TIRANA, June 27 – Albania’s central bank says it is working to set up a Credit Bureau that will increase transparency on borrowers when it comes to creditors’ decision-making on approving new loans. The project, already in its final stage, is expected to have a huge impact on reducing non-performing loans, currently at about 18 percent, down from a record 25 percent in mid-2014.
NPLs have emerged as a key barrier to lending which has been striving to return to positive growth rates in the past couple of years. Due to the high level of NPLs, lending standards continue to remain tight while demand for new loans has been low amid investor hesitation to undertake new risk.
The Bureau allows creditors to look at an individual’s borrowing and bill-paying habits to determine whether they represent a risky loan.
“Differently from the credit registry currently managed by the Bank of Albania, the Credit Bureau, is expected to collect information not only on the exposure of borrowers to the banking and financial system, but also their exposure to non-financial institutions such as the state-run electricity distribution operator, water supply companies and private telecommunication operators,” says the central bank.
Experts say the establishment of the Credit Bureau will also address the lack of credit scoring system in the country and brings added value to the banking and financial system to create a more complete risk picture on borrowers. The credit score system is also envisaged as a measure that should be undertaken to reduce non-performing loans in the country based on an inter-institutional plan of measures to tackle their high level, a key barrier for credit recovery.
The central bank says it has submitted the Credit Bureau draft to interest groups and is awaiting their stance whether they will commit themselves to share information.
The current Credit Registry, the electronic database on borrowers has been operational since 2008, with 16 commercial banks and a number of non-bank financial institutions and savings and loan associations reporting to the central bank.
The Credit Bureau project is being undertaking as part of a deal the Albanian government has signed with London-based European Bank for Reconstruction and Development to support investment climate and good governance.
