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| Vol. 17, No. 23 | March 13, 1998 |
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| Vol. 17, No. 23 | March 13, 1998 |
Kenneth Koford, economics, just returned from his fifth trip to Bulgaria. And, while he loves the country for its face-to-face culture, people, mountains and beaches, he was not there on vacation.
Koford spent February 1997 to January 1998, on a leave of absence from the University, teaching at Sofia University and conducting research on bank lending practices in Bulgaria.
The trip was funded through the U.S. State Department as part of the Fulbright Program, which allocates funds for professors to go abroad, teach and conduct research. The program also brings foreign professors to teach and conduct research in the U.S.
In the three years since his last visit to Bulgaria, he said the country has gone through several changes. "The biggest difference this trip was the terrible economic collapse that hit bottom three days before I arrived," Koford said. "The currency dropped to 1/50 of its former value in six months. The average salary for a professor was the equivalent of $5 a month."
While in Bulgaria, Koford taught micro- and macroeconomics at the undergraduate level, and an industrial organization class at the graduate level.
Koford describes Bulgarian teaching methods as formal and distant, when compared to America, where the student is seen as valuable. But the more open and casual American teaching style is attractive to Bulgarians. "I felt I did a good job just by being a typical American teacher and representing our style of education," he said. "It was a great experience seeing the university there change and improve as compared to my visit three years ago."
During his year in Bulgaria, Koford also researched the country's banking system. "I was interested in learning if the Bulgarian banks use effective ways to determine reliable borrowers," he said. "I discovered that many of the banks were lending to friends who wouldn't pay the money back. The banks made bad loans, due to bad management, and so had no money."
"U.S. banks typically have about 3 to 5 percent of loans that are bad," Koford said. "Bulgarian banks have more than 50 percent and most of the banks have failed."
One example of bad loan management Koford cited was a bank that was lending money to a prominent Bulgarian who used it to buy two Mercedes, a soccer team and a restaurant. He would then go back to the bank and ask for more money. The banks and the courts are afraid of this man, according to Koford, so he was not forced to pay the money back.
The people in Bulgaria rely on cash because the banks are unreliable, Koford said. There are no personal checking accounts for households, and a lot of money is kept in homes. This practice leads to a high theft rate.
Companies in Bulgaria also are afraid of the collapse of the banks, according to Koford. The businesses pay their bills by the "suitcase method," traveling with cash to the location of the bill collector. The largest denomination of currency, the lev, was equal to about $5 when he arrived, Koford said, so large numbers of bills were needed to pay a debt of any size.
Because the Bulgarian lev is so unstable, there is wide use of the American dollar, with currency changing businesses on every block, Koford said.
"Life is hard there," Koford said, referring to the unreliability of the utilities, the crowded conditions of public transportation and the month-long scarcity of pasteurized milk he experienced while in Bulgaria. "It's a country trying to adjust to a modern capitalist world, and it is having trouble."
Goods, like cheese and bread, produced within the country are cheap and good according to Koford, but international goods, such as TVs, are priced according to the international market and are out of the income range of most Bulgarians.
Koford has prepared a report for the International Monetary Fund, an organization that is assisting Bulgaria with its financial and economic crisis, on the research he conducted while there. He said he plans to use many of the experiences and insights he gained while in Bulgaria as he teaches international economics to his classes at the University.
-Gail E. Walford
