Only 44 percent of debtor households said they had borrowed from banks and non-bank financial institutions
TIRANA, Oct. 16 – More than half of debtor Albanian households, some 56 percent, borrow informally mainly from friends and relatives and local shops, shows a Bank of Albania survey. The findings of the survey reconfirm the critical situation Albanian households are facing during these crisis years and banks being the second choice of households when it comes to borrowing. Central bank data show lending to households dropped to 144.6 billion lek at the end of the first half of 2013, slightly higher compared to the same period last year but down 2 percent compared to the first half of 2011. The situation is also a result of tighter lending standards banks are applying as bad loans have reached a record 25 percent and lending has for the first time plunged into slight negative growth rates for the first eight months of this year.
The Bank of Albania survey showed some 28 percent of interviewed households said they had at least one loan to pay, a six percent drop compared to the second half of 2012. In 44 percent of cases, the households said they had borrowed from formal sources such as banks with 39 percent and other non-bank financial institutions with 4 percent, which is a 2 percent decrease compared to the second half of 2012.
Some 1,200 households in 17 Albanian districts were interviewed as part of the survey conducted in May-June 2013.
Around half of Albanian households declared monthly income between 17,000 to 50,000 lek (Euro 119 to 350) and only 22 percent declared monthly income between 50,000 to 100,000 lek (Euro 350 to Euro 700). The main sources of income for households include income from self-employment (28 percent), pension (28 percent) and work in the private sector (24 percent). The share of remittances and work in the private sector as a source of income dropped in the first half of 2013 while the share of self-employment continued increasing. Some 73 percent of debtor households said their ability to repay remained unchanged in the first half of this year, some 23 percent reported a drop in their repayment ability and 5 percent reported an improvement.
The debtor households which report a drop in their ability to pay loans choose to reduce their household spending in 51 percent of the cases and seek a temporary job in 22 percent of the cases as the two main ways of handling financial difficulty, shows the survey.
As far as the second half of 2013 is concerned, 78 percent of debtor households do not expect changes in their ability to pay loans, 14 percent expect improvement and 8 percent expect deterioration. Some 59 percent of households ruled out taking another loan in the next six months.
More Albanians plunging into poverty
Albania’s poverty rate has increased by 2 percent or around 29,000 people in the past four years as the country’s GDP growth rate dropped to an average of 3 percent down from 6 percent annually in the pre-crisis years. The results are confirmed in a recent living standard measurement survey conducted by Albania’s state Institute of Statistics and the World Bank.
The survey carried out in September-October 2012 on around 6,670 households nationwide showed the number of people who live below the poverty line in Albania rose by around 2 percent to 14.3 percent in the past four crisis years. “The fraction of the population whose real per capita monthly consumption is below Lek 4,891 (Euro 34.6, USD 46) increased from 12.4 percent in 2008 to 14.3 percent in 2012. In the previous years, poverty fell from 25.4 percent in 2002 to 18.5 percent in 2005 and 12.4 percent in 2008. This means that roughly 28,896 people in addition to 373,137 poor people in 2008 fell into poverty.”
Businesses
The central bank survey does not report data on informal borrowing by businesses but representatives of the business community report a sharp increase in the past few years as bad loans have registered a sharp increase and accumulated unpaid government bills to private companies have reached more than Euro 200 million. Gjergj Filipi, the director of Tirana-based Agenda Institute, says businesses are turning to informal channels after being classified by banks as unreliable borrowers. Local media report construction companies, whom government owes millions of Euros for finished public works, are the most engaged in informal borrowing whose interest rates range up to 5 percent compared to an annual 10 to 12 percent in banks. In crisis since the onset of the global financial crisis and facing liquidity problems the construction sector has been widely using the countertrade practice which involves the exchange of goods or services with other goods or services, rather than with money.
The latest Bank of Albania survey with around 700 enterprises nationwide showed some 53.7 percent of the active enterprises said they had a loan to pay off, almost at the same levels compared to the end of 2012.
The amount of the loan was at almost half of the company’s capital for 73 percent of the companies. Some 71.7 percent of enterprises said they spent 20 percent of their income on the payment of loans. Meanwhile, another 20.8 percent of enterprises spent 20 to 50 percent of their income on loans, almost at the same levels compared to the previous six months.
The survey shows businesses are largely pessimistic about new loans with 83.4 percent of enterprises not planning to take out new loans. Relations with banks are considered crucial by the overwhelming majority of companies but 38 percent of enterprises describe the process of borrowing as difficult and 7.6 percent very difficult.
