed to integrate with standard spreadsheet packages such as Lotus 1-2-3, Microsoft Excel and Corel Quattro Pro, and operates with a variety of databases.
According to Clark, the situation is getting better as they progress through various phases. The first goal is to get Pristina and the regional offices onto a network. Once that is done they can get all of the core levels of government (health, education and the like) onto one financial system.
“Only in the far distant future would there be plans for a complete decentralization of financial management here,” Clark said. “To put it into perspective, everything here is cash…therefore because it is all cash it also means there is very little leeway for more advancement into modern modes of payment,” he explained.
Eventually, since local governments are fairly strong, the CFA would like to see licences introduced to the local municipalities. The final stage will be getting all municipalities and government agencies networked using one system.
“The reality is that it is going to be a long run to get the final phase in and running,” Clark said. “We would be very happy if we got to the point where all of the budget agencies, including the municipalities, would at least be using the product (FreeBalance).” He added that it is a bit too early to say everything will be linked on a network, but that’s the goal if in a couple of years Kosovo is redeveloped and stable.
“It really is quite an experience and it is unique for the UN as well,” he reflected. “How often around the world does a world body come in and, not only supervise and protect a particular area, but also start setting up the whole infrastructure, including the detail of government?”