Bad loans in micro-credit institutions at 7%

TIRANA, July 2 – Non-performing loans are also increasing in micro-credit financial institutions, although not to the frightening extent they have risen in banks. Data show bad loans at micro-credit institutions have grown to around 7 percent in 2012 while in the banking sector they have reached a record high of 20 percent.
Zana Konini, the director of the Albanian Savings and Credit Union (ASCU), says the loan portfolio at risk has reached at 7 percent mainly because of the return of crisis-hit migrants and rising prices of agricultural inputs.
“The fact that we operate in a market which produces agricultural products which will nevertheless be consumed is one of the factors which has preserved stability,” Konini told reporters.
The Union expects the loan portfolio to increase by 4.5 percent to 4 billion lek at the end of 2012 and the number of active customers to grow to around 21,000.
The ASCU grants microcredit of up to 6,000 euros and supports SMEs with loans up to 2.5 million lek. Since its beginnings in 1992, the Union has expanded its operations in 16 districts covering 1,073 villages with more than 18,000 active customers.
Albania’s non-banking financial sector, dominated by micro-credit financial institutions and insurance companies shrank to 5.3 percent of the total financial system at the end of 2011, compared to 5.7 percent at the end of 2010, according to data made available in the latest Bank of Albania financial stability report.
Despite bad loans at non-banking financial institutions rising to 7.6 percent in 2011 compared to 5.9 percent in 2010, their net profits rose to 1.1 billion lek, up from 979 million lek in 2010, according to the Bank of Albania.
Although one of the key sectors of economy, the agriculture sector employing half of the country’s population and producing 20 percent of the GDP, is the least financially supported by government and commercial banks.
Bank of Albania data show total credit to the agricultural sector in April 2012 stood at 5.6 billion lek accounting for only 1.4 percent of total credit to businesses.
This important sector to the Albanian economy continues to be the least government-funded among the other four priority sectors of education, health, defence, and transport with only around 0.51 percent of the GDP.