Lek-denominated loans to businesses at the end of the first quarter of 2015 accounted for 38.6 percent of total lending, up from 37.2 percent a year ago and only 20 percent at the onset of the global financial crisis in 2009
TIRANA, May 13 – With interest rates on loans denominated in the national currency having considerably declined in the past six crisis year, businesses are preferring borrowing in lek rather than in foreign currency, mainly euro which yet accounts for around half of total lending to the private sector.
Bank of Albania data show lek-denominated loans to businesses at the end of the first quarter of 2015 accounted for 38.6 percent of total lending, up from 37.2 percent a year ago and only 20 percent at the onset of the global financial crisis in 2009.
Lending to businesses grew by 1.7 percent to 398 billion lek (€2.76 bln), mainly fuelled by 5.6 percent increase in lek-loans. Lending in Euro which still holds around 50 percent of total lending, declined by 4.5 percent year-on-year in March 2015.
Lending in U.S. dollar has also increased its share in lending to businesses mainly because of the sharp depreciation of the Albanian currency which has lost around a quarter of its value against the dollar in the past year.
Lending in U.S. dollar rose to 39.7 billion lek at the end of the first quarter of this year, accounting for 10 percent of total lending to businesses, compared to 8 percent a year ago.
Lending to businesses accounted for 73 percent of total lending at the end of March 2015, when lending to the economy slowed down to 2.2 percent.
Detailed data show “trade, repair of cars and household equipment” holds the majority share of lending with 135 billion lek (€937 mln) or 34 percent of total lending to businesses. Next come the processing industry with 59 billion lek (€ 500 mln) or 15 percent of the total followed by “production, distribution of electricity, gas and water” with 53 billion lek (€368 mln).
Despite accounting for almost 20 percent of the GDP and employing half of the country’s population, the agriculture sector is one of the least financed sectors by commercial banks with total lending at the end of March 2015 at 6.5 billion lek (€45 mln) or 1.6 percent of the total.
Lending to households at the end of the first quarter of 2015 grew by 4 percent to 147.8 billion lek (€1 bln), with lending in the national currency increasing its share to 49 percent. Lending to households is dominated by financing to real estate, mainly apartments and in Euro, which is the currency they are traded.
Lending to the economy slowed down to 2.2 percent last March as interest rates on loans denominated in the national currency underwent a surprise increase unveiling the poor transmission of the central bank’s monetary policy which since late January 2015 has kept the key interest rate at a historic low of 2 percent.
Latest Bank of Albania data shows interest rates on lek-denominated loans rose to 8.25 percent last March, up from 8.02 percent last February and 7.96 percent in March 2014 when the key interest rate stood at 2.75 percent.
Non-performing loans at around a quarter and poor demand for new loans as the economy struggles with growth rates of around 1 to 2 percent as well as sluggish consumption and private investments are considered the key barriers to a recovery in credit, experts say.
