TIRANA, Feb.26 – Loans have become a normal feature of Albanians’ life despite low figures when compared to other countries. The banking sector has liberalized loans since two years ago with the proliferation of commercial banks, mostly foreign owned in the country. Household loans have made up more than one third of the entire loan portfolio for the banks operating in Albania. The features of this lending have been so far high risk high interest. Indeed the central bank has often expressed concern about the high level risk loans practiced by the banks which charge clients between 15 and 18 percent in rates.
Loans to individuals make up 7 percent of the GDP for 2006 and their ratio to the total amount of loans has been a steady one third.
A slight shift from loans taken out to trade real estate to loans financing consumption has been noticed in the last period, with an approximate shift from 20 to 30 percent.
Higher Interest rates for household loans
Banks prefer to lend to household and individual consumers whose salary is registered and disbursed through the bank. Almost half of loans with higher interests belong to this category. The IMF has requested BoA to set up stricter regulations about high risk loans.
In a report published lately in Washington, the IMF said that “Accurate reporting on interest rates and badly performing loans should be the object of careful reporting of second level banks to BoA. IMF has stressed many times the importance of monthly reporting to BoA of all the problematic aspects of the banking system. Information about the geographic distribution of risky loans and other indicators can make the bank more prepared for every circumstance.
Household Loans
BoA’s 2006 data show that the majority of Albanians, 61 percent, use loans to trade real estate and the rest use it for consumption purposes and business activity supporting.
Loan breakdown
Lek-denominated loans have become more favorable for clients with the November loan portfolio being composed at 29.7 percent by domestic currency loans. This has been influenced by seasonal offers for holiday loans in the summer. Despite this foreign exchange loans still constitute 70.3 percent of the entire loan portfolio being thus the main voice of the balance sheet. The performance of these loans has been generally positive for the second half of 2006. The annual increase rate for November was 48 percent reaching a peak since July of last year. The increase in foreign exchange loans is attributed to the financing of foreign purchases by individual consumers in Albania.
