Businesses hesitant to borrow

TIRANA, October 6 – Commercial loans continue growing at slow rates during this year, confirming the tight standards applied by banks operating in Albania and businesses’ hesitation to make new investments. Latest data by the Bank of Albania show lending to businesses reached 309.1 billion lek (around 3 billion dollars) at the end of August 2010, up only 365 million lek compared to July 2010, but a record 33.6 billion lek year-on-year.
The majority of loans continued going to the “Trade, car and household article repair” group receiving a total of 105 billion lek, or one-third of the total commercial loans granted in recent years.
Second came the crisis-hit construction sector with 62.4 billion lek, followed by the manufacturing industry with 46.2 billion lek and support to the ‘production and supply of electricity, gas and water’ with 21 billion lek.
Lending standards during the second quarter of this year remained tight for businesses and eased somehow for individuals, according to a lending survey carried out by the Bank of Albania.
Data show lending standards applied to small and medium-sized enterprises remained tight while corporations had their standards eased for the second quarter in a row.
Banking experts said the tight lending standards were influenced by specific problems in the sectors where businesses operate, the macroeconomic situation and the individuals’ financial situation.
The central bank expects credit to the private sector to grow during the second half of this year after the budget review and the cut of the key interest rate by 0.25 percentage points few weeks ago.
Credit to the private sector continued growing at low rates even in the first half of this year despite improved liquidity and a significant increase in the number of deposits which was followed by declining interest rates.
The average year-on-year growth of credit to the private sector during the second quarter of 2010 was 9 percent, said the central bank. The International Monetary Fund expects the private credit growth to drop to 8.6 percent of the GDP this year, down from 10.3 percent in 2009 and 32.1 percent in 2008 when the global crisis started.
The lending market continued to suffer from fluctuation of interest rates and tight lending standards in the April-June period, said the central bank in its latest monetary policy report.