2006 ANNUAL REPORT

HELPING WOMEN EARN A LIVING
THROUGH
TRADITIONAL CRAFTMANSHIP

***

YOU CAN HELP US DO SO
THROUGH
PURCHASE OF PRODUCTS

HAND MADE BY

Radmila	Ismeta	Milena

In 2006, BHCRAFTS:

* helped over 500 women from around Bosnia and Herzegovina

* established Centre for transfer of traditional craft skills in Tuzla with support from European Union

* promoted original B&H handicrafts in USA , Japan , France , UK , Switzerland , Denmark , Netherlands , Slovenia & Bosnia and Herzegovina

* defined strategic objectives that will be the focus of our activities in a years to come

* …

WHAT CAN YOU READ IN THIS ANNUAL REPORT?

The aim of this report is to provide you with an insight to changing developments in 2006, activities taken and goals achieved, summary of financials, and projects implemented in 2006, to plans and vision for 2007 and challenges for further growth.

SUMMARY

A SUMMARY OF 2006 THROUGH LETTER OF CEO . . . . . 3

FACTS AND FIGURES FROM 2006 . . . . . . . 4

Background . . . . . . . . . 4

Projects . . . . . . . . . 4

Identity . . . . . . . . . 5

Philanthropy . . . . . . . . . 5

Positive changes . . . . . . . . 5

FINANCIALS . . . . . . . . . 7

PROSPECTS FOR GROWTH . . . . . . . . 8

Plans for 2007 . . . . . . . . 8

Challenges in 2007 . . . . . . . . 9

LETTER FROM THE CEO

Dear Reader,

another year of hard work and support to women of Bosnia and Herzegovina is behind. It was a very challenging, yet rewarding year, filled with versatile activities that lead to great results.

Training programs for women artisans and employees of handicraft associations we work with, developing new collections, attending international trade fairs, strengthening corporate gift program and organizing fashion shows/auctions in country, are just a portion of what we were working on in previous 365 days.

We are very proud that we have successfully implemented the project “Centre for transfer of traditional craft skills” with support of European Union that strengthened the craft industry in North East B&H. The contributions provided to women exceeded the amount of 130000KM (65000Euro), and the number of artisans varied from 250 to 700.

We have also worked toward strengthening philanthropy in Bosnia , helping the work of children’ homes from Sarajevo and Kulen Vakuf through our fundraising campaigns.

Our efforts and results have not gone unnoticed by the public. NTV Hayat, Dnevni Avaz, Magazines: Grazia, Azra and Max, as well as Radio Stari Grad and Kameleon have all helped us to popularize the craftsmanship in Bosnia .

However, 2006. also laid great problems in front of our team. In May 2006., „SATEX“, Sarajevo, BHcrafts long-term cotton yarn supplier, stopped operating due to worker's strike until further notice which cuased serious turbulences in everyday functioning of the handicraft program, because the organization has been forced to switch from purchasing minimums in amount of 5-10kg per color to another cotton yarn supplier from B&H whose minimum order per color is 25-100kg. Such high minimums laid heavily on BHCrafts.

The priority in 2007., will be to find a long-term solution to the above problem, rather then quick-fix, and to implement some highly-innovative projects including the preservation and promotion of cultural heritage and cultural tourist offer, felting program, modernization of hand-loom unit, etc.

You can find up to date information about new projects, activities, products etc. on our web site www.bhcrafts.org

Thank you for your continuous support to our work.

Sincerely,

Lejla Radončić

FACTS AND FIGURES FROM 2006

BACKROUND

The handicraft project run by UHD Bosanske rukotvorine is a big scale project that is providing secure income up to 700 craft producers around the country each year, most of whom are poor or otherwise marginalised from society (unemployed, low-educated women from rural areas). The statistics shows that approximately 200 to 250 women are regularly engaged throughout the year, while additional 400 to 450 are occassionally involved, depending on the organization's ability to provide income generation to these women, that is the market demand for the products hand made by women crafters.

Becuase of this scale, the organization invests each year considerable amounts to sustaining the program and promoting the crafts from BiH, including investments in purchase of raw materials, production equipment (weaving looms, knitting needles, etc.), marketing activities (extensive market research, attending international trade fairs, maintaining and extending networks of sales representatives, maintaining retail shops in country, etc.), promotional activities (brochures, post cards, web site...), development (training of new women, product development, etc.) and administrative costs (utilities, maintaining two offices, vehicles etc.).

Approximately 80% of these investments are financed each year through the sale of goods and services performed by association's commercial arm (BHcrafts d.o.o.), while the new initiatives and upscaling of activities are typically funded through sources or funds mobilized from the public and/or the philanthropic sector.

PROJECTS

One of the milestones in 2006 was the project “Center for transfer of traditional craft skills” supported by the European Union. The aim of the project was to establish the Centre for the transfer of traditional craft skills to strengthen the economy of NE Bosnia and Herzegovina with emphasis on rural areas.

