IBNA Analysis/Does Albania have the necessary conditions to increase crediting?

IBNA Analysis/Does Albania have the necessary conditions to increase crediting?

Insights from the Governor of the Bank of Albania, Gent Sejko, the head of the Albanian Association of Banks, Christian Canacaris and the head of the Union of the Chambers of Commerce and Industry of Albania, Ines Mucostepa

Tirana, 4 March 2016/Independent Balkan News Agency

By Edison Kurani

Albania is one of the less developed countries as far as business crediting and household consumption is concerned. Also, the country is still in its first steps in terms of the use of credit cards, although many countries of the world have been using them for decades.

In these circumstances, Albanian financial authorities are encouraging businesses and individuals to borrow and on the other hand, they are asking banks to be less stringent when issuing loans.

Governor of the Bank of Albania, Gent Sejko says that currently, the economic and financial situation of the country seems to enjoy stability.

According to him, the state of the banking system in terms of capitalization, liquidity and financial performance is favorable.

Under these circumstances, according to Sejko, there exist possibilities for a revitalization of lending.

Therefore, governor Sejko calls on the representatives of commercial banks in the country to present this situation of the Albanian economy on their mother banks, “to convince them that Albania offers the necessary conditions to boost crediting”.


Sejko’s request to boost crediting, comes at a time when Albania reached the worst level of nonperformance loans, 25% of the total.

Everything started in 2008 when the Lehman Brothers crisis was felt in Europe and Albanian enterprises felt the blow. Nonperformance loans started rise dramatically and banks started to impose more criteria in crediting the economy. Many companies could not make it and this led to their bankruptcy. The situation continued like that for a period of seven years, until 2015.

Governor Sejko says that after this period, “for the first time, thanks to the coordinated efforts of all institutional actors, we managed to see a significant drop of non performance loans”.

But Mr. Sejko identifies a low level of crediting: “From the numerous contacts that I have had with the banking industry and business representatives, I gather that the sides see the problem on each other. It seems that in many occasions, banks adopt solid criteria, while many business representatives cannot understand that compliance with contractual relations is the basis of success of the market economy”.

Canacaris: Albanian economy, expectations are optimistic for 2016

The head of the Albanian Association of Banks and the director of Raiffeisen Bank Albania, Christian Canacaris, says that in general, 2015 was a complex year, not only for Albania, but for the entire world.

In a European context, Canacaris says that although recovery continues, in 2015 it was slow. “In fact, in the last quarter of 2015, GDP in the Eurozone remained lower than its peak in the period before the crisis at the start of 2008”, Mr. Canacaris says.


Meanwhile, in the context of economic growth for Albania, Mr. Canacaris suggests that 2015 did not deliver the optimist expectations. And according to him, this was reflected by a low level of crediting of the private sector by the banking sector.

Mr. Canacaris also says that: “The region and Europe needed for a long time to face the threats that related to the delays in the payment of loans by Greece, which also had their psychological impact in Albania.

However, the banking sector in Albania remained sustainable and not affected by the crisis.”

“On the other hand, Mr. Cancaris continues, European banks faced more regulatory rules and austere policies in the EU as opposed to banks in Europe and their branches in other countries. What’s more, this year we also faced legislative and regulatory changes in a local context, especially in relation to the fiscal sector”.

Stopping on nonperformance loans, Mr. Cancaris says that they continue to be the main problem for banks, “bearing in mind all our engagement to trace and collect loans issued to consumers”.

In spite of these challenges, Mr. Canacaris says that the banking system continued to expand its activity during 2015, as it’s confirmed by the growth of its activities at a rate of 1,9%. “Banks continued to be well capitalized, liquid and safe. The best evidence is public trust which is shown by the growth of deposits”, says the head of the Association of Banks.

However, the loan portfolio has grown more slowly although fresh loans have been issued in sustainable amounts by the banking system.

When the published statistics regarding loans are analyzed, for Mr. Canacaris there are several elements that must be considered to evaluate the real growth of crediting.

“First of all, the loan surplus at the end of 2015 must be corrected with the total of 190 million euros of nonperformance loans transferred out of bank financial statements during the year. By removing their effect, the portfolio of the loan surplus would result in a growth of more than 2% during the year.

Secondly, it must be stressed that the loan portfolio is characterized by short maturity periods, such as overdrafts. They have short periods of repayment and are offered on a refinancing basis, thus having a lower impact in the total of the portfolio, although these lines of crediting have injected liquidity in the private sector”.

Meanwhile, banks in Albania have reduced lending interests in response to the facilitation monetary policy of the Central Bank.

Stopping on the Albanian economy, Mr. Canacaris says that expectations for 2016 are optimistic.

“Both international institutions and domestic ones predict a 30% economic growth, which offers hope for a positive perspective”, he says.

As far as banks are concerned, Mr. Canacaris says that they have optimistic expectations and ambitious objectives for the growth of crediting in 2016 and remain committed in issuing more loans, which are their main source of business.

To reached these objectives, the execution of the collateral remains a concerning issue.

Mr. Canacaris says that the effective execution will bring a better banking performance in relation to the reduction of non performance loans.

He also mentions the fact that “after a constant growth during a seven year period, the reduction of NPLs at a level of 18,2% in December 2015, mainly came due to the coordinated efforts by banks and the application of the measures set out by the Bank of Albania and not as a result of the collection of debts, as it should have been the case”.

Mucostepa: Banks must see the business sector as a partner, not as a random customer

The Union of the Chambers of Commerce and Industry of Albania is aware of the problems that businesses face on a daily basis. The head of this union, Ines Mucostepa, says that the business sector praises the orientation of banks in crediting new sectors of the Albanian economy with high development potential such as agriculture and tourism.

Ines Mucostepa

She appeals for more support for businesses that operate in these sectors. “Agriculture, agri-processing, tourism or technology are fields which Albanian enterprises are focused on investing. Therefore, commercial banks must now move their lending portfolio toward these fields, by being more flexible in the opportunities that they offer”.

Mucostepa says that banks must see the business sector as a partner and not as a random customer. “Banks must be mature, visionary and patient in the phase of the repayment of loans and lending. Businesses that borrow must be treated as partners and not as a random client. We hope that this will be the right path that will be followed”. /ibna/