The list of activities realized by the team of eight in only 12 months are impressive and so are the project results.

The main activities included the formation of the Centre, capacity building seminars and consultations for the administration of three target SMEs, craft training programs for the craft producers, and an array of activities that improved the supply chain and lead to improved competitiveness of handicrafts on local and export markets (constant development of new collections, market research, and extensive marketing campaign on local and international level including participation at international trade fairs, direct approach, local promotional campaigns etc.) and development of souvenirs.

The project met all its objectives. Not only that BHcrafts managed to establish the Centre for transfer of traditional skills in Tuzla, it managed to efficiently organize craft production in three target areas, improve the skills and competitiveness of target SME’s, improve quality, design and affordability of handicrafts, supply attractive tourist destinations with souvenirs, increase the sale of handicrafts as well as entrepreneurial skills of craft producers and their income.

Project in numbers: 86 trainees upscaled their craft and entrepreneurial skills, 86 trainees joined BHCrafts handicraft program, 16 operating production networks were strengthened as well as 3 new SMEs from NE BiH, 3 new production co-ordinators contracted, 4 SMEs workers improve entrepreneurial skills and know-how on handicraft production, an amount of €65 706, 56 distributed to craft producers, 19 new clients attracted thus increasing the number of total clients in 2006 to 59, 8 tourist attractions supplied with souvenirs, 2 new sales representative contracted (for two key markets: USA and UK) and reach turnover of Euro 220 000,00

However, the long term objective is to provide these services to all craft associations in B&H and become the Centre for entire country.

IDENTITY

2006 was also a Year of creating a strong identity for BHcrafts. Through systemized approach and with assistance of professional PR agency, we have created an array of promotional materials that reflects our vision, present our work and testifies to our results.

Whether we are talking about catalogues, post cards, brochures about the organization or a specific project, packing materials or the web site, we all agree they are interesting, innovative and present the positive energy of our program. For illustration please visit www.bhcrafts.org

PHILANTHROPY

It was 2004 when BHcrafts organized a first charity auction/fashion show in Bosniak Institute in Sarajevo . Although we had numerous auctions since then, we always try to be innovative and unique to maintain the interest of the public and guests. New collections of clothing and accessories are introduced each time, as well as new auction items.

In 2006. the organization hosted two charity auctions/fashion shows, on June 1 st and November 30 th . Both were held at Bosniak Institute, a renown cultural centre and a true guardian of B&H cultural heritage, located in the heart of Sarajevo . Many organizations and individuals unite to make the program successful. From professional and amateur models who walk the catwalk pro bono and pro bono auctioneers, to media patrons of the event. Media patrons of December’s event were NTV HAYAT, Dnevni Avaz, Radio Stari Grad, Radio Kameleon, MAX Magazin, Gracija and Azra Magazine.) Auctioneers were H.E. Lawrence Butler, Principal Deputy of the High Representative, OHR and Mr. Dirk Reinerman, the World Bank director for BiH, both very outgoing and greatly supportive of organization’s mission and work.

Alongside with using auction as the fundraiser for its new initatives, a percentage of sales always go to another humanitarian project. In June 2006. it was for children’s home Bjelave, Sarajevo , while the one in December supported two children’ homes: Children’s home “Duga”, Kulen Vakuf and children’s home “Bjelave” from Sarajevo .

POSITIVE CHANGES

At BHcrafts we want to testify to positive changes within the program and within the society. We want to testify about success stories of women who were forced from their homes during the war and were deprived of everything that was familiar to them, but yet managed to find strength and courage to go on.

We want to present the stories of women who have learned the value of education, and although not educated themselves, work their best to be able to educate their children. We want to present the stories of women who have not begged for help, but work hard to provide better life for themselves and their families.

Herewith, we want to present the story of Sajma Alic, as wrote by Nedim Dervišbegović, a Reuters journalist from Sarajevo . The full story can be read at our web site.

Sajma Alic took up knitting in 1995 to keep her mind off the fate of her husband, who stayed in besieged Srebrenica while she fled with their baby, two of hundreds of thousands made refugees by Bosnia 's 1992-95 war.

Alic and some 50 other refugee Muslim women joined a pilot work therapy project run by a Norwegian aid agency in the northern town of Tuzla . Starting with a donation of yarn and needles, they made sweaters, hats and gloves for their children.

"It helped us a lot not to think about the situation we were in," said the 35-year-old. "It still does."

Her husband is still missing and presumed dead since Bosnian Serb forces overran Srebrenica in July 1995, killing 8,000 Muslim men. What started as a distraction is now the livelihood of Alic and the other women, most of whom are widows with children.

Alic, who is one of the most productive women, earns more than the average monthly salary of 600 Bosnian marka ($400). Combining that with the pension for her husband and help from her in-laws she has built a house, learned to drive and is determined to provide a better future for her teenage daughter.

"I will do this as long as there's work and they want me," she said with a shy smile as she sewed decorations on a multi-coloured handbag in the Tuzla office of the co-operative.

FINANCIALS

Chart 1. Composition of budget Y2006	The total budget in 2006. was approximately 340.300,00Euro, which is 42% higher than the budget for Y2005. Majority of activities were financed through own sources (sales of handicrafts in country and abroad). Significant sources have been contributed by European Union for the Establishment of Centre for transfer of traditional craft skills, while the smallest percentage came from local fundraising campaigns. For percentage details pls. see chart on left
Income from own sources (sales of handicrafts) was 217.200,00Euro, which represents an increase of almost 24% from Year 2005. The increase can be attributed to the extensive marketing campaign in country (retail program, corporate gift program, wholesale program), and abroad (participation at international trade fairs, direct approach through international sales representatives, etc.). Majority of sales comes from local market (42% from retail outlets in down town Sarajevo , 8% from corporate gifts program & 11% from wholesale program).	Chart 2. Breakdown of sales per source
Chart 3. Comparison of sales Y2004, 2005 & 2006	As seen from Chart 3. all markets show steady growth, with the exception of Great Britain and Switzerland. The organization is proud to have many steady clients in country and abroad, but also many new clients as a result of continuous market research. USA remains to be number 1 export market, followed by the French market.

How sales reflect on women we work with?

The higher the turnover is, the higher are the artisans’ salaries, and the higher is the possibility to include new women in production program.

PROSPECTS FOR GROWTH

PLANS FOR 2007:

In 2006., the BHCrafts team took time to create a vision for its future work and has decided that it will diligently work on the following:

• Preserve and promote cultural heritage of Bosnia and Herzegovina and its inhabitants, with focus on preserving and promoting B&H traditional craftsmanship;
• Decreasing poverty in B&H by creating work opportunities in traditional activities, with focus on economic empowerment of women;
• Stimulating regional economic growth, with emphasis on rural areas;
• Promoting local entrepreneurship and general development of entrepreneurial culture necessary for the growth of transitional economy, with emphasis on promotion and recognition of social entrepreneurship;
• Providing support to development of small and medium enterprises, humanitarian organizations, associations, co-operatives and other forms of organized groups with the aim to strengthen their economic and organizational structures;
• Promotion of dialogue across entity and state borders;

The three following projects will be the priority for BHCrafts:

CHALLENGES IN 2007

Unfavorable climate for handicraft producers in Bosnia and Herzegovina and BHcrafts in particular, caused by the cease of operations of the only cotton yarn producer in B&H, company SATEX d.o.o. Sarajevo in May 2006, will represent one of the biggest challenges in 2007.

 In May 2006., BHcrafts long-term cotton yarn supplier „SATEX“ Sarajevo stopped operating due to worker's strike until further notice which cuased serious turbulences in everyday functioning of the handicraft program, because the organization has been forced to switch from purchasing minimums in amount of 5-10kg per color to another cotton yarn supplier from B&H whose minimum order per color is 25-100kg.

Such high minimums lied heavily on BHcrafts budget. For example to fullfil recently received order from one client from UK which requires use of 20kg of winter white cotton, the organization needed to buy 100kg of this cotton, thus was forced to create stock of winter white cotton in amount of 80kg.

According to various indicators the situation with the SATEX, will not improve soon. Aside the unresolved issues between the management and workers regarding unpaid salaries and social security, there is an on-going court process between Emin Fatkic, the buyer of 67% of the state capital of SATEX and The Sarajevo Canton Privatization Agency who wants to cancel privatization contract because the buyer has not fulfilled an obligation to forbid the sale of company's assest during the contract determined timeframe.

Although the organization is on the constant search for alternative suppliers, the research results showed that there are only a few available suppliers in the region with minimums as explained above, while the suppliers from the EU countries have lower minimums, but higher prices (30Euro per kg) making the future prospects of dealing with this problem twofold:

• The first option is that BHcrafts decrease the scale of the handicraft production and limit the production according to availability of raw materials currently on stock and organization's ability to procure new raw materials from its sales turnover
• The second option is that BHCrafts secures outside funding to create the reserves of raw materials, as foreseen by thus project proposal, while continuing to search for suitable alternative cotton yarn supplier.

The first option is highly unfavorable, as it will not only decrease the scale of support provided to women crafters (in particular, the value of their income & number of involved women), and endanger the ability to recruit new women, but will endanger the future prospects of the BHCrafts program. With this said, if the organization cannot find alternative means to continuosly procure raw materials under the new terms, it will be forced to decline some of the received orders, risking to loose the declined customers on the long run.

Because of this reason BHcrafts will in Year 2007 concentrate on securing reserves of raw materials through organizational budget and direct support from donor organizations.